Guidance Note For Forensic Accounting And Investigation Standard No. 230 On Using The Work Of An Expert outlines the manner in which the Professional prepares and executes work procedures when implementing the requirements of the Standard during the course of a Forensic Accounting and Investigation (FAI) engagement.
Digital Accounting Assurance Board
The Institute of Chartered Accountants of India
1st June, 2023
GUIDANCE NOTE FOR FORENSIC ACCOUNTING AND INVESTIGATION STANDARD NO. 230 ON USING THE WORK OF AN EXPERT
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 230, on “Using the Work of an Expert,” 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.
Page Contents
1.0 Introduction
1.1 FAIS 230 on “Using the Work of an Expert” expects the Professional to understand the responsibilities when reliance is placed on the work of another Professional considered to be an expert in some area relevant to the engagement.
1.2 The requirements of the Standard are expected to be implemented through:
(a) An evaluation of the needs and availability of the expertise.
(b) Exercising the authority of who to engage and evaluating the credibility of that expert.
(c) Conducting an evaluation of the work performed and how to use the report.
(d) Maintaining ultimate responsibility of the work performed.
2.0 Objectives
2.1 This Guidance Note (GN) outlines the manner in which the Professional prepares and executes work procedures when implementing the requirements of the Standard during the course of a Forensic Accounting and Investigation (FAI) engagement.
2.2 This GN provides the Professional with help on:
(a) The procedures to be followed for engaging the Expert.
(b) How to add credibility and reliability to the assignment using the work of the Expert.
2.3 The GN also provides examples and illustrations to help the Professional apply similar work procedures which may be relevant to the circumstances of the engagement.
3.0 Procedures
3.1 Procedures for Engaging the Expert: The Professional is expected to obtain information about the independence, objectivity, qualifications and credentials of the Expert prior to engaging and relying on the work of the Expert. Illustrative sources for such information are as follows:
(a) Knowledge of the Expert’s qualifications, membership of a Professional body or industry association, license to practice, or any other form of external recognition.
(b) Personal experience with previous work of the Expert.
(c) Discussion with other Professionals who are familiar with the Expert’s work to obtain feedback on the Expert.
(d) Discussions with the Expert to understand their availability of time and resources.
(e) Published papers or books written by the Expert.
3.2 Annexure 1 has a list of illustrative check points to be considered prior to appointment of an Expert and Appendix 2 has a sample template of a written confirmation / declaration which may be obtained from the Expert.
3.3 Defining the Scope and expected deliverables of the Expert: The Professional may communicate the following aspects to the Expert (indicative list):
(a) Objective and scope of the Expert’s work including the manner in which the evidence is to be gathered, retained and preserved.
(b) Responsibilities of an Expert for conducting work procedure and responsibility if any of the Professional to help the expert while conducting work procedures.
(c) Confidentiality requirements and whether the Expert will have direct access to the Client.
(d) Reporting authorities for the Expert.
(e) Engagement timelines and milestones of the Expert.
(f) Nature of deliverables to be provided by the Expert.
(g) Permissions and waivers enabling the Professional to share the Expert’s deliverables.
(h) Retention of Expert’s working papers and production of evidence before a Competent Authority.
3.4 Evaluating the Work of an Expert: The Professional may evaluate the work performed by the Expert by conducting inquiries with the Expert and considering the following (indicative list):
(a) Nature of information (internal or external) accessed and relied upon by the Expert in arriving at the conclusion.
(b) Assumptions, if any made by the Expert and scope limitations or restrictions, if any faced by the Expert.
(c) Results of the Expert’s work, i.e., the relevance and reasonableness of the work.
(d) Results of the Expert’s work in the light of the Professional’s overall knowledge of the Client’s business and findings from other investigation procedures.
(e) Conflict of Interest, relationships or circumstances which may adversely impact or impair the professional judgement of the Expert that have come to the notice of the Professional during the course of the engagement.
3.5 Based on the nature and circumstances of the engagement, evaluation of the Expert’s work and assessment of whether the objectives have been achieved, the Professional may use professional judgement to consider whether or not the Expert’s report is to be included in the FAI report.
3.6 In case the Professional disagrees with the Expert’s work; the Professional may consider whether additional procedures need to be performed, either by the Expert or the Professional, or to appoint an alternate or additional Expert. In such circumstances, details regarding the appointment of the Expert, and the rationale for disagreeing and not including the results of the Expert’s work may have to be disclosed in the working papers.
4.0 Explanations with Examples
4.1 The Professional may decide to engage an Expert in the following scenarios:
(a) Gathering of electronic evidence through digital imaging of electronic devices such as desktops, laptops or cell phones and data extraction.
(b) Legal advice (viz. The Insolvency and Bankruptcy Code, 2016) and taxation related advice (viz. Determination of royalty amounts as per Section 9 of the Income Tax Act, 1961) sought in relation to insolvency engagement and/or disputes regarding determination of royalty amounts.
(c) Technical design, valuations, evaluations or certifications to be provided or issued by the relevant industry experts (viz. engineering, soil testing, fire, crisis management etc.).
(d) Market or corporate intelligence in relation to target entities and target individuals to be obtained through discreet enquiries and physical site visits.
(e) Forensic analysis including signature and image analytics.
(f) Project management and consultancy services.
(g) Analysis of trades such as in futures, options or commodities to identify the market manipulation, if any.
4.2. The appropriateness and adequacy of the procedures performed by the Expert are the responsibility of the Expert. For instance, digital imaging, data indexing and execution of search terms performed by an e-Gathering Expert are the responsibility of the Expert. The Professional does not have the same expertise and, therefore, may not be in a position to review and challenge the Expert’s work.
5.0 Annexures with Illustrations
5.1 This Section provides illustrative examples of the following:
- Check points to be considered prior to appointment (Annexure 1)
- Written confirmation from an Expert (Annexure 2)
Annexure 1 – Illustrative check points to be considered prior to appointment of an Expert
1. Whether the Expert has the desirable reputations which is devoid of any unethical or improper conduct and has not been the subject of press reports suggesting illegal/unlawful activities.
2. The Expert’s qualifications, availability of resources, geographical location should be commensurate/suitable to perform the services contracted for.
3. Any interests or relationships (financial, personal, business or otherwise) which the Expert has with the Professional and/or the Client.
4. Any past relationships and/or working experience which the Expert has with the Client and/or the Client’s group entities.
5. Any conflicts / independence concerns which the Expert has; close personal or family relationships with the Professional and the Client, whose engagement the Expert is being engaged for.
6. If appropriate, the Professional may choose to conduct (with the full knowledge and consent of the Expert) a reference check, a brief due diligence or a complete background check and disclose any relevant information sought by the Professional.
7. The Expert is expected to display a commitment towards ethical conduct and abide by the applicable laws and regulations at all times during the engagement.
Annexure 2 – Written representation / confirmation from the Expert
I / We, confirm that the management of [Expert name] and their immediate relatives (as defined below) are not related (financially / commercially) to the management of [Professional name] and [Client name] from [engagement commencement date] to [engagement end date].
I / We also confirm that I / we along with our employees, if any who will work with [FAI Professional name] and [Client name], shall conduct ourselves with ethics and integrity and not indulge in any illegal / unlawful practices including those which may be construed as bribery or corruption.
I / We confirm that I / we have neither been subject to an investigation or convicted of or pleaded guilty of an offense involving fraud or corruption, nor have I / we been listed by any Government agency as debarred, suspended, or proposed for suspension/debarment.
I / We understand and agree that any false certification is grounds for [Professional name] to immediately terminate the relationship with [Expert name].
Expert Name:
Title: ______
Signature:__
Date:
Note: ‘Immediate relative’ means a spouse, and includes parent, sibling, and child including stepchild of such person or of the spouse, any of whom is either dependent financially on such person or consults such person.
