Aldermen lean toward forensic audit of rec department
By Gordon Dritschilo
Staff Writer | August 20,2013
What is the difference between a regular audit and a forensic audit?
Both aim to test the accuracy of financial statements, but a forensic audit tends to more thoroughly question those statements.
The Board of Aldermen is looking at performing a forensic audit of the Recreation and Parks Department following the revelation of $47,000 in unauthorized spending at Bear Mountain Design, an architectural firm.
Last week, city auditor John Coffin sent the Board of Aldermen a piece by financial writer Dave Donovan outlining the differences. The main feature of a forensic audit, he said, is that it is aimed at detecting the theft of assets.
“A common example of asset-theft fraud is when an executive creates a dummy vendor account that gets a payment sent to it every month,” Donovan wrote. “Since a financial audit only checks the accuracy of the financial statement’s data, dummy accounts can easily be overlooked by a financial auditor, because they only see that a vendor is getting paid.”
Regular auditors do not check the validity of accounts. A forensic auditor investigates and validates each account.
Coffin has pointed out that while the board may not have approved it, Bear Mountain was a legitimate account from a bookkeeping standpoint — it was an actual company providing a product in return for the money it received from the city.
The city previously considered hiring a forensic auditor to look at the treasurer’s office in 2006, but opted instead to have then-state auditor Randy Brock review the city’s financial controls.
Forensic audits were used in the investigations of embezzlement by town officials in Weybridge and Ira.