Draft Guidance Note – FAIS 350 : Review and Supervision

Guidance Note on Forensic Accounting and Investigation Standard No. 350 Review and Supervision aims to offer guidance regarding review and supervision in order to ensure the effective and efficient performance of work procedures in accordance with the engagement terms and applicable laws and regulations. The note emphasizes the importance of comprehensive and reliable gathering of evidence, information, and data to achieve the assignment’s objective. It also highlights the significance of monitoring assignment timelines, updating the plan as needed, and evaluating the procedures, evidence, and documentation to derive necessary conclusions. Additionally, the guidance provides examples and illustrations to assist professionals in applying similar work procedures relevant to the engagement’s circumstances.

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

GUIDANCE NOTE ON FORENSIC ACCOUNTING AND INVESTIGATION STANDARD NO. 350 REVIEW AND SUPERVISION

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 350, on “Review and Supervision” 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 This Guidance Note (GN) with reference to FAIS 350, deals with review and supervision as an integral part of the operational framework. This is separate and distinct from the quality control covered in FAIS 610: Quality Control. The purpose is consistent which is to ensure that the objectives of the engagement are achieved, and the work deliverables meet the standards defined in the engagement letter as detailed in the next paragraph.

1.2 Supervision requires directing the efforts of engagement team who are involved in accomplishing the objectives of the engagement and determining whether those objectives are being accomplished as planned.

1.3 Elements of supervision include guiding team members, ensuring the availability of a clear communication channel to report and track issues, concerns, and their disposal. The extent of supervision appropriate in a given instance depends on many factors, including the:

(a) Complexity of the subject matter.

(b) Qualifications/skills of persons performing the work.

(c) Procedures to be performed.

(d) Controls or accounts and disclosures to be evaluated.

1.4 The review plan may seek to maintain required levels of quality as applicable to the engagement and create an open environment within the engagement team (including transparency with two-way interaction etc.) to allow smooth functioning and interaction. The plan may include check points to determine the nature, timing and extent of such direction, supervision, and review.

2.0 Objectives

2.1 The objectives of this GN are to provide guidance on the aspects of review and supervision to ensure that:

(a) The work procedures are being performed effectively and efficiently in line with the terms of the engagement and applicable laws and regulations, if any. Details of the terms of engagement are available in FAIS 220 on “Engagement Acceptance and Appointment” and applicable regulations are referred in FAIS 130 on “Laws and Regulations”.

(b) The process of gathering evidence, information and data is comprehensive and reliable to help achieve the objective of the assignment.

(c) The assignment timelines are monitored as per the plan and the plan is updated, as and when necessary, not just based on the work completed and resources allocated but also to reflect any change in approach or hypotheses that may arise as a result of the progress in the engagement and the evidence gathering process in line with FAIS 140 on “Applying Hypotheses”.

(d) The procedures undertaken, the evidence gathered, and the documentation prepared are evaluated to ensure their adequacy and appropriateness to derive necessary conclusions in line with FAIS 320 on “Evidence and Documentation”.

2.2  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 Review and supervision are effective when there is clarity among team members regarding their roles and responsibilities as well as how they are aligned to the engagement. Due to the sensitivity of the assignments, information sharing is generally on a need-to-know basis. However, important information which includes matters that may affect the nature, extent, and timing of work procedures they are to perform (such as the nature and complexity of the entity’s business) as it relates to their assignments and possible challenges in execution of the engagement is shared timely.

3.2  The work performed by engagement team member may be reviewed on sample basis to determine whether it was adequately performed and to evaluate whether the flow of information from evidence gathering to analysis to deriving conclusions is consistent and both outliers and apparent contradictions have been satisfactorily addressed.

3.3  The Professional responsible for review could:

• Ensure that the engagement documentation adequately represents the services Professional was engaged to provide.
• The electronic as well as physical storage of evidence and documentation is as per established protocols and rules for Read/Write/Retrieve etc. are clearly defined and access is provided as per these rules.
• In addition to access specific rules, protocols may also be defined for preservation and retention of evidence and documentation, after completion of the assignment with responsibilities allocated. Work products/deliverables/output and the supporting engagement documentation needs to be appropriately reviewed before any work product/deliverable/output is issued.
• Engagement documentation is reviewed before finalization and sign off.

3.2 The Professional may delegate aspects of the documentation review responsibility. The responsibilities for reviewing documentation may be agreed during engagement planning. The nature, timing, and extent of the review of the engagement documentation that is appropriate in each instance depends on many factors, including the complexity of the subject matter, the nature of the services, the ability of the person preparing the documentation, the ability and experience of the reviewer etc.

3.3 To determine the extent of supervision necessary for engagement team members to perform their work as directed and form appropriate conclusions, the Professional and other engagement team members performing supervisory activities may consider the:

• Nature of the company, including its size and complexity.
• Nature of the assigned work for each engagement team member, including the procedures to be performed and the controls or accounts and disclosures to be tested.
• Knowledge, skill, and ability of each engagement team member. In case required skills are not available, the Professional may seek assistance from an expert as per FAIS 230 on “Using the work of an Expert”.
• Nature, size of data and an assessment of any tool required to process the data.
• Appropriate documents/ information is received on timely basis from the organisation and if there is a gap then to bridge that gap by discussing/escalating with concerned stakeholder as per the Engagement letter.

3.4  The review concentrates on the appropriateness and overall completeness of the engagement documentation and its ability to support the work, report, or work product/output/deliverable.

3.5 The purpose of review is to determine whether the:

• Work procedures have been performed to a satisfactory level, and meet any applicable regulatory or professional standards, as appropriate.
• Documentation adequately reflects the work performed and complies with the requirements of FAIS 320 on “Evidence and Documentation”.
• Work output/deliverable are objective, factual, accurate, clear, easily understood, and logical.
• Numbers and data used have validated and cross-checked for both correctness and related obligations with respect to permissions for data usage have been fulfilled.
• Review process may be continuous throughout the engagement and not solely related to the final work product/product/deliverable. The process may include client communication where appropriate.
• Services are performed as specified in the engagement agreement/contract/addendum with the client.
• No forms of positive or negative assurance is included in the report or work product or deliverable or output.
• Where the assignment could not be completed because of any concerns on availability of data or personnel or any other reason the related documentation is in line with FAIS 510 on “Reporting Results”.
• Review of the work procedures/evidence gathered by engagement team in reference to the hypothesis and make necessary changes including rejecting or adding new or alternate hypotheses as appropriate. FAIS 140 on “Applying Hypotheses”.

4.0 Explanations

4.1 To remain sufficiently and appropriately involved and to demonstrate leadership and the appropriate behaviour and culture, the Professional may:

Supervision

• Visit the engagement team locations as deemed appropriate and meet with supervisors and the firm’s experts.
• Speak with engagement team members and direct, supervise and review their work.

Review

• Conduct regular update meetings with other leaders of the engagement team to discuss progress and any issues arising, particularly in relation to significant matters and significant judgments identified. This discussion may include whether there needs to be, or have been, any significant changes to the overall strategy and plan.
• Review and compare with similar projects either within the organization or outside to identify improvement areas.
• Include one-off sessions with experts or seniors within the firm to provide guidance and clarify doubts of the team members where appropriate.

4.2 Reference may be made to collection, storage, retrieval and retention of evidence and other engagement documentation as enunciated in FAIS 320: Evidence and Documentation. Engagement review documentation may include:

• Minutes of review meetings.
• Disposal and closure of Items and concerns raised during the review.
• Sources for review and validation of data used in the work products/output/deliverable including external data sources as well reports from experts or agencies involved in the process.
• Review process for Collection, Storage, Retrieval and Retention of Evidence and Other Engagement documentation. FAIS 320 on “Evidence and Documentation”.
• Any other review related documents maintained by the team.
• Learnings to be carried forward to future engagements including process improvements and other recommendations.

5.0 Annexures

As explained earlier in this guidance note the extent of the review and supervision process is a function of the complexity of the engagement and the skills and experience available in the team. An illustrative review check list is provided below:

S. No.	Review points	Review comments	Target Timelines for addressing review comments	Comments addressed by (Name of team member)	Remark, if any
1	The engagement has been planned appropriately?
2	The scope of the procedures performed are in accordance with the engagement agreement?
3	Define protocols related to evidence collection and documentation i.e., Deviations for defined access, storage, retention, and retrieval protocols.
4	The engagement has been Informed about their responsibilities at the start of engagement as well as during the engagement?
5	Evaluate if existing engagement team has necessary skill set required for completion of the engagement?
6	Evaluate if existing engagement team has necessary Tools required for completion of the engagement?
7	Whether the objectives of the procedures were achieved?
8	Regular review of relevance of Hypotheses and need to  change work procedure where applicable.
9	Whether the work performed is adequately documented and supports our findings?
10	Whether the documentation adequately reflects the work performed and complied with the requirements of FAIS 320: Evidence and Documentation?
11	Are work output/deliverable of appropriate quality, objective, factual, accurate, clear, easily understood, and logical?
12	Appropriate escalation within the Professional’s organization as well as the primary and where appropriate the secondary stakeholders where there are issues or concerns like data availability,  infrastructure accessibility, cooperation of Key Management Personnel etc.
13	In case Professional has used the work of an expert, it was adequately documented. Differences of professional opinion, if any, were appropriately resolved?
14	Is there any open item required to be completed before providing the report to the client?