Forensic Economic Examination vs Audit and Tax Inspection

Clients often come to me already holding a tax inspection report or an auditor’s report and ask a single question: can I use this to recover damages or to overturn additional tax assessments in court? The difficulty is that an audit, a state tax inspection and a forensic economic examination are three different instruments — different in purpose and, crucially, different in legal force. Treating one as a substitute for another costs the parties to a case both time and money. Let me set out how they differ and which of them actually produces evidence that a court will accept.

Three instruments, three different goals

The most common mistake is to see these procedures as interchangeable — the logic being, “we were checked, there is a document with figures, that is enough.” In reality, each was designed for its own task and answers its own question.

Audit: an independent opinion on the reliability of the accounts

An audit is an independent review of financial statements, carried out by an auditor or audit firm on the basis of a contract with the client, within the framework of the legislation on the audit of financial statements. Its purpose is to express a professional opinion on whether the statements fairly present the financial position of the entity in accordance with the applicable standards (IFRS, or Ukraine’s national accounting standards, NP(S)BO).

The result is an auditor’s report containing an opinion — unmodified or modified. An audit answers the question “can the figures in the statements be trusted”, but it does not establish anyone’s guilt, it does not calculate loss for a specific court dispute, and by itself it has no status as procedural evidence.

Documentary inspection (a State Tax Service check): compliance with the Tax Code

A tax inspection — colloquially called a “reviziya” — is a form of state control. It is conducted by the State Tax Service of Ukraine (DPS) on the basis of an order, in the manner and within the limits set by the Tax Code of Ukraine (PKU). Its purpose is narrow: to verify whether the taxpayer correctly assessed and paid taxes and duties and complied with the requirements of the PKU. The Code itself distinguishes desk audits, documentary audits (both scheduled and unscheduled) and factual audits — and it is the documentary audit that people usually mean when they speak of a business being “inspected”.

The result is an inspection report (act) or certificate, on the basis of which the DPS issues a tax notification-decision (PPR). It is important to understand that this is a document produced by a supervisory authority, not an independent expert assessment. It reflects the position of one side — the state, acting through the DPS.

Forensic economic examination: an answer to a specific question

A forensic economic examination is appointed when establishing the circumstances of a case requires specialised economic knowledge. It is carried out by a forensic expert entered in the state Register of Certified Forensic Experts, on the basis of a court ruling and — in criminal proceedings — at the request of a party to the proceedings or on the assignment of an investigating judge or court, in the manner prescribed by the Law of Ukraine “On Forensic Expert Activity” and the Ministry of Justice’s Instruction No. 53/5.

The expert does not examine “the enterprise as a whole” — the expert answers specific questions actually put to them: what is the amount of income not received, is a particular transaction supported by documents, what is the amount of material harm. The work relies on primary documents, accounting registers, contracts and other economic information supplied within the case file. The result is an expert opinion, which procedural law recognises as an independent source of evidence.

Who, on what basis, and with what status — a comparison

Criterion	Audit	Tax inspection (DPS)	Forensic economic examination
Purpose	Independent opinion on the reliability of the accounts	Control of PKU compliance and full payment of taxes	Answer to a specific question of the court / investigation
Basis	Contract with the client	Order of the DPS (under the PKU)	Court ruling / party request or assignment (Law “On Forensic Expert Activity”)
Performer	Auditor / audit firm	Inspector — an official of the DPS	Forensic expert from the Ministry of Justice Register
Status of the result	Auditor’s report — not evidence in itself	Inspection report — the DPS’s position, the basis for a PPR	Expert opinion — an independent source of evidence (KPK Art. 101, HPK Art. 98)
Challenge	Dispute with the auditor under the contract	Complaint to a higher DPS body or claim in the administrative court (KAS)	Assessed by the court; a repeat or additional examination is possible

Legal force: why this is the decisive difference

It is the procedural status of the result that sets the examination most sharply apart. An expert opinion is an independent means of proof whose existence and content are directly regulated by procedural law: in criminal proceedings it is defined by Article 101 of the Criminal Procedure Code of Ukraine (KPK) — and it is listed among the procedural sources of evidence in Article 84 KPK — while in commercial proceedings it is governed by Article 98 of the Commercial Procedure Code (HPK); the Civil Procedure Code and the Code of Administrative Procedure (KAS) contain equivalent provisions. In other words, it is a self-standing type of evidence that the court examines under a defined procedure.

At the same time, an important caveat applies: no evidence — including an expert opinion — has predetermined force. The court weighs it according to its own conviction, together with the rest of the case materials. So an opinion does not “decide the case automatically”, yet without it some circumstances simply cannot be properly established.

A tax inspection report does appear in court, but as a written document reflecting the position of a party — the DPS. The court weighs it on a par with the other materials and is under no obligation to agree with its conclusions. An auditor’s report, likewise, is only a written document, not an “examination”: it is persuasive to an owner or investor, but in a dispute it does not carry the weight parties sometimes ascribe to it.

Why a report cannot be “reworked” into an examination, or vice versa

In my practice I am often asked to “just formalise the DPS report as an expert opinion”. That does not work, and here is why:

• Different actors and guarantees of independence. An inspector is an official of a supervisory authority; an auditor performs under a contract with a client. A forensic expert is independent, is warned of criminal liability for a knowingly false opinion, and answers only the questions put by the court or a party.
• Different subject matter and methods. An inspection checks compliance with the PKU; an examination investigates specific circumstances using a scientifically grounded methodology entered in the relevant register of methods.
• Different procedural form. An opinion is prepared within proceedings, on a ruling or assignment, respecting the rights of the parties and with the expert warned of liability.

Relabelling one document as the other is impossible. However, an inspection report or an auditor’s report can serve as one of the source materials the expert examines — while the expert forms an independent conclusion.

When proving the amount of damages truly requires an examination

This is the key practical point. In criminal proceedings concerning economic offences — investigated, among others, by the Bureau of Economic Security (BEB) — and in commercial and civil disputes over compensation for harm, the amount of loss often has to be established specifically by an examination, above all where the sum is a qualifying element of the offence or where the opposing side contests it.

Use a simple rule: if the amount of loss is disputed, the documents are numerous, and your opponent challenges your calculation, you need a forensic economic examination, not an inspection report. An inspection report alone is frequently insufficient here — the court, having weighed the parties’ arguments, may appoint an examination to obtain an independent answer on the amount. And if an opinion already obtained raises doubts or contains gaps, procedural law allows an additional examination (to clarify or supplement it) or a repeat examination (assigned to a different expert) — a further advantage over an inspection report, which provides for no such review. Decided cases involving such opinions can be found in the Unified State Register of Court Decisions — a useful source for understanding how courts weigh this kind of evidence.

A typical mistake: asking the expert to assess whether the DPS acted lawfully

The most frequent error in framing questions is to ask the expert to assess lawfulness, legality or guilt. That lies outside the expert’s competence: legal qualification is for the court, not the economist. Questions must be strictly economic, not legal.

Compare:

• Wrong: “Did the DPS lawfully assess additional tax?” — a legal question the expert has no right to answer.
• Right: “Is the amount of the tax liability for such-and-such transactions over such-and-such period supported by documents?” — an economic question the expert can address.

Framing the questions correctly is half the success of an examination. A poorly posed question yields either the expert’s refusal or an opinion the court cannot use.

A short checklist: what you actually need

• You want assurance about the reliability of the accounts for an owner or investor → an audit.
• You received a tax notification-decision and disagree → challenge the report administratively or in the administrative court (KAS); an examination may be needed to produce a counter-calculation of the amount.
• You need to prove the amount of damages or lost income, or to confirm/refute a transaction in court or investigation → a forensic economic examination.
• You are preparing questions for the expert → frame them economically, without asking the expert to judge lawfulness or guilt.

If you are unsure which measure fits your situation, or doubt whether your questions are properly framed, it is better to check before you start than after. As a forensic economic expert I help determine whether an examination is in fact required and how to phrase the questions so that the opinion carries evidentiary weight in court.