Guidance Note for Forensic Accounting and Investigation Standard No. 610 on Quality Control provides practical guidance on the application of quality control techniques to ensure a consistent and acceptable quality of work in forensic accounting and investigation engagements. It emphasizes the importance of identifying all direct and indirect stakeholders and recognizing their varying quality expectations for the assignment. The guidance note highlights that the Professional should determine the adequacy of the quality control process based on the nature and complexity of the specific assignment.
Digital Accounting Assurance Board
The Institute of Chartered Accountants of India
1st June, 2023
GUIDANCE NOTE FOR FORENSIC ACCOUNTING AND INVESTIGATION STANDARD NO. 610 ON QUALITY CONTROL
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 610, on “Quality Control,” 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.
1.1 This Guidance Note (GN) deals with practical application of Quality Control (QC) techniques to support the Professional in ensuring a consistent approach for an acceptable quality of work performed.
1.2 It is important to identify all direct and indirect stakeholders because they may have different quality expectations from the assignment.
1.3 Professional to decide on the adequacy of Quality Control process commensurate with the nature and the complexity of the assignment.
2.1 The objective of this GN is to assist the Professional to focus on quality in all forensic assignments along with a structure in place for the quality standards adherence.
2.2 The process of Quality Control (QC) in forensic assignments is a process initiating before accepting the assignment and ending post the submission of the final assignment report.
2.3 The Professional may establish a Quality Control System (QCS) keeping in view the general expectations of these stakeholders.
3.1 Before accepting the assignment, the Professional may assess that certain basic checks are in place, which is as follows:
3.1.1 Perform an independence check. This can be done by carrying out procedures like reviewing past and current business and professional relationships and other connections between the Professional and the subject of the assignment or the client; the nature of the scope of work received by the Professional and the authority and position of the person granting the assignment to Professional. For reference, the meaning of Independence in relation to this guidance is defined in the Basic Principles of Forensic Accounting and Investigations.
3.1.2 Obtain a fair understanding of the proposed forensic assignment and ascertain whether the Professional is equipped with adequate skills, competence, and relevant staff so that a quality assignment report is produced during the course of the forensic assignment. In ascertaining the skill and competence of the Professional, consideration needs to be given to the scope and nature of the assignment, the past knowledge, experience, and qualifications required to conduct such assignment, and the availability of required manpower and technical resources to deliver the assignment results within the required timeframe.
3.1.3 For instance, while conducting an assignment in an automated environment, the Professional may engage the staff having required IT auditing skills. Similarly, while conducting assignment related to a construction project, a civil engineer staff or expert may also be needed apart from Chartered Accountants, and so on.
3.1.4 Have a discussion with the client and/or the target/subject entity to understand the scope along with possible scope and data limitations that the Professional might face during the course of the forensic assignment. This is imperative for QC so that the Professional does not face any limitations that they are not aware of while accepting the assignment.
3.1.5 Accept the assignment once the Professional is satisfied that he/she would be able to deliver a quality assignment report within the acceptable time frame as required by the Client.
3.2 During the course of the forensic assignment, the Professional needs continuous monitoring of work through adequate staffing, review and supervision of the work performed, giving proper guidance on documentation of the Work plan for the assignment, reviewed versions of the report, etc.
3.3 Given the dynamic nature of forensic assignments the work plan may need revision based on new facts and evidence. Accordingly, the hypotheses can be developed in line with new information that comes to light. This is essential to maintain QC.
3.4 During the course as well as pre-completion of the assignment, the Professional may need to conduct market surveys or field studies to gather information about the parties allegedly involved, and the possible modus operandi of committing fraud to develop and re-model the hypotheses on a continuous basis during the assignment. Such unstructured information is usually available outside the organisation and may be gathered by the Professional during field visits, informal discussions with people, and accessing information that may not be received in a formal or authenticated manner from its source and is usually named as market intelligence. The reports as well as working papers may clearly identify such information and indicate the nature of such information to be intelligence or hearsay, instead of being conclusive evidence so that the users of such information can make informed conclusions thereof.
3.5 Quality Control Review: Prior to the finalization of the assignment report, depending on the nature of the forensic assignment, the Professional may perform an independent internal review of the assignment report, which may be in the form of a peer review. This is essential primarily for the following reasons:
3.5.1 Given the nature and use of the report of forensic assignment, an independent QC review can critically examine the assignment report to understand the various issues or loopholes in the report, that may raise doubts or concerns over the veracity or the reliance to be placed on the report.
3.5.2 Further, if there are known gaps in the analysis conducted during the forensic assignment on account of various reasons, such as data limitation, scope limitations, etc., or the areas where there may be concerns in the future, the QC process helps to make sure that these are properly addressed by preparing well-documented work papers explaining the rationale behind the limitations, gaps or concerns, as applicable.
3.5.3 It may help to assess that the documentation is as per FAIS 320 on “Evidence and Documentation”.
3.6 The Professional may build a system of safe filing, storage and retrieval of all working papers. The retention period of these working papers should be defined in consultation with the Client and relevant regulatory requirements. For instance, in case of an assignment that is linked to an ongoing court case or a regulatory investigation, the retention period should be aligned to the requirements of the assignment and may need longer periods of retention.
The Quality Control System (QCS) implemented by the Professional may include a periodic self-check on the systematic and logical arrangement of all working papers and their retention. This check may extend to the digital working papers (including storage drives having forensic imaging data) as well.
4.1 The Professional may implement a Quality Control System (QCS) that is robust enough to check sufficient quality of work in performing the review and compliance with applicable professional and legal standards/regulations.
4.2 The QCS may develop a checklist for various quality reviews required in the project, including but not limited to:
(a) Pre-acceptance procedures – Including evaluation of skill sufficiency of the professional and independence of the team.
(b) Scoping and planning stage – Including assessment of key risks and objectives that will be covered in the assignment, as well as the work plan/schedule and the use of SME professionals.
(c) Execution and fieldwork stage – Including evaluation of findings/hypothesis, documentation supporting the same and completion of work plan (including the adequacy of communication with stakeholders of key results and challenges). This will also include the sign-off of SME professionals, as required.
(d) Reporting stage – Refer to the Quality Control Review process in para 4.8
(e) Post-reporting documentation and archival – Including adequate retention of documentation to support the conclusions of the audit and proof of quality reviews. The Professional may clearly document the times when multiple signoffs are required (e.g., L1, L2, external SME, etc.).
4.3 The completion of all activities in the quality checklist (up to the “Post- reporting documentation and archival stage”) may be signed off by the Professional before issuance of the report. The Professional may also define the timeline within which the post-documentation and archival activities are to be completed and signed off.
Refer to Annexures with Illustrations/Checklists for sample checklists.
4.4 The Professional may define the frequency of a periodic independent peer review. The reviewer may be independent of the executing team in charge of the assignment and may not have a reporting line to the Professional or the staff on the project. If required, an external party may be appointed to perform a such review.
4.5 Any findings from the peer review are to be agreed upon with the Professional, and a remediation plan may be defined. A follow-up testing may be performed by the peer-review within pre-agreed timelines from the date of peer-review report issuance.
4.6 Staffing and Competency
The professional may assess the capabilities and competencies of the team to be involved in the assignment by considering their understanding of professional standards, regulatory and legal requirements, technical expertise including relevant information technology, knowledge of industries in which the client operates, ability to apply professional judgment and past experiences, if any.
The Professional may implement training programs, online courses, classroom sessions, on-the-job learning with the seniors, individual development plans, etc to continue developing the capabilities and competencies of the team.
The Professional communicates the requirements in an appropriate and frequent manner to the staff. This may include training at a regular frequency (preferably once a year). Staff who have not demonstrated sufficient knowledge of the QCS in internal assessments are not to be included. The Professional may also assess that any external SMEs appointed for assignments are adequately trained on the QCS prior to the assignment.
4.8 Quality Control Review
(a) The Professional may establish policies and procedures requiring quality control review that provides an objective evaluation of the significant judgment and conclusion reached in the report for all forensic accounting and investigation assignments.
(b) The Professional may establish policies and procedures setting the criteria for eligibility and appointment of quality control reviewers, the extent and timing of their involvement, and documentation requirements for the quality control review.
(c) Quality control review to be completed before the issuance of the report.
Matters having differences of opinion between the Professional and Quality Control Reviewers to be resolved before the final report issuance.
4.9 The Professional may implement a process by defining the minimum number of hours to be spent in Continuing Professional Education (CPE) annually and obtaining written confirmation from the team. CPE program may be designed by including the combination of online courses, case study submissions, classroom sessions, contributions in the magazine relevant to their professional fields, facilitating seminars, etc.
4.10 The assignment documentation is the property of the firm, and it may define the process to maintain the custody, integrity, accessibility, and retrieval of the same.
Illustration checklist 1: End-to-end Process
|Pre-acceptance procedures||1. Whether the Professional along with his team is independent of the assignment?
2. Is the relationship with key stakeholders and conflict of interest checks performed?
3. Are available resources competent and possess the requisite knowledge to complete the assignment?
4. Is due diligence performed with respect to the nature, scope, purpose, limitations, expected assignment reports, timeliness, and cost?
5. Is the engagement letter or other equivalent document shared with the appointing stakeholders to obtain consent in writing?
(Also refer to FAIS 210: Engagement Objective, and FAIS 220: Engagement Acceptance and Appointment)
|Scoping and Planning||1. Has an assessment of the objectives that will be covered in the assignment been done and discussed with the team?
2. Whether the usage of technology to be deployed is considered as part of planning?
3. Have enough procedures including consideration of fraud indicators been designed to meet the objective of the assignment?
4. Whether the Professional is using the work of an expert? If yes, whether the requirements as stated in
FAIS 230: Using the Work of An Expert are met? Also refer to FAIS 310: Planning the Assignment
|Execution and Field Work||1. Whether the obtained evidence is reliable and relevant to draw a conclusion?
2. Whether all procedures have been performed as designed in the planning phase including procedures identified as per the revisited planning phase in the light of the additional information or change in the scope of work?
3. Whether sufficient documentation is maintained explaining the way the evidence was discovered, reviewed, recorded, and stored?
4. Where the work of an expert is used, requirements as stated in FAIS 230: Using the Work of An Expert are met.
Also refer to FAIS 320: Evidence and Documentation
|Pre-completion of Assignment||1. Whether the appropriate level of reviews performed as per the policies defined by the firm depending on the complexity involved?
2. Whether all work has been completed and reviewed in accordance with the assignment plan and objectives?
3. Where deemed necessary, whether the significant matters arising from the review are consulted with the SMEs or experienced peers?
Also refer to FAIS 350: Review and Supervision
|Reporting||1. Whether the final conclusion drawn is in line with the work performed and reviewed?
2. Where independent peer reviews are involved, have all the differences in the opinion resolved, aligned and documented?
|Post-reporting documentation||5 Has all planning including revised planning papers, work performed, evidence obtained, reviews, and conclusions drawn is documented as per the requirement of the standards?
6 Have signoffs obtained from the reviewers, peer reviewers, experts, and SMEs involved in the assignment?
7 Has all the communication with the stakeholders and minutes of those meetings and interviews been documented?
8 Is the final assignment report attached/indexed in the file/folder/tool?
Also refer to FAIS: 320 Evidence and Documentation
Illustrative checklist 2: Quality Controls in case of using the work of an expert
|Using the work of an expert||Where Professionals make an independent determination of using the work of an expert:
(a) Whether the independence and objectivity of an expert were evaluated?
(b) Whether the qualification and credentials of an expert were evaluated?
(c) An Agreement with the Expert is in place to define the scope and objective of the work of the expert, including adequate provisions for Confidentiality and Non-disclosure?
Also refer to FAIS 230: Using the Work of An Expert
|Where the appointing Authority engages the expert and in case of concerns with respect to the independence and objectivity of an expert appointed, whether the Professional communicated the same to the Authority in a timely manner?|
|Whether the work done by an expert were evaluated and reviewed by the Professional ensuring the procedures performed were as per scope and the evidence gathered are sufficient and reliable supporting the overall conclusion?|
|Whether the final report issued by the Professional clearly state the role of the Expert and the reliance placed (if any) on the work conducted by the Expert?|
|An original signed final copy of the formal report issued by the Expert, along with supporting documents, if any, are included in the working files?|