Audit vs. Forensic Accounting: What is the difference?

Often the terms audit and forensic accounting are used interchangeably without really understanding the key differences, such as, who is responsible, what is it, and what is its purpose/why it is needed.

In this article, we have reviewed the key differences between audit and forensic accounting which we have summarised into the following three categories.

• Objectives and requirements.
• Appointment and timing.
• Procedures and reporting.

Objectives and requirements

The objectives of an audit and forensic accounting differ significantly.

According to the Institute of Chartered Accountants in England and Wales (ICAEW), the primary objective of an audit is: ‘To provide an independent opinion to the shareholders on the truth and fairness of the financial statements and to report by exception to the shareholders on the other requirements of company law, such as where, in the auditors’ opinion, proper accounting records have not been kept.’

An audit gives confidence that a company’s financial statements show a true and fair picture of its financial position.

It’s important to note that not all companies are required to have an audit. The Companies Act sets out specific criteria, using what’s known as a public interest (‘PI’) score, to determine whether an audit is mandatory.

An audit is required for:

• Companies with a PI score above 750 points under the Companies Act scoring system. (This typically includes listed companies and government-owned entities.)

However, a company must still be audited if its PI score is below 750 points and it meets two or more of these criteria:

• Annual turnover exceeds £15 million.
• Total assets exceed £7.5 million.
• 50 or more employees on average.

Forensic accounting, on the other hand, involves conducting a detailed forensic analysis by a qualified accountant. This type of work is typically required in situations involving legal disputes or litigation.

According to the Network of Independent Forensic Accountants (NIFA), a forensic accountant is:

‘Usually retained in matters where there are complex financial or business-related issues which have to be reviewed, analysed, or interpreted and summarised in a format that can be understood by non-financial people.’

In practice, forensic accountants play a vital role in analysing, interpreting, and presenting financial information in a clear and objective way for use in legal proceedings.

Common scenarios where a forensic accountant may be engaged include:

• Quantifying claims before or during litigation, including assessing potential tax implications for different approaches taken by either the claimant or defendant.
• Investigating and analysing the accuracy and reliability of financial evidence at all stages of a legal dispute.
• Providing expert witness testimony in court.
• Acting as a shadow adviser, offering independent and confidential advice to one of the parties involved in a dispute.

Appointment and timeframes

The appointment process and timeframes for audits and forensic accounting engagements differ considerably. In the case of an audit, a company’s auditor is appointed annually by the shareholders. When a company changes its auditor, it’s wise to invite accounting firms to bid for the audit. After the tender process ends, the directors will suggest their chosen firm to the shareholders for approval.

Like auditors, a forensic accountant in a legal case must stay independent from the parties involved. However, if they are acting purely in an advisory capacity, full independence is not mandatory, though it is generally considered best practice.

For companies that require audits, the audit must be performed annually. Before starting fieldwork, auditors will set a detailed timetable that includes key dates for:

• When financial information will be available; and
• When the audit findings and reports will be delivered.

In contrast, the timeframes for forensic accounting investigations can vary significantly. The schedule depends on court deadlines, case milestones, or requirements set by legal teams. It’s important to keep everyone updated on progress. This way, deadlines are met, and the investigation runs smoothly.

Procedures and reporting

An audit report provides an independent evaluation of a company’s financial statements, offering what is known as reasonable assurance. This means the auditor has gathered sufficient and appropriate evidence to conclude that the financial statements are prepared in accordance with the relevant reporting framework and are free from material misstatement, whether caused by error or fraud. It is not a guarantee of absolute accuracy, but it does give users confidence that the figures present a true and fair view of the organisation’s financial position.

Auditors do not examine every single transaction; instead, they apply the concept of materiality. Materiality is typically calculated as a percentage of profits or revenue and serves as a threshold to guide auditors. It helps determine which transactions or account balances require detailed testing and whether any identified misstatements are significant enough to impact the overall opinion.

Once the testing approach is agreed, auditors use a range of procedures to verify transactions, including cross-checking details against original documents. Auditors check any assumptions or estimates by talking with management. They also use external research if needed. These procedures help auditors check if the financial statements are free from material misstatement.

Forensic accounting procedures may resemble audit testing in some respects. However, the purpose is fundamentally different. Forensic accountants don’t just give opinions on financial statements. They look for irregularities, financial loss, or discrepancies. Then, they measure the impact of these issues.

Forensic accountants document their work in a detailed report, clearly outlining the procedures performed, findings and results, assumptions made and sources.
In some cases, these reports might be submitted to court during legal proceedings. This adds extra scrutiny and highlights the need for accurate and clear documentation.

Summary

Choosing the right professional is essential to ensure you receive the appropriate service from qualified experts. At Gerald Edelman, we have specialist teams of both auditors and forensic accountants. If you’re unsure which service best suits your needs, get in touch with one of our experts today.

This article was updated in January 2026