Forensic Auditing and ESG Compliance: Detecting Fraud and Enhancing Transparency in Corporate Reporting

Muhammed Zakir Hossain, Annatul Islam Hredoy and Jobaer Rahman Rashed
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Muhammed Zakir Hossain: Associate Professor, Department of Business Studies, State University of Bangladesh, Bangladesh
Annatul Islam Hredoy: Carlson School of Management, University of Minnesota, United States of America
Jobaer Rahman Rashed: Humphrey School of Public Affairs, University of Minnesota, United States of America

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Abstract: This study examines the importance of forensic auditing in detecting fraud and ensuring compliance with Environmental, Social, and Governance (ESG) reporting standards. This framework is becoming increasingly essential for corporate accountability and sustainable investment. This investigation employs a qualitative approach, incorporating semi-structured interviews, case studies, and document analysis to explore the complex methods forensic auditors use to identify ESG-related fraud, including greenwashing and social compliance misreporting. Significant findings reveal that forensic auditing methods—especially data analytics, blockchain tracking, and document verification—effectively detect fraud and enhance the transparency of ESG claims. Nonetheless, obstacles remain, including the absence of uniform ESG metrics, varying regulatory frameworks, and limited data availability, which hinder auditors' ability to validate ESG disclosures. The investigation highlights the importance of forensic auditing as a distinct investigative method that complements conventional audits by providing a more comprehensive examination, essential for accurate ESG reporting. It suggests that companies integrate forensic auditing into their ESG practices and that lawmakers establish uniform regulations to enhance effective ESG oversight. The results enhance comprehension of how forensic auditing can enhance ESG accountability, providing crucial insights for organizations, regulators, and stakeholders committed to fostering a more transparent and sustainable corporate environment.

Keywords: Greenwashing; Fraud Detection; ESG; Forensic Auditing (search for similar items in EconPapers)
Date: 2025-11-14
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Published in European Journal of Management, Economics and Business, 2025, 2 (6), pp.108-123. ⟨10.59324/ejmeb.2025.2(6).08⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05736677

DOI: 10.59324/ejmeb.2025.2(6).08

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