Forensic audits gain pivotal role in insolvency landscape

Rising instances of bankruptcy actions by creditors under India’s Insolvency and Bankruptcy Code (IBC) against distressed companies are fuelling the growth of forensic audits, and signifies the increasing importance of such audits in providing evidence for court proceedings, said experts.

- Gireesh Chandra Prasad 

Forensic auditors scrutinize financial records to unearth evidence, including irregularities, which are relevant in legal cases. IBC’s focus on reviewing past transactions of companies highlights the critical role of forensic auditors in addressing industrial distress in India, the experts added.

Anoop Rawat, a partner specializing in IBC at the law firm Shardul Amarchand Mangaldas & Co., explained the provisions for dealing with preferential, undervalued, or fraudulent transactions of corporate debtors leading up to insolvency proceeding, or ‘avoidance transactions.’

“Under these provisions, resolution professionals can hire services of professionals (forensic auditors) for a determination on these transactions, and upon determination by a resolution professional, he is required to approach tribunals for seeking reversal of avoidance transaction among other remedies."