India plans to release forensic accounting and investigation standards

Indian government plans on coming up with forensic accounting and investigation standards (FAIS) as it aims at setting the basic quality parameters for conducting investigations.

A committee has been constituted by The Institute of Chartered Accountant of India (ICAI) to deliberate on FAIS, which can be expected to be framed by the end of 2020. Atul Kumar Gupta, President of the Chartered Accountants body informed during a virtual conference.

As per the ICAI, the decision of setting up the forensic accounting and investigation standards (FAIS) will make India the first country in the world to release the standards.

What will be the objective of FAIS?

As per the statement released by ICAI, the proposed objectives of FAIS will be to codify best practices in the twin domains of forensic and investigations, setting the basic quality benchmarks for conducting assignments in those areas.

Why setting up of FAIS is important?

The Reserve Bank of India (RBI) has mandated a forensic audit for the transactions of over Rs. 200 crores while the companies or lenders individually call for such investigations or audits upon the suspected fraud.

As per Atul Kumar Gupta, there must be forensic due diligence for all the companies where the public interest is involved, above a threshold level.

The decision to set up the standards was spurred because of the lack of standardisation of forensic reporting and investigation which leads to considerable differences in such reports.

Apart from improving the quality of forensic reports and their admissibility as the evidence in court proceedings, the step is also expected to benefit the banks, regulators, corporate entities, and enforcement agencies such as the Economic offense Wing, Serious Fraud Investigation Office, and Reserve Bank of India (RBI).

Formulation of forensic accounting and investigation standard:

The FAIS (forensic accounting and investigation standard) will comprise of 30 standards which cover all the aspects of essential domains.

The ICAI has been planning to consult the stakeholders which will include the RBI, corporate affairs ministry, the comptroller and auditor general of India, and the Securities and Exchange Board of India, during the course of its deliberations.

The draft standards will also be released for the public comments, which after ICAI will release them.

Once the standards are released, they will be mandatory with the prospective effect for ICAI members who will be working on forensic and investigative engagements and the failure to comply will result in disciplinary action.