Sponsored
    Follow Us:
Sponsored

Guidance Note for Forensic Accounting and Investigation Standard No. 510 on Reporting Results outlines the key elements that should be included in a written report for a Forensic Accounting and Investigation (FAI) engagement. The objective of this guidance note is to provide guidance on how to effectively cover each of these key elements in a meaningful manner. It provides details on the content and structure of the report to ensure compliance with the Standard. Additionally, the guidance note includes examples and illustrations to assist Professionals in applying similar work procedures that are relevant to the specific circumstances of 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. 510 ON REPORTING RESULTS

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 510, on “Reporting Results,” 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 510 on “Reporting Results” mandates a written report comprising of the findings along with the evidence relied upon by the Professional in a structured manner to provide the stakeholders with a balanced and factual account of the outcome of Forensic Accounting and Investigation (FAI) engagements.

1.2 The objective of a report is to enable the stakeholders to understand the case background including concern, evidence which supports as well as refutes the concern, which in turns helps the stakeholders reach a factual conclusion.

1.3 The Professional, as part of their deliverable, may issue interim reports, or a final report on conclusion of the assignment. However, in some cases if a new fact or evidence comes to the knowledge of the Professional after issuing final report, may also choose to issue a supplementary report.

2.0 Objectives

2.1 This Guidance Note (GN) sets out key elements which may form part of a written report in FAI engagement.

2.2 The objective of this GN is to provide details of how to cover each of the key elements of the Standard in a meaningful way.

2.3 This 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 When writing a report, the Professional follows a structured and organised approach to ensure clarity, accuracy and achievement of assignment objectives. The Standard refers to the need for certain key elements in the drafting of the report.

3.2 FAI engagements are diverse in nature and have unique characteristics. Therefore, reporting requirements may vary. If statutory requirements, or the terms of the FAI engagement prescribe a format of the report, the Professional would adhere to that. Nevertheless, certain key elements are likely to form part  of most engagements. An overview of these key elements is provided as an indicative list in para 4.3 of FAIS 510. An explanation of these is provided here.

3.3 Key Elements of a Report:

(a) Covering letter: It is a good practice for the Professional to issue a covering letter along with the report addressing it to the primary stakeholders and referencing it to the engagement letter.

(b) Executive summary: The executive summary is a concise overview of the engagement and the findings. It provides a comprehensive picture of the concerns raised, work procedures carried out and the findings. It is a good practice to include a disclaimer stating that the executive summary is not a substitute to the report and should be read in conjunction with the report.

(c) Title, addressee, distribution list: The title of the report may include the case reference number, or project name, as appropriate. The report shall be addressed to the primary stakeholders. Distribution of the report to others shall be with the prior approval of the Primary Stakeholders. A disclaimer may be added to restrict the distribution of the report beyond the primary stakeholders.

(d) Scope and objectives of the engagement: The report may begin with the scope and objective of the engagement defined at the time of agreeing the terms. However, any additional scope items may be included for an assignment, if appropriate.

(e) Approach and broad work procedures undertaken: This section documents the work procedures performed by the Professional to gather evidence and information to determine the facts reported. This confirms that the Professional conducted procedures that were sufficient, appropriate and commensurate to the scope of the engagement. The work procedures may include sampling methodologies, digital tools and techniques, people interviewed, information gathered from public domain and site visits conducted, amongst others.

(f) Reference to use of expert: The work of an Expert may be included in the report along with the credentials and the scope of work.

(g) Reference to FAIS or any other standards adhered to: The report would include a statement confirming that the engagement has beenn conducted in accordance with the FAIS and also highlighting deviations, if any.

(h) Detailed findings: The report includes details of findings based on the evidence and documentation. As a good practice, the findings are referenced to the relevant evidence and information gathered, which may be annexed to the report. The Professional may list the findings on the basis of evidence relied upon, the modus operandi identified and the quantum (to the extent possible) of the deviations noted. The Professional would choose a structure most conducive to convey the findings as per stakeholder format requirements. For example, tables or matrix with diagrams or graphical flow charts may be used to depict fund flows.

(i) Assumptions, limitations and disclaimers: Where the Professional makes any assumptions, such assumptions and the reliance placed on them may be adequately disclosed in the report. When the Professional has not been able to review relevant information or perform relevant tests, a limitation on the scope of the work, the reasons for the limitations, the potential impact of the limitations, and any other disclaimers, may be disclosed in the report. The Professional may exercise discretion at the time of drafting limitations and disclaimers.

(j) Conclusions: Based on the findings noted, the Professional may arrive at certain conclusions regarding the objectives of the engagement. For example, the conclusions may indicate whether there has been any deviation to procedures, or whether there is a possibility of a legal violations, etc. However, the Professional shall refrain from expressing any opinion, such as those relating to the guilt or innocence of any person in the report.

(k) An indicative report template is provided in Annexure A.

3.4 Considerations for issuance of Interim reports: The Professional may consider the following at the time of issuance of interim reports:

3.4.1    The report may contain ‘Interim Report’ in the title.

3.4.2 A statement to the addressee of the Interim Report that the observations contained in the report are based on the work procedures performed till date, which may change on account of performance of complete work procedures or information gathered post the date of the Interim Report.

3.4.3 A statement that the Interim Report may not be in accordance with all the Forensic Accounting and Investigation Standards.

3.4.4 A statement that due care should be taken by the addressee before taking any actions based on the observations in the Interim Report on account of incomplete work procedures.

3.4.5 If, for any reason, the Professional is unable to complete a FAI engagement, the incomplete work procedures and the reasons thereof may be adequately captured in the Final Report subsequently to be issued by the Professional.

3.5 Inability to issue a report: The professional may be unable to complete an engagement for the following reasons:

(a) Possible involvement of primary stakeholder.

(b) Limitations in availability of evidence.

(c) Non availability of stakeholders.

(d) Life Threatening Circumstances.

(e) Any other extenuating circumstances.

In such circumstances the Professional would need to record the reasons for non-completion of the engagement and communicate as per the revised communications protocols and incorporate the same in the final report.

3.6 Attributes of a report: Certain drafting qualities of the report are important to ensure its credibility. Examples of some of these are as follows:

3.6.1 Free from bias: The report is prepared on the basis of facts determined during the course of the engagement without any personal bias. The report should not include opinions or conclusions on whether or not a person is guilty or innocent.

3.6.2 Factual: Facts stated in the report are generally supported with relevant and reliable evidence. Such evidence may be annexed to the main report.

3.6.3 Clear and unambiguous: The language used in the report should be easy to understand.

3.6.4 Transparent: The report may contain complete details of all the findings. In case of any limiting factor in the engagement, the same may be highlighted in the report.

3.6.5 Chronological: The report may establish the chronology of the events which occurred regarding the issue under consideration.

3.6.6 Meeting the objective: The report may be reviewed to evaluate whether the findings are in line with the objective of the engagement.

3.6.7 Circulation: The report may have restricted circulation and only circulated to the primary stakeholders unless it has been expressly mentioned in the letter of engagement that the report has to be shared with others. The report may clearly highlight who it can be circulated to and include a note to maintain confidentiality.

4.0 Annexures

Annexure A – Indicative Report Template

COVERING LETTER

Name & Address of the Professional
Date of issue of report

Primary stakeholders

Subject: Forensic Accounting / Investigation report for {Case reference}

I/We have conducted a Forensic Accounting / Investigation into {matter at hand} in accordance with the terms of engagement laid out in the engagement letter dated {date}. Attached is the fact-finding report.

CONFIDENTIAL REPORT

Distribution List Primary Stakeholders

Others (where approved by Primary Stakeholders)

Case Reference

Case reference number / Project name, if any
Assignment Start date Date of starting the assignment, as agreed upon in the terms of the engagement
Assignment End date Date up to which work was performed
Report Date Date on which report is issued
Notice to the reader Any limitation or statement to be highlighted to the primary stakeholders may be provided here.

Examples include:

1. This assignment is conducted in accordance with the requirements of Forensic Accounting and Investigation Standards, issued by The    Institute of Chartered
Accountants of India (ICAI).

2. This assignment is governed by the scope defined in the Engagement/Appointment Letter dated XXX

3. The {Professional} has relied upon the information and documents provided up to XXX date

4. This report is issued to provide summary of findings. Any conclusion drawn out of these findings is the responsibility of the {primary stakeholders}

5. The Professional has relied upon the work of {expert}, {Credentials of the expert and scope of his work} who is an expert in the field of {subject matter}.

6. This report must not be circulated further without the written approval of the Professional.

7. No part of the report must be read in isolation.

Scope The objective of conducting the engagement, as defined in the letter of engagement/appointment.
Work Done The broad work procedures performed, detailing the people interviewed, the devices reviewed and the period of coverage.
Executive Summary Summary of key findings.
Detailed findings The detailed list of findings provide a reference to the evidence, which may be annexed to the report as well as any assumptions made in order to test the findings.
Conclusion Whether or not the evidence collected through the course of the investigation supports the concerns.

Sponsored

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Sponsored
Sponsored
Sponsored
Search Post by Date
October 2024
M T W T F S S
 123456
78910111213
14151617181920
21222324252627
28293031