Introduction to FAIS
The Forensic Accounting and Investigation Standards (FAIS) were introduced by the Digital Accounting and Assurance Board (DAAB) of ICAI to bring structure, consistency, and credibility to forensic accounting and investigation (FAI) engagements. These standards became mandatory from July 1, 2023, for all ICAI members conducting FAI assignments.
The FAIS framework is divided into six series:
- 100 Series– Key Concepts
- 200 Series– Engagement Management
- 300 Series– Executing Assignment
- 400 Series– Specialized Areas
- 500 Series– Reporting
- 600 Series– Quality Control
This article focuses on the 300 Series, which outlines the core execution procedures for forensic assignments.
Overview of FAIS 300 Series
The 300 Series comprises six standards that guide professionals through the execution phase of a forensic engagement. These standards ensure that forensic accountants apply consistent, methodical, and legally defensible procedures during investigations.
Summary of Key Standards in the 300 Series along with suitable examples of the stated procedures:
1. FAIS 310 – Planning and Performing Forensic Procedures
This standard emphasizes the importance of a structured approach to planning forensic assignments. It includes defining the scope, objectives, timelines, and resources, while also identifying potential risks and red flags.
Examples of Procedures:
Reviewing internal audit reports and whistleblower complaints.
Conducting preliminary interviews to understand the business environment.
Identifying high-risk areas such as cash transactions or related-party dealings.
2. FAIS 320 – Evidence Collection and Preservation
This standard focuses on the proper collection, handling, and preservation of both physical and digital evidence. It ensures that the chain of custody is maintained and that evidence remains admissible in legal proceedings.
Examples of Procedures:
Imaging hard drives and extracting emails using forensic tools.
Collecting original invoices, contracts, and bank statements.
Documenting every step of evidence handling to maintain integrity.
3. FAIS 330 – Use of Technology and Tools
This standard encourages the use of forensic software, data analytics, and other digital tools to enhance the efficiency and accuracy of investigations.
Examples of Procedures:
Running Benford’s Law tests to detect anomalies in financial data.
Using data mining tools to identify duplicate payments or shell vendors.
Employing forensic software to analyze large volumes of transactional data.
4. FAIS 340 – Interviews and Interrogations
This standard provides guidance on conducting interviews ethically and effectively. It emphasizes objectivity, legal compliance, and the importance of corroborating statements with evidence.
Examples of Procedures:
Conducting structured interviews with employees and vendors.
Observing behavioral cues and inconsistencies in responses.
Comparing interview responses with documentary evidence for validation.
5. FAIS 350 – Analysis and Evaluation
This standard involves analyzing financial and non-financial data to identify patterns, inconsistencies, and potential fraud indicators. It also includes evaluating the reliability of evidence and drawing conclusions.
Examples of Procedures:
Performing ratio and trend analysis to detect financial manipulation.
Conducting variance analysis between budgeted and actual figures.
Mapping relationships between entities using link analysis tools.
6. FAIS 360 – Documentation and Working Papers
This standard mandates maintaining comprehensive documentation of all procedures, findings, and evidence. It ensures transparency, accountability, and reviewability of the forensic process.
Examples of Procedures:
Creating detailed working papers with references to evidence.
Maintaining logs of interviews, data analysis, and findings.
Preparing documentation to support expert witness testimony.
Importance of the 300 Series
The 300 Series is critical because it:
- Standardizes execution of forensic engagements.
- Enhances credibility and defensibility of findings.
- Ensures compliance with legal and regulatory frameworks.
- Promotes professional skepticism and ethical conduct.
Applicability and Enforcement
- FAIS is mandatory for ICAI members from July 1, 2023.
- Applicable to all new engagements initiated on or after this date.
- Non-members are encouraged to adopt FAIS voluntarily for best practices.
Conclusion
The FAIS 300 Series is a cornerstone in the professionalization of forensic accounting in India. It empowers practitioners to conduct investigations with rigor, transparency, and accountability, aligning with global best practices. As financial crimes become more sophisticated, adherence to these standards ensures that forensic professionals remain effective, ethical, and legally compliant.
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