What is the characteristic of a forensic audit?

A forensic audit is characterized primarily by its specific focus on investigating financial discrepancies, fraud, and other illicit financial activities. This type of audit is not merely a routine examination of financial statements or compliance with regulations; rather, it is an in-depth investigation that aims to uncover any wrongdoing or misconduct within an organization. Forensic auditors use various investigative techniques and analyses to gather evidence that can potentially lead to legal actions or support claims in litigation scenarios.

While the other options touch on important aspects of accounting and auditing—such as compliance with regulations, operational efficiency, and tax return accuracy—they do not encapsulate the essence of a forensic audit, which is strongly centered around uncovering fraud and financial misconduct. Forensic audits often involve working closely with law enforcement agencies and legal teams to ensure that findings are substantiated and can stand up in court. This makes the investigation of financial discrepancies and fraud the defining characteristic of a forensic audit.