ICAI to come out with 8 new forensic accounting, investigation standards

By: |
August 12, 2021 8:24 PM

Under the new accounting standards, auditors will be required to follow stiff norms while conducting forensic audit, they said.

A bench headed by Justice A M Khanwilkar was told by ICAI's counsel that an appropriate decision will be taken on the representation within two weeks.A bench headed by Justice A M Khanwilkar was told by ICAI's counsel that an appropriate decision will be taken on the representation within two weeks.

Chartered accountants’ apex body ICAI will come out with eight new forensic accounting and investigation standards, whereby forensic auditors will be required to issue a precise and unambiguous report, sources close to the development said.

Under the new accounting standards, auditors will be required to follow stiff norms while conducting forensic audit, they said.

The new forensic audit standards are likely to render several existing forensic audit reports untenable, especially where lenders have used ambiguous and inconclusive reports to classify borrower loan accounts as fraud.

These are part of eight new forensic accounting and investigation standard (FAIS) proposed by the institute’s Digital Accounting and Assurance Board. These proposals will be placed for final approval on Friday.

The Institute of Chartered Accountants of India (ICAI) had earlier issued 13 FAIS.

The sources said that governing council of ICAI is meeting on Friday to approve the new forensic audit and investigation standards. As a part of the new accounting standards, forensic auditor will be required to issue a precise and unambiguous report.

Further, such report is also required to be backed by reliable evidence and relevant documents collected by the auditor in line with the requirements of FAIS to support its conclusions.

Also, the report will not express an opinion or pass any judgement on the guilt or innocence.

FAIS categorically mandates that the principles of natural justice needs to be met by conducting a discussion of the observations with the subject party and their views need to be suitably incorporated in the report.

Currently there are no standards or guidelines prescribed by any regulator or authority to monitor or regulate the function of forensic audit.

In the absence of such regulation any and every self-acclaimed forensic audit expert or firm was appointed by the lenders to conduct forensic audit as per their own rules and procedures and present their reports based on their own judgements.

In most of such cases, the reports used to be inconclusive, ambiguous and devoid of reliable evidence. There was no review or appeal mechanism against any erroneous or wrong forensic audit findings, as well the same were not even shared with the concerned party.

 

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