Guidance Note for Forensic Accounting and Investigation Standard No. 310 on Planning the Assignment provides guidance on how professionals should conduct planning procedures to meet the requirements of the standard during a Forensic Accounting and Investigation (FAI) engagement. The objective of the note is to assist professionals in scoping and planning the assignment in accordance with the standard. This includes developing and utilizing a process for completing the planning procedures, undertaking key elements of planning to achieve assignment objectives, and creating broad work procedures based on gathered information. The note also emphasizes the importance of confirming the broad plan with the Primary Stakeholders to ensure it aligns with their expectations. Additionally, the guidance provides examples and illustrations to help professionals apply the planning requirements seamlessly and effectively 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. 310 ON PLANNING THE ASSIGNMENT
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 310, on “Planning the Assignment,” 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 310 on “Planning the Assignment” expects the Professional to recognise the need for a well-planned assignment, the objectives of which are clear, in line with the nature of the engagement, as well as its scope and terms.
1.2 This is one of the first Standards of the 300 series level which cover the provisions at an assignment level, as opposed to the other Standards in the series which cover provisions at an overall engagement level. This Standard also makes this important distinction between an engagement and an assignment.
1.3 The requirements of the Standard are expected to be implemented through:
(a) Conducting planning in a process driven manner and documenting the agreed outcome.
(b) Undertaking some key activities, covering key elements and collecting certain important information.
(c) Communicating relevant elements of the plan, as necessary.
1.4 Planning allows the Professional to anticipate and address areas of concern, allocate resources appropriately, and ensure the successful completion of the assignment.
2.0 Objectives
2.1 This Guidance Note (GN) outlines the manner in which the Professional undertakes the planning procedures for implementing the requirements of the Standard during the course of a Forensic Accounting and Investigation (FAI) engagement.
2.2 The objective of the GN is to assist the Professional in scoping and planning the assignment in order to comply with the Standard as follows:
(a) Developing and using a process in completing the planning procedures.
(b) Undertaking certain key elements of planning to ensure the achievement of assignment objectives.
(c) Using the information gathered, developing certain broad work procedures.
(d) Confirming the broad plan with the Primary Stakeholders to ensure it will meet their exceptions.
2.3 The GN also provides examples and illustrations to help the Professional apply the planning requirements in a seamless and effective manner all through the engagement.
3.0 Procedures
3.1 The Professional would have a standard process driven approach to planning assignments. This process would deploy various techniques, such as a checklist, to develop and prepare a plan.
3.2 The Professional may consider it appropriate to allocate sufficient time and resources to gather required information, conduct interviews, or perform analyses when dealing with a complex assignment or new stakeholders.
3.3 The Professional may determine the extent and depth of planning based on the complexity of the engagement, which could depend on:
(a) Nature of assignment, such as a financial statement fraud, asset misappropriation, or a case of corruption etc.
(b) Scope and size of the assignment, such as the number of entities or business units, the volume of transactions, restrictions on availability of data or the scope of work, the duration of the event and the number of stakeholders involved.
(c) Involvement of multiple jurisdictions or regulatory requirements, which could also increase complexity.
3.4 Planning may also depend upon the familiarity of the Professional with the stakeholders and facts such as:
(a) Previous working relationships or experiences with the stakeholders may affect the level of trust and understanding between the Professional and stakeholders.
(b) Information available on the public domain in relation to the nature of business and industry.
(c) Availability and quality of information about the case, such as prior investigations, litigation, audit reports, or whistle-blower complaints.
3.5 On an overall basis, the key elements to be considered while planning an FAI engagement are as set out below:
(a) Be specific: Focus on the subject matter of the assignment (e.g., a certain allegation, financial statement line item, employee, third party, department, function and location). The Professional may limit procedures to the subject matter at hand and skip information not relevant to the scope.
(b) Update regularly: Update and revise the plan as needed throughout the assignment. For instance, if a new whistle-blower comes forward during the assignment or additional areas of concern or additional sources of evidence are identified, the Professional may adjust the plan accordingly.
3.6 The Professional may consider the following while planning an assignment:
3.6.1 Alignment with scope: The plan can be aligned with the mandate, knowledge of business environment and other relevant laws regulations. The planning process will depend upon “Engagement Objectives” as per FAIS 210.
3.6.2 Risk Factors: The Professional can:
(a) Evaluate the risks identified as per FAIS 120 “Fraud Risk” and design adequate procedures to prioritize vulnerable areas.
(b) Tailor work procedures to consider any other risks identified as per FAIS 220 “Engagement Acceptance and Appointment”.
3.6.3 Approach and Methodology: The Professional may align the understanding through discussions with stakeholders in order to define a clear and concise approach as follows:
(a) Obtain a detailed understanding of the subject matter, details
of the available data sources and level of cooperation which is expected to be extended to the Professional.
(b) Determine the varied methodologies that may be employed in order to collect evidence, viz., discussions and process understanding, data analytics, document review, transaction testing, corporate intelligence, market intelligence etc.
(c) Determine the forensic tools and technologies available with the Professional which may be leveraged to achieve the objectives of the assignment along with limitations, if any.
(d) Assess the need for experts and/or third parties in relation to any services to be rendered to the client.
(e) The methodology may be tailored to the specific needs of the engagement and be flexible enough to adapt to changes that may arise during the investigation.
3.6.4 Discussion with Stakeholders
(a) Identify the relevant stakeholders who may have information, knowledge or interest in the assignment.
(b) Determine the appropriate timing and manner to approach the stakeholders, keeping in mind the confidentiality requirements.
(c) Conduct discussions and deliberations with the stakeholders to gather their insights on identifying relevant information, their data sources and other intricacies.
(d) Align stakeholder expectations with the assignment objectives and expected outcome.
3.6.5 Technology Deployment
(a) Determine the usage and acceptability of technology tools to meet the assignment objectives, quality requirements, and timely completion of the project.
(b) The Professional may consider the following aspects:
- Level and extent of technology deployment.
- Management of IT processes, internally by the organisation, or outsourced to a third party.
- Need to use the services of an expert on part of the assignment.
- Need to conduct remote data processing, such as accessing data from a different location.
- Need to deploy data analysis, data mining, or digital forensic tools in the assignment.
(c) The Professional may verify that the selection and use of technology tools comply with applicable laws and regulations.
(d) For instance, where required by regulations, the Professional may obtain the necessary consent from those whose data will be accessed. Additionally, the Professional may assess the security and confidentiality of the data and ensure that it is stored, processed, and transferred in a secure and compliant manner.
3.6.6 Skill and Resource Assessment
Understanding various aspects and components of the engagement would enable the Professional to make a reasonable assessment of the skills and resources required to undertake the assignment such as, the following (indicative list):
(a) Accounting or Financial Experts.
(b) Subject Matter Experts (legal, industry, technology, etc.).
(c) Tools for data extraction and analysis.
(d) Disk recovery tools.
(e) Mobile forensic tools.
3.6.7 Resource Allocation
(a)Prepare a work schedule to estimate the time required for key procedures depending on the assignment objectives, scope, depth of coverage, and map these with available resources and competencies (knowledge, experience, expertise, etc.) for proper resource allocation.
(b) Define the number and skill level of resources to be allocated to the assignment and key milestones to be achieved.
(c) The work schedule may consider the potential impact of contingencies such as delays, unexpected findings, or resource constraints, and the Professional may manage them effectively to minimize their effects on the assignment.
(d) The Professional may use experts in completing parts 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.”
3.6.8 Communication: Based on assimilation of the above factors, communicate the realistic expected outcomes that are achievable and work output by the Professional.
3.7 On an overall basis, the key elements to be considered while planning an FAI assignment are as set out below:
(a) Focus on the subject matter of the assignment (e.g., specific allegations, financial statement line item, employee, third party, department, function, location, etc.). The Professional may limit the work procedures to the subject matter at hand and not look at information which may not be relevant to the scope.
(b) Update and revise the plan as needed throughout the assignment. For instance, if a new whistle-blower comes forward during the investigation or additional areas of concern or additional sources of evidence are identified, the Professional may adjust the plan accordingly.
3.8 Additionally, the Professional may identify sufficient and appropriate milestones to keep stakeholders informed about the progress of the assignment and seek their inputs and feedback.
4.0 Explanations with Examples
4.1 Some examples on application of this Standard where only a part of the engagement is outsourced to the Professional are as follows:
(a) A bank is concerned about potential money laundering activities and hires the Professional to investigate specific high-risk transactions. In this case, the FAI assignment is only a part of the engagement (focusing on high-risk transactions), and the Professional will plan and apply the Standard to this specific aspect of the investigation.
(b) An organisation is investigating alleged employee misconduct and hires the Professional to conduct interviews with some employees suspected in the misconduct. In this case, the FAI assignment is a specific group of tasks (of conducting interviews), and the Professional will plan and apply the Standard to the interview process only.
(c) An organisation is dealing with a bribery and corruption case and hires the Professional to review financial transactions related to expense reimbursements and travel records of the accused. In this case, the FAI assignment is a part of the engagement (focusing on financial transactions), and the Professional will plan and apply the Standard to the financial review aspect of the investigation.
5.0 Annexures with Illustrations
5.1 The table below further illustrates the concept of Engagement and Assignment
|
Sr. No. |
Engagement | Possible Assignments | IIIustrative planning Process |
| 1 | A Professional is hired by a manufacturing organisation to investigate allegations of procurement fraud. The terms of reference include identifying any fraudulent activities, determining the extent of the fraud, and recommending appropriate actions to prevent future occurrences. The scope of work covers the entire procurement process, from vendor selection to payment approval, and the expected deliverables are a comprehensive investigation report and a presentation of findings to the organisation’s board of directors. | Assignment 1: vendor selection and bidding processes at a specific plant. The Professional may review relevant documentation, interview plant employees, and analyse bid data to identify any irregularities or signs of collusion between organisation employees and vendors. | Scope:
The scope of work covers the entire procurement process from vendor selection to payment approval. Possible Fraud Risk Factors:
Approach and Methodology: Assignment 1:
Assignment 2:
Assignment 3:
|
| Assignment 2: reviewing relevant documentation, such as email exchanges, text messages, or any other records that may support or contradict the allegations. The Professional would analyse this evidence to determine its relevance, authenticity, and potential impact on the investigation’s outcome | |||
| Assignment 3: examining the IT systems used in the procurement process, such as the organisation’s enterprise resource planning (ERP) system, to detect any unauthorized access or manipulation of data. The Professional may collaborate with IT experts to review system logs, access controls, and data integrity |
