ICAI prescribes standards for auditors conducting forensic investigation

Surabhi Mumbai | Updated on March 16, 2021

The Institute of Chartered Accountants of India (ICAI) has released Forensic Accounting and Investigation Standards amidst rising cases of accounting, financial and loan irregularities.

“We have issued 16 standards, the rest are still in progress,” said Manu Agrawal, Chairman, Digital Accounting and Assurance Board, ICAI, noting that this is the first time that such standards have been issued. The standards were released early last month.

Noting that the Reserve Bank of India mandates forensic audits for credit exposure above a certain threshold, Atul Kumar Gupta, Past President, ICAI, said earlier there was no standardisation in the process and whether the reports were admissible in a court of law was a challenge.

“By having these standards, we wish to standardise the activity in a way that is beneficial for banks and others as well as users of the reports,” he said.

According to the Compendium on Forensic Accounting and Investigation Standards brought out by ICAI, in addition to outlining fundamental principles for the guidance of the members, the standards also serve as performance benchmarks.


“Standards have been classified in the categories: Standards on Key Concepts, Standards on Engagement Management, Standards on the Executing Assignments, Standards on Specialised Areas, and Standards on Quality Control,” it said.

Agrawal said while courses are yet to start, auditors are free to use the standards.

“With an increasing number of accounting, financial and loan irregularities being observed recently, ICAI has acknowledged a pressing need for proactive action in this area. Therefore, as a first step it has recognised that forensic accounting examinations and investigations need to be conducted in a highly professional manner such that evidence discovery can withstand the high level of scrutiny which is subject to in a Court of law,” the Compendium said, adding that they are designed to help members conduct high quality and highly credible assignments.

The ICAI had in last year constituted a committee to deliberate on FAIS.

Banks tend to declare an account as wilful defaulter or fraud based on a report of a forensic auditor appointed by the banks. However, until now, there were no prescribed forensic standards on how an auditor should approach any particular set of transactions.

Published on March 16, 2021

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