Forensic Audit Standards

FORENSIC ACCOUNTING AND INVESTIGATION STANDARD NO. 210 ENGAGEMENT OBJECTIVES

Contents

Paragraph(s)

Introduction and Scope ................................................................................. 1

Objectives .................................................................................................... 2

Requirements ……………………..................................................................... 3

Explanatory Comments ……………………. ..................................................... 4

Documentation for Compliance ……………………........................................... 5

Effective Date ............................................................................................... 6

Annexure 1: Indicative List of Nature of Engagement and Possible Objectives

This Forensic Accounting and Investigation Standard Number 210, on “Engagement

Objectives” issued by the Council of the Institute of Chartered Accountants of India

(ICAI) should be read in conjunction with the “Preface to the Forensic Accounting and

Investigation Standards”, the “Framework Governing Forensic Accounting and

Investigation Standards” and “Basic Principles of Forensic Accounting and

Investigations” issued by the Institute.

1 Introduction and Scope

1.1 Forensic Accounting and Investigation (FAI) engagements are of special nature undertaken for a specific purpose. This Financial Accounting and Investigation Standard (FAIS or Standard) deals with setting the objectives of such engagements.

1.2 FAI engagements can be undertaken for different context or situations such as those provided in Annexure 1, where different possible objectives are also indicated depending upon the nature of services being provided. Therefore, a clear understanding is required about the purpose and objectives of the engagement, especially if the output of the engagement may be used for legal purposes.

1.3 Scope: This standard is applicable to all FAI engagements. This Standard does not apply to situations where the outcome of the work is being used for Expert Testimony, which is being covered by a separate FAIS 390, on “Testifying in a Court of Law”.

2 Objectives

2.1 The overall objective of this Standard is to understand the broad objectives of the FAI engagement, discuss and agree with the stakeholders the main purpose and the expected outcome of the engagement.

2.2 The supporting objectives of this Standard on Engagement Objectives are to ensure that:

(a) The Professional has clarity on the main purpose of the engagement and the mandate (objective) issued by the Stakeholders.

(b) The scope of the engagement (along with any limitations) is consistent with the objectives, clearly defined and agreed with the Stakeholders.

3 Requirements

3.1 Given the nature of the engagement to be either a Forensic Accounting or an Investigation, the Professional shall fully understand and document the main objectives of the engagement.

3.2 The scope of the engagement shall be defined in line with the objectives so that it is clear what is included and what is out of scope. For example, where Forensic Accounting activities may go beyond the collection of evidence, and present these in a court of law as an expert witness, this fact shall be included in the scope.

3.3 The Professional shall ensure that the expected outcome is in line with the objectives and the defined scope, and where there is any mismatch between any of these, clarity should be sought to get such ambiguity resolved. This may require to change either the objectives, the scope or the outcome or all three.

3.4 The objective of any engagement shall not be designed to commit to any particular outcome, since the outcome is dependent on the facts and evidences collected. The Professional can however, help draw reasonable conclusions based on the evidence gathered, where this is part of the mandate.

4 Explanatory Comments

4.1. The understanding of the mandate given by the stakeholder shall be incorporated in the Engagement Letter in line with FAIS 220 on “Engagement Acceptance and Appointment”. The objectives of the engagement might undergo changes while the engagement proceeds and hence the objective set in the beginning may have to be amended or modified during the course of the engagement.

4.2. Where the Professional is engaged to undertake certain forensic accounting work prior to the conduct of similar work by others, such engagement shall be accepted with ethical safeguards, and if there are concerns that the work of the Professional may be misused for any unethical purposes, then the Professional may choose not to accept such an engagement.

5 Documentation for Compliance

5.1 The initial correspondence, minutes of meeting in respect of objective of the engagement to be undertaken and its stakeholder or any communication leading to finalization of the nature of engagement and its objectives, will become part of the documentation for the purpose of this Standard.

5.2 The requisition of the engagement by the client having a defined scope and objectives.

5.3 Documentations to support any limitations of scope of work, or access to reports, or assumptions made.

6 Effective Date

6.1 This Standard is applicable for all engagements beginning on or after … (a date to be notified by the Council of the ICAI).

Annexure 1

INDICATIVE LIST OF NATURE OF ENGAGEMENT AND POSSIBLE OBJECTIVES

(A) FORENSIC ACCOUNTING SERVICES:

POSSIBLE OBJECTIVE: Undertake a discovery and identification of evidence and ascertainment of facts concerning the manner in which various transactions, funds and balances have been dealt with and treated in the books of accounts with the purpose of highlighting any accounting, legal, regulatory or contractual breaches, deviations or violations.

NATURE OF SERVICE (Indicative List)

1 Financial Statement manipulations

2 Fund diversions/Asset Tracing

3 Anti-Money Laundering

4 Licence Fees/Dues/Tax Evasion

5 Related party transactions/valuations

6 Valuations/Estimations of loss/damage

7 Suspicious Transactions under IBC

(B) INVESTIGATION SERVICES:

POSSIBLE OBJECTIVE: Examine facts and circumstances to gather evidence to support certain hypotheses regarding allegations or fraud Indicators with the purpose of proving/disproving legal violation or unethical intent of suspected individuals.

NATURE OF SERVICE (Indicative List)

1 Criminal Investigations

2 Fraud Investigations (including Cyberfrauds)

3 Insurance/Personal Injury Claims

4 Ethical/Code of Conduct Violations

5 Whistle-blower complaints/POSH allegations

6 Asset theft/Bribery/Corruption

7 Data breach/theft of Intellectual Property

POSSIBLE OBJECTIVE: Provide testimony in a Court of Law, based on Forensic Accounting and Investigation (FAI) expertise and/or to help facilitate some resolution to legal disputes based on facts/circumstances and FAI expertise.

NATURE OF SERVICE (Indicative List)

1 Expert Witness (in a Court of law)

2 Alternate Dispute Handling

FORENSIC ACCOUNTING AND INVESTIGATION STANDARD NO. 240 ENGAGING WITH AGENCIES

Contents

Paragraph(s)

Introduction and Scope ............................................................................... 1

Objectives .................................................................................................. 2

Requirements ……………………. ................................................................. 3

Explanatory Comments ……………………. ................................................... 4

Documentation for Compliance ……………………......................................... 5

Effective Date ............................................................................................. 6

Annexure 1: Indicative List of Agencies

This Forensic Accounting and Investigation Standard Number 240, on “Engaging with Agencies,” issued by the Council of the Institute of Chartered Accountants of India (ICAI) should be read in conjunction with the “Preface to the Forensic Accounting and Investigation Standards”, the “Framework Governing Forensic Accounting and Investigation Standards” and “Basic Principles of Forensic Accounting and Investigations” issued by the Institute.

1. Introduction and Scope

1.1 Forensic Accounting and Investigations (FAI) engagements are highly specialized in nature and in many engagements, Professionals are required to interact, or work closely with, the Law Enforcement Agencies, Regulatory Bodies or Adjudicating Authorities (collectively referred to as “Agencies”). This interaction is either in their Professional capacity as a service provider, or in their capacity as part of their organization.

1.2 Definitions:

(a) Law Enforcement Agencies are typically Central or State Agencies mandated to enforce a particular law with the power to prevent, detect and investigate non-compliances with those laws. Their powers may be restricted by geography or by type of law they are entrusted to enforce.

(b) Regulatory Bodies are established to govern and enforce rules and regulations for the benefit of public at large.

(c) Adjudicating Authorities refer to Tribunals or Judicial Authorities established to interpret the law and pass necessary judgements in case of disputes.

(d) Note: Agencies may also include international bodies, in such circumstances, the engagement may be governed by rules and laws relevant to the particular agency or engagement.

An indicative list of Agencies is presented in Annexure 1.

1.3 Scope: This Standard covers the following type of engagements:

(a) Engagements where the Professionals are appointed by the Agency or on their behalf as a Consultant, Advisor or an Expert.

(b) Engagements where the Professionals are called upon by the Agency in respect of the work carried out by them under the instructions of their employer, client or other Stakeholders.

This standard does not apply in situations wherein the Professionals provide Expert Witness services in any proceeding before the court of law. In such cases, Professional should refer to a separate FAIS on “Expert Witness”.

2. Objectives

2.1 The main objectives of this standard on Engaging with Agencies are:

(a) Define certain protocols, including legal aspects, which are to be followed while undertaking engagements involving Agencies.

(b) Clarify certain roles and responsibilities of Professionals when interacting with the Agencies.

(d) Outline the manner in which the Professional can provide evidence to Agencies in relation to engagements carried out by the Professional.

3. Requirements

3.1. Professional shall agree on the objectives, scope and planned procedures of the engagement with the Agencies through an engagement letter or suitable form of communication. (refer Para 4.1)

3.2. Professional shall be aware of the applicable laws and regulations being governed by the respective agency and the legal implications of their work. (refer Para 4.2)

3.3. Professional shall comply with Basic Principles with special emphasis on Independence, Objectivity, Integrity, Confidentiality and Neutrality. (refer Para 4.3)

3.4. Professional shall be aware of their roles and responsibilities in presentation of facts before the Agencies. (refer Para 4.4)

3.5. Due professional care shall be taken with regards to communication with Agencies supported by adequate documentation trail. (refer Para 4.5)

4. Explanatory Comments

4.1. Engagement Letter or Terms of Reference (refer Para 3.1)

The Professional shall agree on the objectives, scope and planned procedures of the engagement with the Agencies either through a Reference or Work Order issued by the Agency or through an Engagement Letter or such suitable form of communication issued by the Professional. In this regard, the Professional shall adhere to FAIS 220 on “Engagement Acceptance and Appointment”.

If during the course of the engagement, there is a change in scope and objectives, the same shall be documented and agreed upon in the manner that is binding on both the parties. The Professional shall in all cases clearly communicate any changes to the concerned Agencies.

4.2. Understanding of applicable laws and regulations (refer Para 3.2)

The Professional may engage legal experts or seek appropriate legal advice as deemed fit to gain an understanding of applicable laws and regulations. Further, the Professional performing services in the nature of digital forensics shall be aware of the procedures to be undertaken to maintain evidentiary value of the digital data.

4.3. Special emphasis governing engagement with Agencies (refer Para 3.3)

(a) During the tenure of the engagement, the Professional may be privy to information which is highly confidential in nature. The Professional shall inform their team members on the sensitivity of the engagement and to share the information only on a “need to know” basis.

(b) The Professional shall take into account the protracted nature of the engagement and the need to be available later to explain their work and findings. Therefore, the Professional shall secure their evidence and documents to ensure admissibility in the court.

4.4. Explanation on work carried out for other stakeholder(s) (refer Para 3.4)

When the Professionals are called-upon by Agencies for clarifications regarding engagements carried out by them, they shall ensure the following:

(a) The terms of engagement entered with Client shall include clauses relevant to sharing of information with Agencies in line with FAIS 220 on “Engagement Acceptance and Appointment”.

(b) Communication with respect to scope limitations and work procedures that may have impact on the engagement deliverables.

(c) Professionals engaged by Agencies to provide expert advice shall be duty bound to assist the agencies in areas of their expertise while maintaining their objectivity and independence and inform the agencies on matters outside their expertise.

4.5. Communication with Agencies (refer Para 3.5)

The Professional shall secure adequate documentation of correspondence with Agencies at every stage of the engagement and ensure archival of such correspondence. In this regard, the Professional shall also ensure adherence to FAIS 250 on “Communication with Stakeholders”.

5. Documentation for Compliance

5.1 Engagement Letter/Terms of Reference with scope, objectives and procedures

5.2 Chain of custody for physical/digital evidence

5.3 Non-Disclosure undertaking from Professionals and team members involved in the engagement.

5.4 Retention of all correspondences including Reports and Working Papers in physical/digital form.

6. Effective Date

6.1 This Standard is applicable for all engagements beginning on or after … (a date to be notified by the Council of the ICAI).

Annexure 1

Indicative list of Agencies

1. Law Enforcement Agencies:

(a) Central Bureau of Investigation (CBI)

(b) Enforcement Directorate (ED)

(d) Serious Frauds and Investigations Office (SFIO)

(e) Insolvency and Bankruptcy Board of India (IBBI)

(f) Directorate General of Income Tax Investigation (DGIT)

(g) Computer Emergency Response Team- (CERT)

(h) National Crime Records Bureau (NCRB)

2. Regulatory Bodies:

(a) Reserve Bank of India (RBI)

(b) Securities and Exchange Board of India (SEBI)

3. Adjudicating Authorities:

(a) National Company Law Tribunal (NCLT)

(b) Income Tax Appellate Tribunal (ITAT)

FORENSIC ACCOUNTING AND INVESTIGATION STANDARD NO. 310 PLANNING THE ASSIGNMENT

Contents

Paragraph(s)

Introduction and Scope ............................................................................... 1

Objectives .................................................................................................. 2

Requirements ……………………. ................................................................. 3

Explanatory Comments ……………………. ................................................... 4

Documentation for Compliance ……………………. ....................................... 5

Effective Date ............................................................................................. 6

This Forensic Accounting and Investigation Standard Number 310, on “Planning the Assignment,” issued by the Council of the Institute of Chartered Accountants of India (ICAI) should be read in conjunction with the “Preface to the Forensic Accounting and Investigation Standards”, the “Framework Governing Forensic Accounting and Investigation Standards” and “Basic Principles of Forensic Accounting and Investigations” issued by the Institute.

1 Introduction and Scope

1.1 Planning the Forensic Accounting and Investigation (FAI) assignment involves understanding the objectives of the assignment and developing a strategy for its execution to achieve those objectives.

1.2 The depth and extent of planning required will depend on the nature and complexity of the assignment. The familiarity of the Professional with the stakeholders and the facts of the case will also impact the level of planning that is required.

1.3 Definitions: The following definitions have been used in this Standard:

Engagement: An Engagement shall mean the overall contractual arrangement between the Professional and the Client, stipulating the terms of reference, scope of work, coverage, and expected deliverables.

Assignment: An Assignment shall mean some part of the engagement (such as a specific business or location), or a portion of the overall engagement (such as the IT or technical aspects) or a specific group of tasks (such as conducting interviews), undertaken by the Professional.

1.4 Planning the FAI assignment involves the following key elements:

(a) It is specific in nature and covers the subject matter of the assignment included under the scope (i.e. location, function, nature or legal entity, including third parties, where relevant).

(b) It is an ongoing activity, which is periodically reviewed during the course of the assignment.

1.5 Scope: This Standard applies to all FAI assignments. Where only part of the assignment is outsourced to the Professional, this Standard shall apply to the extent the Professional needs to plan the activities of the outsourced part of the assignment only, as defined in the terms of engagement.

2 Objectives

2.1 The objectives of this Standard on Planning the Assignment are as follows:

(a) To ensure that the planning process is in line with the overall scope of work and terms of engagement and applicable regulations, if any.

(b) To consider the risk factors, limitations or restrictions and the steps required to mitigate these.

(d) To identify the diverse sources for collection of evidences (such as public domain, representatives of the client, accounting systems, etc.).

(e) Determine data and information owners, in particular, identify information critical to the assignment.

(f) Evaluate the resources, skills and timeline requirements with the availability to allocate appropriate resources to the assignment.

3 Requirements

3.1 Planning of the FAI assignment shall follow a laid down process (refer Para. 4.1), the outcome of which shall be duly documented (refer Para. 5.1).

3.2 The planning activities shall contain all the key elements required to help achieve the objectives of the assignment (refer Para. 2.1). These key elements shall include the following:

(a) Knowledge of the relevant business and environment (refer para 4.2).

(b) Risk Considerations (refer Para 4.3).

(d) Technology deployment (refer Para. 4.5)

(e) Resource allocation (refer Para. 4.6).

3.3 Based on the key activities completed and the information gathered, the work methodology shall be established (including any hypotheses formulated), together with the depth and nature of procedures to be conducted, both of which shall be documented by the Professional (refer Para. 4.7).

3.4 Certain elements of the plan (especially, those relevant to its effective execution) shall be communicated to the Client and other stakeholders, on a need-to-know basis, prior to the commencement of the assignment procedures to ensure smooth conduct of the assignment.

4 Explanatory Comments

4.1. The Planning Process (refer Para 3.1): The Professional conducting the assignment shall use professional judgement for the process to be followed in completing the planning activities. The plan shall be flexible to accommodate changes in the scope, since FAI assignments are dynamic in nature. The Professional shall document the procedures and steps required to execute the plans and the nature of output to be delivered.

4.2. Knowledge of the relevant Business and its Environment (refer Para 3.2a): The Professional shall gather all the information relevant for understanding the business environment, legal and regulatory environment, potential modus operandi and operating environment, in so far as it is related to the objectives of the assignment.

4.3. Risk Considerations (refer Para 3.2b): The Plan shall take into account the outcome of the Fraud Risk understanding conducted in line with FAIS 120 on “Understanding Fraud Risk” and any risks highlighted after completing the due diligence mandated in FAIS 220 on “Engagement Acceptance and Appointment”.

4.4. Discussion with the Stakeholders (refer Para 3.2c): A key element of planning involves discussion and deliberation with all stakeholders as deemed fit by the Professional. Their inputs are critical in understanding the intricacies of the assignment, in identification of information and data sources, certain matters of relevance and to align stakeholder expectations with the assignment objectives and expected outcome.

4.5. Technology Deployment (refer Para 3.2d): A key element at planning stage is to determine the usage and acceptability of technology tools to meet the end engagement objective, quality and timely completion of the project. Some of the aspects that need to be considered are:

(a) The extent of computerization and IT deployment.

(b) Insourcing and outsourcing of IT processes in the overall IT framework such as use of cloud technologies, outsourced service providers, remote data processing etc.

(c) Data analysis, data mining and digital forensic tools to be deployed by the Professional for collecting appropriate evidence for the assignment.

(d) Applicable data privacy regulations which have to be kept in mind while planning relevant technology deployment.

4.6. Resource Allocation (refer Para 3.2e): The Professional shall prepare a work schedule to estimate the time required for each procedure depending on the depth of coverage, and map this with available resources and competencies (knowledge, experience, expertise etc.) to ensure proper resource allocation.

The Professional may use an expert in completing a part of the assignment in situations where required skills are not available with the Professional in line with FAIS 230 on “Using the work of an Expert”.

4.7. Methodology and Coverage (refer Para 3.3): The basic work methodology, generally undertaken involves collection of different types of evidence to support the fraud hypothesis, including oral, digital, physical and analytical evidence. Some of the aspects that need to be considered are:

(a) Nature of the assignment and risk involved.

(b) Requirement as per engagement letter agreed with the Client.

(d) Evidence identification.

5 Documentation for Compliance

5.1 Key steps undertaken in the planning process shall be documented to confirm their proper completion.

5.2 The following documents shall be maintained by the Professional:

(a) Planning Process documentation (or Checklists) and any tools used in the planning process.

(b) Documentation supporting the information gathered about the business and operations, systems and processes and any past or known issues.

(d) Summary of resource requirements and comparison with available resources, competencies and matching of skills with the assignment requirements.

6 Effective Date

6.1 This Standard is applicable for all engagements beginning on or after … (a date to be notified by the Council of the ICAI).

FORENSIC ACCOUNTING AND INVESTIGATION STANDARD NO. 320 EVIDENCE AND DOCUMENTATION

Contents

Paragraph(s)

Introduction and Scope .................................................................................... 1

Objectives ....................................................................................................... 2

Requirements ……………………. ...................................................................... 3

Explanatory Comments ……………………. ........................................................ 4

Documentation for Compliance ……………………. ............................................ 5

Effective Date .................................................................................................. 6

This Forensic Accounting and Investigation Standard Number 320, on “Evidence and Documentation,” issued by the Council of the Institute of Chartered Accountants of India (ICAI) should be read in conjunction with the “Preface to the Forensic Accounting and Investigation Standards”, the “Framework Governing Forensic Accounting and Investigation Standards” and “Basic Principles of Forensic Accounting and Investigations” issued by the Institute.

1 Introduction and Scope

1.1 Considering the nature of Forensic Accounting and Investigation (FAI) engagements, the engaging parties often take a legal recourse for concluding the matters. Therefore, the Professional is expected to collect appropriate evidence and maintain required documentation. This Forensic Accounting and Investigation Standard (FAIS or the “Standard”) outlines the understanding and the requirements of subject matter.

1.2 “Evidence” refers to the information, written or oral, or contained in electronic form, relied upon by the Professionals to arrive at the conclusions on which the Professional’s report is based. Evidence includes both information collected from underlying entity records and processes, information collected from other sources, public or private documentation, analysis of data, testimony, spoken recollections, hearsay information and information from other investigation activities and testing procedures, to the extent admissible in the courts of law.

1.3 “Documentation” refers to the aggregate of all evidences collected along with the written record of work procedures performed and conclusions reached and reported. It includes electronic records and correspondence in digital format, and incorporates details of project plan, engagement team composition, analysis conducted, document reviewed, quality review, etc.

1.4 Scope: This Standard applies to all FAIS engagements. However, the manner in which the evidence is to be gathered from the performance of investigation activities and testing procedures (e.g., Data analytics, conducting interviews, collection and review of electronically stored information, etc.) are not subject matter of this FAIS and the Professional shall refer to the relevant Standard on those subject matters.

This standard is not meant to cover situations wherein the Professional provides expert witness services in any proceeding before a court of law, arbitration or adjudicating authority. In such case, the Professional shall refer the separate Standard on Expert Witness.

2 Objectives

2.1 The objectives of the Evidence and Documentation Standard are to ensure that:

(a) the Professional collects appropriate, reliable and sufficient evidence, which can stand on its own and does not require any follow-up clarification or additional information to arrive at the same conclusion as drawn by the Professional.

(b) adequate documentation is prepared and maintained to:

(i) Facilitate a review and confirmation of procedures performed by the Professional; and

(ii) Validate the findings and support the basis on which observations are made and conclusions are drawn.

3 Requirements

3.1 Professional shall obtain evidence from reliable sources and ensure that evidence collected through various procedures are complementary and relevant to the objectives of the assignment (refer Para 4.1).

3.2 Professional shall obtain relevant and appropriate evidence, admissible in the court of law, to support the basis of findings which allows reliable conclusions to be drawn from those findings (refer Para. 4.2).

3.3 Professional shall record all evidence collected and shall maintain written or digital documentation explaining the manner in which the evidence was gathered, reviewed, documented and stored.

3.4 Professional shall ensure that complete and sufficient documentation is maintained which contains details of the procedures performed, analysis conducted, findings and observations derived from the procedures, evidence relied on in the reports. Where documentation is in digital or some other format, it should be reproducible as hard-copy documents for admissibility in a court of law (refer Para. 4.3).

3.5 The ownership and custody of the documentation shall remain with the Professionals. Where work is entrusted to a third party a mechanism shall be drawn to ensure that all evidences and documentation are readily available to the Professional (refer Para. 4.4).

4 Explanatory Comments

4.1. Reliability of Evidence (refer Para 3.1): The reliability of the evidence depends on its source (e.g., internal from the entity or external third party) and its type and completeness. In cases where the Professionals have doubts on the reliability of evidence or its source, they shall evaluate the necessity of identifying additional corroborative evidence and the need to modify or extend the procedures in order to resolve those doubts.

4.2. Relevance of Evidence (refer Para 3.2): Professional shall ensure that the evidences collected through various sources are relevant to the objectives of the assignment and are appropriate considering their importance to the subject matter. Professional shall ensure that the evidences, on the basis of which conclusions are drawn in the report, are admissible in the court of law.

4.3. Nature of Documentation (refer Para 3.4): Documentation shall be complete and comprehensive. For example, it could, where relevant, consist of details of procedures performed, purpose and outcome of such procedure, information relied on, source of the information, chain of custody maintained, minutes of the meetings conducted during the course of the assignment, signed testimony of a witness, data analytical procedures performed, methodology followed for sample selection, document review and review of electronically stored data, key correspondence (including e-mail communication) with respect to the assignment.

Documentation shall be maintained in a logical manner with appropriate references to the observations forming part of the report. All documentation shall be retained in accordance with the legal requirements and Professional’s retention policy.

4.4. Ownership and Custody of Documentation (refer Para 3.5): Both ownership and custody of the investigation documentation shall remain with the Professionals. Where part of the assignment is outsourced to an external service provider or an Expert, documentation requirements of FAIS 230 (on “Using the work of an Expert” are complied with (refer Para 5 of that Standard).

4.5. Considering the quasi-legal nature of investigation assignments, Professionals shall consider applicability of the privileged nature of the engagements and accordingly ensure that the details of evidence and documentation is shared only with those who have authorised access to them.

5 Documentation for Compliance

5.1 Detailed working paper including details of evidences relied on in the investigation report, quality check procedures implemented, name of the reviewer, etc as detailed in this standard.

5.2 Chain of custody for physical and digital evidence.

6 Effective Date

6.1 This Standard is applicable for all engagements beginning on or after … (a date to be notified by the Council of the ICAI).

FORENSIC ACCOUNTING AND INVESTIGATION STANDARD NO. 330 CONDUCTING WORK PROCEDURES

Contents

Paragraph(s)

Introduction and Scope .................................................................................... 1

Objectives ....................................................................................................... 2

Requirements ……………………........................................................................ 3

Explanatory Comments ……………………. ........................................................ 4

Documentation for Compliance ……………………. ............................................. 5

Effective Date .................................................................................................. 6

Annexure 1: Indicative List of Work Procedures

This Forensic Accounting and Investigation Standard Number 330, on “Conducting Work Procedures,” issued by the Council of the Institute of Chartered Accountants of India (ICAI) should be read in conjunction with the “Preface to the Forensic Accounting and Investigation Standards”, the “Framework Governing Forensic Accounting and Investigation Standards” and “Basic Principles of Forensic Accounting and Investigations” issued by the Institute.

1 Introduction and Scope

1.1 This Forensic Accounting and Investigation Standard (FAIS or “Standard”) 330 on “Conducting Work Procedures” deals with various activities required to executeForensic Accounting and Investigation (FAI) assignments.

1.2 Work Procedures refer to a number of FAI activities to collect, analyse and interpret data and information and gather relevant and appropriate evidence in order to prove or disprove formulated hypotheses.

1.3 Generally, in FAI assignments, Work Procedures are first conducted (Phase 1) behind the scenes where there is little or no interaction with the individuals involved, and thereafter (Phase 2), where there is a need to engage with relevant Stakeholders. Some engagements may not involve Phase 2, since the first phase may provide all the evidence required to meet the objectives of the assignment. An indicative list of the typical Work Procedures relevant in each phase is presented in Annexure 1.

1.4 Scope: This Standard applies to all Forensic Accounting and Investigation engagements and covers both the phases mentioned above.

2 Objectives

2.1 The main objectives of this Standard on Conducting Work Procedures are to ensure:

(a) The Professional has developed Work Procedures for effective execution of the assignment;

(b) The professional conducts planned Work Procedures to achieve the objectives of the assignment; and

(c) There is clarity on activities to be undertaken to either prove, disprove or not prove the hypotheses as formulated by the Professional.

2.2 The overall objective is to ensure the effective and efficient performance of the Work Procedures in line with quality standards.

3 Requirements

3.1 The Professional shall develop Work Procedures to be performed keeping in mind the agreed scope and objectives of the assignment (refer Para 4.1).

3.2 The Professional shall evaluate deploying relevant tools (such as Data Analytics) and techniques (such as Digital Forensics) for the purpose of information and evidence gathering and to effectively perform the Work Procedures.

3.3 As part of the Work Procedures undertaken, the Professional shall pay due attention to any Fraud Risk Factors which are identified (refer Para 4.2).

3.4 Work Procedures developed shall include the formulation and testing of hypotheses to collect relevant and appropriate evidences. Where required, hypotheses may need to be redesigned and reformulated and this shall be done in accordance with FAIS 140 on “Applying Hypotheses” (refer Para 4.3).

3.5 Based on the progress of the assignment, the Professional shall assess the need for any change in methodology (e.g., engaging experts) and accordingly make necessary modifications to achieve the agreed scope and required objective (refer Para 4.4).

3.6 The Professional shall duly document the details of the work performed, the outcome of each Work Procedure and the conclusions drawn thereupon in accordance with

FAIS 320 on “Evidence and Documentation”.

3.7 The Professional shall maintain effective and timely channels of communication with the Stakeholders with respect to the progress of the assignment in accordance with FAIS 250 on “Communicating with Stakeholders”.

4 Explanatory Comments

4.1. Developing Work Procedures (refer Para 3.1): On the basis of detailed plan and methodology as developed in the planning phase in accordance with FAIS 310 and the preliminary analysis of the information gathered, the Professional shall develop Work Procedures for executing the assignment.

4.2. Consideration of Fraud Risk Factors (refer Para 3.3): Where any fraud risk factors (also referred to as “Red Flags”), or suspicious transactions, or unusual circumstances are identified in the preliminary review (phase 1), they shall be further assessed and validated through a detailed review or investigations in phase 2 of the assignment. Professionals shall take due precautions in gathering and safeguarding the evidential matter, especially from a legal perspective.

4.3. Testing Hypotheses (refer Para 3.4): Red flags as identified earlier, need to be corroborated with the hypotheses formulated to either prove, disprove or not prove them. In case there is any deviation, alternate hypotheses may need to be developed and Work Procedures modified accordingly.

4.4. Changing Plan and Engaging Experts (refer Para 3.5): During the course of the assignment, the Professional may require to modify the original plan to incorporate new developments. Such changes may require the need for expert services not anticipated at time of planning. In such cases, the Professional shall take necessary measures to engage the services of an expert in accordance to FAIS 230 on “Using the work of Experts”.

5 Documentation for Compliance

5.1 Professional shall document the scope, plan and methodology and corroboratethe same with the Work Procedures performed by the team.

5.2 All the relevant analysis, working papers, documentary and digital evidences along with proper Chain of Custody form.

6 Effective Date

6.1 This Standard is applicable for all engagements beginning on or after … (a date to be notified by the Council of the ICAI).

Annexure 1

INDICATIVE LIST OF WORK PROCEDURES

During Phase 1 (Preliminary Review)

OBJECTIVES: The broad objective of this phase is to discreetly gather evidence to establish whether there is a prima facia case in the allegations or that some violations, irregularity or fraud indicators are present and merit further review. If possible, attempt will be made to quantify the nature and severity of the irregularities.

WORK PROCEDURES (Indicative List)

1. Identify the nature of evidence required to confirm the allegations/possible violation.

2. Collect various data, information, facts and documents pertaining to the subject matter.

3. Look for fraud indicators (“red flags”) such as any unusual or suspicious circumstances, suspicious transactions, unusual trends or patterns, etc.

4. Collect available evidence using regular masked “audit” procedures.

5. Conduct discreet enquiries to corroborate evidence and identify all those involved.

6. Evaluate allegations and segregate opinions from verifiable facts.

7. Perform basic financial analysis to quantify the extent of loss/damage.

During Phase 2 (Detailed Investigation)

OBJECTIVES: The broad objective of this phase is to prove/disprove the hypotheses postulated so as to establish the veracity of the evidences collected through direct engagement with the people involved. Where evidence for intent is required, this phase mayrequire conducting interviews to collect written statement from key individuals. This phase helps to establish the true modus operandi.

WORK PROCEDURES (Indicative List)

1. Conduct physical verifications and other “field procedures” to verify/corroborate facts and information collected in phase 1.

2. Identify key individuals involved (internal or external) and their personal and specific role in subject matter.

3. Postulate hypotheses and collect evidences to prove/disprove and follow these up with additional hypotheses until there is clarity on the modus operandi.

4. Seek clarification and written response from the individuals, including any third parties.

5. Interview relevant stakeholders with facts/evidence and record their written statements.

6. Analyse evidence and derive possible conclusions for reporting.

FORENSIC ACCOUNTING AND INVESTIGATION STANDARD NO. 350 REVIEW AND SUPERVISION

Contents

Paragraph(s)

Introduction and Scope ............................................................................... 1

Objectives .................................................................................................. 2

Requirements ……………………. ................................................................. 3

Explanatory Comments ……………………. ................................................... 4

Documentation for Compliance ……………………. ....................................... 5

Effective Date ............................................................................................. 6

This Forensic Accounting and Investigation Standard Number 350, on “Review and Supervision,” issued by the Council of the Institute of Chartered Accountants of India (ICAI) should be read in conjunction with the “Preface to the Forensic Accounting and Investigation Standards”, the “Framework Governing Forensic Accounting and Investigation Standards” and “Basic Principles of Forensic Accounting and Investigations” issued by the Institute.

1 Introduction and Scope

1.1 The Forensic Accounting and Investigation Standard (FAIS or “Standard”) on “Review and Supervision” deals with exercising due professional care through a process of review and supervision towards effective assignment performance.

1.2 Definitions: The following definitions have been used in this Standard: Review, refers to the examination of planning and work procedures, collection of evidence, conclusions drawn therefrom and documentation of working papers. Supervision, refers to the oversight of the activities performed by the staff and the provision of overall guidance to the team for the achievement of objectives.

1.3 Scope: This Standard deals with the Professional’s responsibility for review and supervision of the assignment. Where only part of the FAI assignment is outsourced to the Professional, this FAIS shall apply to the extent the Professional needs to review and supervise the activities of the outsourced part of theassignment, as defined in the terms of engagement.

2 Objectives

The objectives of this Standard on Review and Supervision are to ensure that:

(a) The work procedures are being performed effectively and efficiently in line with the terms of the engagement and applicable regulations, if any.

(b) The process of gathering evidences, information, data is comprehensive and reliable to help achieve the objective of the assignment.

(c) The progress of the assignment is monitored as per the plan and the plan is updates, if required, based on the work completed and resources allocated.

(d) The procedures undertaken, the evidence collected, and the documentation gathered is evaluated to ensure their relevance and adequacy to derive necessary conclusions.

3 Requirements

3.1 The Professional shall use best judgement for the process to be followed for review and supervision. The periodicity and extent of the review shall be planned considering all relevant factors of the assignment. (refer Para 4.1).

3.2 While the nature of review and supervision required will vary, the Professional shall exercise oversight on the activities being performed to ensure they are as per the assignment plan (refer Para 4.2).

3.3 The Professional shall also review the plan during the course of the assignment to evaluate if circumstances have changed significantly to revisit the plan in accordance with FAIS Standard 310 on “Planning the Assignment” (refer Para 4.3).

3.4 The work procedures conducted, and the working papers prepared, shall be reviewed by the supervisor to ensure the completion of procedures in accordance with the assignment plan and objectives.

3.5 Depending on nature of the assignment, the Professional shall identify matters for consideration in the review process and that consultations are held with experienced team members or experts in line with FAIS 230 on “Using work of Experts” (refer Para 4.4).

4 Explanatory Comments

4.1. Extent of Review and Supervision (refer Para 3.1): The extent of review and supervision varies for each assignment, and depends upon various factors such as the nature and objectives of the assignment, its complexity, extent of digitalisation, applicable laws and regulations, involvement of government agencies, the competency of the team, time and budget constraints etc.

4.2. Nature of Review and Supervision (refer Para 3.2): Review and supervision includes various matters such as (indicative list):

(a) Tracking the progress of the assignment in line with the plan, time lines, budget etc.;

(b) To confirm the competence and capabilities of individual members of the assignment team to meet planned objectives;

(d) Work procedures being completed adhere to the relevant Standards and laws and regulations, especially in meeting admissibility of evidence.

4.3. Change in circumstances (refer Para 3.3): The Professional shall reassess the adequacy of supervision when the objectives, the scope or terms and circumstances change significantly during the course of the assignment and individual members of the team continue to:

(a) Have the necessary skills and competence to perform the assigned work;

(b) Have sufficient time to perform the assigned tasks; and

4.4. Matters for consideration (refer Para 3.4): The Professional shall evaluate the matters for considerations arising from the review process for significance and seek consultations or inputs from experienced peers or subject matter experts.

5 Documentation for Compliance

5.1 To adhere to compliance requirements of the Standard, key steps undertaken in the review and supervision process shall be documented depending on the factors such as nature of assignment, applicable regulations if any, to confirm proper completion.

6 Effective Date

6.1 This Standard is applicable for all engagements beginning on or after the date to be notified by the Council of the ICAI.

FORENSIC ACCOUNTING AND INVESTIGATION STANDARD NO. 340 CONDUCTING INTERVIEWS

Contents

Paragraph(s)

Introduction and Scope .................................................................................... 1

Objectives ....................................................................................................... 2

Requirements ……………………. ...................................................................... 3

Explanatory Comments ……………………. ........................................................ 4

Documentation for Compliance ……………………. ............................................ 5

Effective Date .................................................................................................. 6

This Forensic Accounting and Investigation Standard Number 340, on “Conducting Interviews,” issued by the Council of the Institute of Chartered Accountants of India (ICAI) should be read in conjunction with the “Preface to the Forensic Accounting and Investigation Standards”, the “Framework Governing Forensic Accounting and Investigation Standards” and “Basic Principles of Forensic Accounting and Investigations” issued by the Institute.

1 Introduction and Scope

1.1 This Forensic Accounting and Investigation Standard (FAIS) on Conducting Interviews, establishes the norms for Professionals to conduct interviews of both internal and external individuals.

1.2 Definitions:

(a) Interview refers to a structured, meeting with the stakeholders, for eliciting and collecting information from reliable and authentic sources. While interviews are expected to be inter-personal interactions with multiple facets, they are generally well planned and conducted within the framework of existing laws, rules, norms and procedures.

(b) Fact is anything “capable of being perceived by the senses” and is generally proven by evidence.

(c) Complainant is the person who makes the complaint. Some engagements may not have a complainant but a whistle blower who initiates the process of investigation.

(d) Respondent is a person against whom the allegations are made by the complainant, and therefore a subject matter of investigation.

1.3 Most professionals in the Forensic Accounting and Investigation (FAI) domain depend on documentary evidence, but may need to obtain substantial oral testimony to corroborate their understanding of documentary evidences (or in cases where there is no documentary evidence, to establish their understanding). This makes interviewing a necessary part of the overall FAI process.

1.4 Scope: This standard is applicable to all Professionals who communicate or engage with individuals with a view to elicit any information directly or indirectly pertaining to an engagement.

2 Objectives

2.1 The overall objective of this Standard on Conducting Interviews is to collect or elicit information and gather evidence to help achieve engagement objectives.

2.2 The supplementary objectives, supporting this overall objective, are to:

(a) Emphasise the importance of effective planning and preparation prior to conducting interviews;

(b) Take a methodical approach and include certain necessary steps in conducting the interviews; and

3 Requirements

3.1 Interviews shall be conducted after due preparation and planning (refer Para 4.1).

3.2 The interviewer shall develop a methodology, which includes certain essential steps to conduct an effective interview (refer Para 4.2).

3.3 The Professionals conducting or participating in an interview shall maintain confidentiality regarding the details of the interview and its outcome (refer Para 4.3).

3.4 Only interviews within the defined scope of work shall be conducted. Any interviews considered necessary by the Professional, but excluded from the scope for any reason, shall be incorporated in the report in line with FAIS 360 on Reporting Results.

4 Explanatory Comments

4.1. Preparation and Planning of Interviews (refer Para 3.1): Prior to the interview, the interviewer shall complete a scrutiny of relevant and available documents and evidence. This would include preparing a detailed questionnaire and a sequence in which questions may be asked. However, the interviewer shall be flexible and modify the questions or the sequence thereof on the basis of the interviewee’s responses.

4.2. Interview Methodology, with certain Essential Steps (refer Para 3.2): While the methods and modalities of the interview are left to the best judgment of the Professional, certain essential steps shall be included in the interview, such as the following (indicative list):

(a) A clear purpose for the interview methodology.

(b) A list of key themes (or hypotheses) on which information is sought.

(d) Ensuring the independence, impartiality and objectivity of the interviewer, chosen from those who are well trained and experienced.

(e) The interview shall include the presence of senior representatives; where an interviewee is a woman, the representative shall be a woman.

(f) The interview evidence should be collected without any inducement, threat or promise.

4.3. Maintaining Confidentiality (refer Para 3.4): The Professional shall maintain

confidentiality over the content and outcome of the interview.

(a) Unless necessary, the interviewer should not reveal any information gathered during the interview, especially identifiable information.

(b) In cases where the engagement is covered under legal privilege, the interviewer has an additional duty of care towards complying with privilege requirements.

5 Documentation for Compliance

5.1 The content and outcome of each interview shall be duly recorded and documented for subsequent reference and for any legal proceedings.

(a) Minutes of the interview may be circulated to chosen participants (on a need-to-know basis) and receipt duly acknowledged.

(b) A short declaration or affidavit (on a non-judicial stamp paper or blank paper) shall be taken from the Interviewee to eliminate any subsequent claim of use of inducement, threat or promise.

6 Effective Date

6.1 This Standard is applicable for all engagements beginning on or after … (a date to be notified by the Council of the ICAI).

Ajmer din

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