Guidance Note For Forensic Accounting And Investigation Standard No. 240 On Engaging With Agencies outlines the manner in which the Professional prepares and executes work procedures for implementing the requirements of the Standard during the course of a 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. 240 ON ENGAGING WITH AGENCIES
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 240, on “Engaging with Agencies,” 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 240 on “Engaging with Agencies” expects the Professional to understand the responsibilities which apply when asked to engage with the agencies and how to apply these in a Forensic Accounting and Investigation (FAI) engagement.
1.2 The requirements of the standard are expected to be implemented through:
(a) Having the required clarity on the terms of the engagement when the Professional is appointed by the Agency.
(b) Understand the legal and regulatory requirements which drive the manner of engagement.
(c) Maintain desirable communication protocols and documentation.
2.0 Objectives
2.1 This Guidance Note (GN) outlines the manner in which the Professional prepares and executes work procedures for implementing the requirements of the Standard during the course of a FAI engagement.
2.2 Objective of this GN is to assist the Professional engaging with Agencies
in the following manner:
(a) Engagements where the Professional is appointed by the Agency or on their behalf as a Consultant or Advisor.
(b) Engagements where the Professional is called upon by the Agency in respect of the Forensic enagagement carried out by them under the instructions of their employer, client and other stakeholders.
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 Professional engaged as Consultants or Advisors by the Agency
3.1.1 Scope of work: The Professional is expected to agree on the terms of engagement and obtain an appointment letter from the relevant Agency in a timely manner. If the appointment letter does not contain the scope and objectives of the engagement, the Professional may consider discussing the expectations and the scope with the relevant stakeholders of the Agency at the time of entering into the engagement. Such expectations and scope of work may be agreed and documented in the form of written communication. Understanding of the scope of work is important to effectively plan the work procedures, manpower requirements, etc. In case of any additional work request, outside the agreed scope of work, it is advised that the Professional documents the same with the relevant stakeholders of Agency in the manner that is binding on both the parties, and ideally seek to get an addendum to the original appointment letter.
3.1.2 Understanding of applicable laws and regulations: The Professional before planning and designing the work procedures is expected to identify the applicable laws and regulations with respect to the engagement. 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 applicable laws and regulations may vary based on the nature and allegations involved in the FAI engagement and in addition to this, FAIS 130 on “Laws and Regulations” may also be referred for identifying the applicable laws and regulations.
For example, if the Professional has been engaged by Serious Fraud Investigation Office (SFIO), the Professional would be expected to have knowledge of the provisions of the Companies Act, 2013 which are applicable for SFIO and the relevant sections under which the company under investigation (“CUI”) or its Directors can be charged.
3.1.3 Allocation of team with requisite skill set: Basis the agreed scope of work and expectations of the Agencies, the Professional is expected to identify the requisite skill set and allocate the manpower resources to the engagement accordingly. At this stage, the Professional may also plan on the number of resources required for the duration of the engagement and tools and technologies which are required to assist in the engagement and meet the expectation of the Agencies. The Professional is expected to ensure that the team has a good mix of new and experienced staff members with the necessary skill set for using tools and technologies.
For example, a complex investigation involving multiple companies, individuals and analysis of multitude of bank statements would require use of data analytics tools at some stage. The data received from the Banks or third parties could be in different formats which may first be required to be sanitized and structured before it can be analysed and further the bank statements may contain thousands of line items, which can only be efficiently analysed through the use of data analytic tools. Therefore, the Professional in this case may consider including an Expert who has adequate experience of using such tools, as per GN 230 on “Using the work of an Expert”.
3.1.4 Evidence Gathering: In case of engagements with Agencies, it is possible that the Agencies control the process of gathering of evidence and the Professional is required to rely on that information. The same may be disclosed appropriately in the report in line with FAIS 510 on “Reporting Results”.
3.1.5 During the course of engagement, the Professional may be privy to information which is highly confidential in nature. The Professional should place adequate controls to ensure strict confidentiality is maintained and information shared with the team on a “need to know” basis with due authorizations.
For example, a non-disclosure undertaking from the Professional and team members involved in the engagement may be obtained.
3.2 Professional called upon by Agencies to provide information
3.2.1 Professionals are called upon by the Agencies to provide information for an ongoing investigation. For instance, it could be a case where a Professional had carried out a FAI Engagement earlier, on an Entity Under Investigation (“EUI”) or on an Individual as the case may be, and the Agencies have requested for information with respect to the work performed by the Professional as the work could be of some significance to an ongoing investigation. Alternatively, the Professional may also be called upon to provide information as an employee. In either case, the guidance would remain the same.
3.2.2 In case information has been requested verbally by the Agencies, the Professional may request a written communication and share the available information.
3.2.3 The Professional at the time of being called upon may maintain a record of information provided and update it on regular basis. This record content may include, but is not limited to, the following:
(a) Date of request.
(b) Name of Investigation officer along with his/her designation.
(c) Information requested by the Agency.
Mode of sharing (Electronic / Physical). (e) Date on which shared.
3.2.4 The Professional may provide the factual information supported with the available supporting documentation and may refrain from providing any opinions or judgements on any matter.
