Draft Guidance Note – FAIS 250 : Communication with Stakeholders

Guidance Note for Forensic Accounting and Investigation Standard No. 250 on Communication with Stakeholders provides guidance on planning and executing engagement procedures to meet the requirements of the standard during a FAI engagement. The objective of the note is to assist professionals in complying with the communication requirements before and during the engagement. It emphasizes the importance of identifying key stakeholders, establishing a communication process, including a communication protocol, and jointly identifying essential and significant matters for communication. The note also highlights the need for promoting quality and etiquette in communication while ensuring confidentiality. Additionally, the guidance provides examples and illustrations to help professionals seamlessly and effectively apply the communication requirements throughout the engagement.

Digital Accounting Assurance Board
The Institute of Chartered Accountants of India
1st June, 2023

GUIDANCE NOTE FOR FORENSIC ACCOUNTING AND INVESTIGATION STANDARD NO. 250 ON COMMUNICATION WITH STAKEHOLDERS

EXPOSURE DRAFT Approved by DAAB (On 1 June’23)

This Guidance Note provides technical clarifications and implementation guidance on how to prepare for and conduct work procedures on Forensic Accounting and Investigation Standard Number 250, on “Communication with Stakeholders” issued by the Institute of Chartered Accountants of India (ICAI) and should be read in conjunction with all the Standards relevant to the topic. The contents of this Guidance Note are recommendatory in nature and do not represent the official position of the ICAI. The reader is advised to apply his best Professional judgement in the application of this Guidance Note considering the relevant context and prevailing circumstances.

1.0 Introduction

1.1 FAIS 250 on “Communication with Stakeholders” expects the Professional to appreciate the need for a clear, continuous, two-way communication with several stakeholders at various stages of the Forensic Accounting and Investigation (FAI) engagement.

1.2 The requirements of the standard are expected to be implemented through:

(a)M Conducting communication in a process driven manner and by using certain pre-defined and agreed protocols;

(b) Ensuring that certain Essential and Significant Matters are communicated, while not mandating any form and content of communication.

(c) Maintain good etiquette and confidentiality on communication.

2.0 Objectives

2.1 This Guidance Note (GN) outlines the manner in which the Professional plans and executes engagement procedures for implementing the requirements of the Standard during the course of a FAI engagement.

2.2 The objective of the GN is to assist the Professional in complying with the requirements of the Standard on communication before and during the course of the engagement, in this manner:

(a) At the beginning of the engagement, identify all key stakeholders, apart from those who appointed the Professional (the Primary Stakeholders).

(b) Through a dialogue with the stakeholders, and right at the beginning of the engagement, establish a communication process, a key element of which is the communication protocol (which outlines the time and best means of communication);

(c) An list of certain Essential and Significant Matters of communication are jointly identified, including those mandated by law, and a process is agreed and laid down to ensure that these matters are properly communicated in a timely manner.

(d) The process of communication is designed to promote certain basic quality and etiquette of communication at the same time controlling the content such that there are no confidentiality issues.

 2.3 The GN also provides examples and illustrations to help the Professional apply the communication requirements in a seamless and effective manner all through the engagement.

3.0 Procedures

3.1 The original communication of Request for Services, bidding process, Engagement or Appointment letter etc., are starting points for the base of all future communications, especially since these documents would lay out the scope and approach of the engagement. They may form the basis for the subsequent communication process and protocol.

3.2 In the initial stages of acceptance of the engagement, the Professional, with the help of the Primary Stakeholder, discusses and prepares a list of all the relevant stakeholders with whom the Professional would need to interact. Contact details, the position and authority of each of the stakeholders is noted as well as the nature of information which they may be able to provide. The names of the Stakeholders with whom to communicate the Essential and Significant Matters is particularly important. The Professional may choose to connect with some or all of these stakeholders early on and seek their help to design the Communication Process and Protocol.

3.3 In designing and laying out the Communication process, the Professional may keep the following in mind:

(a) The Communication protocol can act as a form of Communication process documentation and capture all the important matters related to the process, list of stakeholders, who will communicate with whom, the nature and timelines of regular communication (e.g., status updates), who has to provide what information and when, what escalation mechanisms kick-in and under what circumstances etc.

(b) The list of stakeholders would need to be flexible and may change as the engagement progresses. The process would allow for an effective way to ensure the stakeholder list is kept updated, including the contact details of all.

(c) The form and format of the communication would also be properly laid out, covering some or all of the following:

• Form: Oral, verbal, written, physical meetings, physical observation
• Format: Voice recordings on digital files, documents (hard copy or digital format such as email or text messages), Digital data files on pen/hard drives, Images and Pictures, Videos (e.g., CCTV recordings), etc.

(d) In the form and format of communication, the Professional may wish to keep in mind the requirements of any relevant laws and regulations, especially those concerning the nature of evidence and the Chain of Custody protocols to ensure that evidence gathered is in compliance with those legal requirements.

(e) Data and information requirement would generally be a key element of the Communication Process and would find appropriate importance in the protocol as well. Getting timely information is key to the engagement and where this is not the case, escalation mechanisms need to kick-in automatically through emails etc. The Professional may be required to follow an escalation protocol in case of delay in obtaining information, lack of timely clearance of queries, etc. An escalation matrix may be defined and agreed at the beginning of the engagement with the Primary Stakeholders for communicating abnormal circumstances, significant matters etc.

(f) Where the Professional is taking help of other Experts, such as Data Scientists or Cyber security experts, the need for appropriate communication would have to be put in place. The Professional should consider incorporating the requirements of FAIS 230 on “Using the work of an Expert”.

(g) Communication about the progress of engagement is one of the important parts of communication. The Professional is expected to define the timelines to communicate the progress of engagement and also communication protocol if any as decided, required or requested by the Primary Stakeholder.

(h) Many times, there could be a need for continuous and immediate conversations, which may not be anticipated in the pre-agreed protocol, in which case there might be a need to bypass some of the protocols requirements to address the issues on hand.

3.4 The communication which is conducted for gathering of information and evidences are required to be predefined and pre-agreed since the Professional is expected to follow appropriate evidence gathering procedures. It will be appropriate that the communication process to establish the manner in which evidence is gathered is also included in the protocol.

For example, in case of obtaining any Public Document as an evidence, an application in the prescribed format (along with fees) is required to be submitted to Public Authorities. The Professional may keep the detailed documentation in form of copy of Application and copy of fees payment Challan, etc, In certain cases, while producing the Public Documents as evidences the application along with details of payment may be required to be submitted.

3.5 While the Standard expects all communication to be with the Primary Stakeholder, it acknowledges that there would be a need for direct communication with the other stakeholders (especially external parties like Government Agencies, suppliers, digital service providers etc.) as and when felt appropriate by the Professional or when called upon by those stakeholders.

(a) The Communication Process and Protocol would anticipate under what circumstances the communication with the other stakeholder would require to be done, and how (i.e., directly or through the Primary Stakeholder).

(b) The nature of communication with other stakeholders differs from that with the Primary Stakeholders. The communication with other stakeholders could possibly be required for enquiry, gathering of evidence, interview etc. Communication with other stakeholders would mostly be done with the prior knowledge of the Primary Stakeholder, unless the communication involves possible suspects, in which case the need for prior knowledge may not be necessary.

(c) Where the Professional is asked to engage with Government or Law Enforcement Agencies when called upon or on behalf of the Primary Stakeholders, the need for appropriate communication would have to be put in place. Most communication with the agencies would be mandated by law (not optional) and therefore the communication protocol would need to accommodate that. The Professional should consider incorporating the requirements of FAIS 240 on “Engaging with Agencies”.

3.6 While observing the Communication Protocol, the Professional is expected to understand the powers of authorities related to the engagement and clarify the communication expectations.

For example, in case of forensic investigation of PUFE (Preferential, Undervalued, Fraudulent, Extortionate) transactions, required by the resolution process as per the Insolvency and Bankruptcy Code, 2016, the Professional may be required to appear before the Committee of Creditors and may be required to provide clarification of relevant reports. The Professional may need to ensure that the Communication Protocols are pre-agreed with the Primary Stakeholders, ideally at the beginning of the engagement, or later if appropriate.

3.7 In certain unique and unusual circumstances, the Professional may suspect some involvement of the Primary Stakeholders, as a result of which the Communication Protocol may need to be re-evaluated and nature of information sharing may have to be reconsidered. This level of professional scepticism is necessary in these sensitive cases and the Professional may choose to reach out to the next higher decision-making authority for further guidance on communication.

For example, if the CEO is the Primary Stakeholder, but now is suspected to be close to those who are suspected of fraud, the Professional may reach out to the Board of Directors or Audit Committee. If appointed by a regulatory body, the Professional may exercise due judgement in communicating such issues encountered to the CEO as required by the initially originally agreed in the Communication Protocols.

4.0 Explanations with Examples

4.1 The Communication Process and Protocol is generally developed jointly with the Primary Stakeholders and the Professional may consider the following in completing such an exercise:

Sr. No.	Point to be considered	Particulars
1	Person through whom most of the communication will take place on behalf of the Professional on most matters.	Details such as Name, contact address, official email details, contact numbers etc
2	Person through whom most of the communication will take place on behalf of Primary Stakeholders for Essential Matters	Details such as Name, contact address, official email details, contact numbers etc
3	Person who will communicate on behalf of Primary Stakeholder for Significant Matters	Details such as Name, contact address, official email details, contact numbers etc
4	Mode of Communication	Details such as Digital Mode, Physical Documentary Mode, Prescribed Format of the Stakeholder etc
5	Mode of Communication with Other Stakeholder for gathering Evidences	List of Other Stakeholders. Address, communication details such as email address, contact numbers etc Communication mode – Digital, paper mode through courier etc. Evidence Gathering mode – list of evidences, mode of evidences, acknowledgement of delivery of evidences. Communication of safe keeping of original documents in case it is in custody of other stakeholders.
6	Mode of Communication with Other Stakeholders like Investigating Authorities.	The written notice from Investigating Authorities to the Professional Format prescribed if any by these authorities to exchange data and information, Mode of acknowledgment for submission of data or information
7	Mode of Communication with Other Stakeholders like Adjudicating Authorities or Judicial Authorities	The legal provisions under which the data and information is to be shared. The prescribed format under the requirements of applicable law. Any restriction or instruction by these authorities about circulation or non-circulation of data and information to certain stakeholders, Mode of submission – digital or physical documentation.

4.2 In certain instances, the Professional is required to communicate with other stakeholders for enquiry, gathering of evidence etc. The Professional may need to intimate the Primary Stakeholder in such circumstance. The Professional may consider the following points for such communication:

SR. NO.	Points to be considered	Particulars
1	Name of the Stakeholder
2	Nature of association with the engagement	As a Cloud Service Provider, Supplier, Customer, borrower etc
3	Confirmation of Contact Details	Confirmation of official address, Authority/Person to whom communicate, email, contact numbers etc
4	Reason for Communication	The details of data, information and documents required etc
5	Timelines for Communication	Periodicity during which the communication may take place
6	Whether any pre- communication from Primary Stakeholder is required	Professionals can suggest Primary Stakeholders to have a pre-communication with Other Stakeholders in case necessary.
7	Mode of Intimation	Digital or Documentary

4.3 While communicating with other stakeholder for gathering of evidence following points may be considered:

SR. NO.	Point to be considered	Particulars
1	Person/Authority with whom to communicate	The Person/Authority may have necessary power/authority on behalf of other stakeholder to exchange data, information which could be of in the nature of evidence.
2	Confirmation of Attendance	In case physical meetings are scheduled the written confirmation of attendance to be obtained.
3	Mode of Communication	Special care to be take about language in which communication to be done, digital communication with prior consent for recordings, oral communication to be documented and subsequently be signed by all the stakeholders etc
4	Precaution about exchange of data and information through digital mode	Requirement of certification for digital exchange of data, information as provided under Evidence Act, accuracy and completeness test while exchanging the data and information etc.
5	Nature of Data and Information required	Depending upon the nature of engagement, professionals may ask for the nature of data, Information required through the communication. In case of enquire or interview on a case-to-case basis Professional can decide about sharing these through communication mode.

4.4 As explained above, the Professional may consider following points for Protocols:

SR. NO.	Point to be considered	Particulars
1	Communication Protocol	To which authority the communication is to be addressed – it could be related to day-to-day requirements in assignments, third party communication for gathering of evidences, communication related to progress of assignments, summary findings, communication of significant matters.
2	Third Party communication protocol	Any prescribed format and mode of communication by law, regulation or entity specific policies. The contractual terms and conditions if any prescribed for communication between Primary Stakeholder and Third Party.
3	Language protocol	The communication language may be considered. In certain cases, the stakeholder may understand only restricted languages and Professional is required to communicate only in that language. Documentation and evidences may be gathered in local, restricted languages. The Professional may decide to take the help of language expert who may help in such communication.
4	General Protocol	General Protocols related to timings of work procedures normally during the daytime. General Protocols related to tone and manner of communication.

4.5 The following considerations may also be taken into account while defining an escalation protocol:

SR. NO.	Points to be Considered	Particulars
1	Hierarchy level of appointing Agency	The hierarchy and authority levels of various designations of appointing agency.
2	Expected Significant Incidences	1. Non-cooperation from certain parties to disputes 2 Non-cooperation from third parties for providing the evidence. 3 Life threating circumstances 4. Work procedures that may involve the legal complications 5. The dependencies of disputed matter on other disputed matters
3	Defining the hierarchy level for different types of Significant Matters	1. Non-cooperation from parties to dispute may be handled at inspecting level 2. The legal complications may be handled by Legal Team of appointing authority.

5.0 Annexures with Illustrations

5.1 The Professional is required to communicate Essential Matters as defined in the Standard. The following is an Illustrative list of Essential Matters:

(a) Scope & Methodology of Engagement: The scope depends upon the nature of engagement, periodicity for which data, information will be examined, investigated, the engagement plan and chosen methodology for Forensic Services to be communicated. Most of the time Scope and Methodology may get covered in the Appointment Letter, but it becomes an essential matter for communication when the agreed scope or methodology changes significantly. For example, an engagement which starts as Forensic Accounting may get expanded into a fraud investigation.

(b) Laws and Regulation applicable to the engagement: Depending upon the Nature of Engagement, the Professional may communicate the Laws and Regulation under which the legal proceedings may take If the Professional is appointed as per the requirement under legal or regulatory provisions the same be mentioned in the appointment letter. Any significant changes to this would also need to be communicated.

(c) Reporting format for the engagement, which may be prescribed by legal and regulatory provisions.

(d) Periodic reporting of engagement progress as per requirements: While communicating the Periodic Status Update Reporting the Professional may consider the following points:

SR. NO.	Points to be Considered	Particulars
1	Periodicity or Frequency of Status Update Reporting	It may be predefined timelines or in the form of completion of certain procedures of engagements.
2	Work Procedures/ Engagement Execution details within certain time period	Details of completed work procedures or details of execution within the time period.
3	Reason for any delay	In case certain work procedures are not completed the reason there of.
4	Sufficiency of Work Procedures	Whether the work procedures performed were sufficient or still further procedures are required to be carried out as outcome may not be confirmed.

5.2 The Professional is required to communicate Significant Matters as defined in the Standard. The following is an Illustrative list of these matters:

SR. NO.	Points to be considered	Particulars
1	Nature of Significant Matters	Nature of Significant Matters could be any as illustrated in the Standard.
2	Timing	When did it come to the notice of the Professional
3	Importance	Importance of the matter in relation to execution of engagement and/or significance of it in relation to achievement of the objectives of engagement.
4	Alternate Options	Any alternate options for getting the data, information, evidence which could be available, which may affect the original Plan, Methodologies, Professional Fees and most importantly its impact on scope of the Engagement.
5	Impact	In absence of any alternate options, the Impact of such significant matters on overall engagement and ultimately on achievement of objectives of Engagement.