ICAI to come up with new forensic audit standards; Governing Council set to meet on Friday

The governing council of ICAI is all set to meet on Friday to approve new forensic audit and investigation standards. Digital Accounting and Assurance Board (DAAB) of the Institute of Chartered Accountants of India (ICAI) has proposed 8 new Forensic Accounting and Investigation Standards (FAIS) which will be placed for final approval on 13 August 2021. ICAI had earlier issued 13 FAISs.   

The new accounting standards prescribe stiff measures to be followed by the Forensic Auditors before giving any final view for declaring any account as fraud.  The Report is 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. 

FAIS further prescribes that the report shall not express an opinion or pass any judgment on the guilt or innocence. 
FAIS mandates that the Principles of Natural Justice must be followed by conducting a discussion on the observations with the subject party and their views need to be suitably incorporated in the forensic report.  

Currently, there are no standards or guidelines prescribed by any regulator or authority to monitor or regulate forensic audits. In the absence of such regulation, forensic audit experts/firms conduct such audits as per their own understandings and procedures. Often they present reports based on their own judgments. Many times such reports are inconclusive or ambiguous. 

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.  

It is to be seen if these new forensic audit standards will have any implications on past forensic audit reports on the grounds of ambiguity or inconclusiveness.