ROLE OF FORENSIC AUDIT IN REDUCING NPAS IN INDIAN BANKS

In recent past, many Corporate frauds like Satyam Computers, Enron ,WorldCom. Madoff have rocked the world due to fraudulent financial reporting This has justified failure of statutory audit, internal control and corporate governance in those companies. Forensic Accountants through their audit help in reducing fraudulent reporting. Forensic audit is a process of auditing of accounts in such a manner that can be produced in court of law. A forensic auditor finds out weakness in control system of management of the organisation and also identifies persons involved in exploiting these situations inside the company. This helps in controlling frauds in companies. The increase in NPA of banks has become a menace in the present period and most of the banks are facing this problem. Increase in NPAs leads to more requirement of capital for provisioning and less fund available for giving loans to public. That generates shrinking of profit for banks. The Banks‟ loans become bad due to improper analysis of credit requirement of any project and lack of proper monitoring by bankers after disbursal of loan to the company. They never verify end use of funds sanctioned to the firm.. This results in borrower taking advantage of laxity on the part of banks. The borrower misuses funds by diverting these funds for personal benefits.. The forensic accountant checks actual financial transaction through firm’s bank’s account statement. Hence they prevent generation of non performing assets in banks . This study concentrates on analysis of NPA accounts in Indian Banks from forensic audit angle as non performing assets in Indian Banks have touched more than Rs. ten lacs crore.