Forensic accounting, forensic accountancy or financial crimes is specially practiced area of accounting to investigate that the firms are engaged in financial reporting misconduct. As the scope of forensic accouting is increasing day by day, the awarenwss among the accounting students is also increasing. Forensic accounting defines various skills and methods to determine the financial reporting misconduct that has occurred. Indiaforensic initiated the CFAP Program is the program designed to equip the accounting students and the professionals for the battle against the frauds.

Today, no domain is spared from misconduct, fraudulence and injustice.  So the scope of forensic accounting is increasing day by day. Forensic accounting is the assistance of finance professionals to settle disputes concerning allegations, fraudulence, suspicion of fraud and misconduct in business.

The CFAP certification is regarded as a turning point for Indiaforensic accreditations which will help the institutions to combat money laundering as well as the illicit activities. In the CFAP syllabus there are 20 chapters which deal with various elements of forensic accounting in India. Following mentioned below is just the outline of the course syllabus. On registering, Certified Forensic Accounting Professional (CFAP) applicants will be able to understand Overview of Forensic Accounting, Understanding the red flags of different fraud schemes, how the frauds are investigated, which tools are used to investigate the frauds, what are financial statements, difference between forensic accounting and fraud examiner, what is fraud, financial statement frauds, stock market frauds, different type of theories used to fight against the companies etc.  The other part of the program deals with the certification exam.  It is an online exam in which it will test the ability of the individual to apply and understand the real life scenario, Contextualized situations that take place. 75% is the minimum passing criteria.  CFAP is regarded as one of the few offerings in forensic accounting these days.”CFAP” before your name opens a wide opportunity in the Anti- Fraud domain.

India witnessed significant growth in the frauds. Banks have witnessed the alarming growth of Non Performing Assets, Insurance companies are bleeding due to the Claim frauds and stock market regulators are actively penalizing the insider traders. Forensic Accountants are called in for the frauds perpetrated by the insiders and forensic auditors are called in to audit the books to identify the red flags of frauds.

“Certified Forensic Accounting Professional is a Gold standard certification in the forensic accounting domain. Indiaforensic is one of the best institute of certified forensic accountants. CFAP is one of the toughest courses in the country. Started with focus on India, today the members of Indiaforensic are present in more than 7 countries including Nigeria, Oman, Qatar, UAE, Uganda and others.”

The way banks know their clients before they open the account, it is important to know your engagement before you start working on the same. It is necessary to understand the forensic audit engagement to make it successful.

The professional should conduct the preliminary procedures before accepting the proposed engagement. As well as to understand the requirements of the engagement. These procedures shall be
directed towards making an assessment as to whether the Basic Principles of Forensic Accounting and Investigations are adhered to.
Examples of such procedures include an evaluation of independence, preliminary capability assessment with available resources and skills, complexity of relevant laws and regulations as well as any constraints or scope limitations. The time limit is specified for the completion.It should determine the need to source an appropriate skilled resources.

Assessment of Risk Engagement

Certified Forensic Accounting Professional shall, through discussion with the stakeholders and a review of available information, conduct an assessment of the engagement risks covering some of the following areas :

• Nature of engagement and its primary purpose;
• Scope of the engagement and any limitations imposed; Changing scope of work leads to a chaotic situation for the auditors as well as the clients.
• Key stakeholders, their relationships and any conflict of interest; Understanding the conflict of interest is crucial part. As it relates to the integrity of the auditors.Statutory and External auditors are liable to do the forensic audit who are always challenged in the courts of law.
• Execution challenges such as access to systems and availability of information;
• Requirement and availability of necessary skills and expertise
• Nature and form of deliverables;
• Intended users (both primary and secondary); and
• Most Important is the Fees and estimated costs.
  Where the engagement risks are substantial with limited mitigations or safeguards, and the risk assessed is above the acceptable levels, the Professional chooses not to accept the engagement, and communicate the reasons for this action.

Forensic Accounting aims to highlight any accounting or legal violations, regulatory deviations or contractual breaches through ascertainment of facts and discovery of evidences suitable for a Court of law. The focus area is critical examination of transactions, funds and balances in the books of account or with third parties.

There are different types of forensic auditing engagements that can take place. They are typically grouped by the types of legal proceedings that they fall under. Below are some of the most common examples:

• Financial Statement manipulations
• Diversion of the funds
• Anti-Money laundering
• Investigations in mergers and acquisitions
• Investigations into Tax Evasion
• Investigation of Related party transactions
• Valuations and Estimations of losses or damages
• Investigation of Suspicious transactions under Insolvency and Bankruptcy Code

Besides the above mentioned types of engagements there are some assignments which are purely in the form of investigations. Additionally, the purpose of the Investigation is to examine facts and circumstances and additionally,  discover evidence to prove or disprove hypotheses formulated regarding alleged legal violations, unethical conduct or the possibility of a fraud by suspected individuals.

• Financial Fraud investigations
• Investigation of Cyber frauds, hacking and malwares
• Insurance or Personal injury claims
• Ethical or Code of Conduct violations
• Whistle-blower complaints
• Prevention of Sexual Harassment related allegations
• Asset theft or Bribery or Corruption
• Data breach or theft of Intellectual Property

Therefore, the forensic accountants also Provide testimony in a Court of Law, based on
investigation expertise to help facilitate some resolution to legal disputes based on facts/circumstances and investigation expertise and they may be summoned to court of laws as the expert witness.

Forensic Audits don’t have direction. It is not a checklist based audit. It requires financial sixth sense to complete the engagements. Most of the forensic audits are based on certain hypothesis. In the forensic audit engagements, the hypothesis is generally verified by testing certain transactions and balances. This testing proves or disproves the possibility of some exceptions.

What is Hypothesis ?

A hypothesis is a provisional, unproven theory. Based on limited facts, assumptions and observations, it is a proposed explanation.

Hypothesis is generally developed considering the facts of the case, tested and revised to support or reject a possible modus operandi of fraud schemes.
While performing the investigation it is necessary to have a clear and defined plan to achieve the given objective. At the same time, maintaining the basic principle of objectivity is also fundamental to the engagement. This allows for a balance between professional skepticism and the need to maintain neutrality.

Applying Hypothesis in forensic audits

Hypotheses generated by the Professional shall be flexible, evolving and include new or alternate hypotheses. It will validate or reject them in order to prove or disprove a larger theory or assumption, such as the modus operandi.

Applying hypotheses is a technique which makes the process of evidence discovery more methodical and effective. Although the hypothesis may not be referred to in the Report, the quality of the evidence discovered as a result of such application, makes the outcome more reliable and suitable for a Court of law.

In formulating the theory or explanation, which form the basis of the hypotheses, the Professional will keep an open mind and develop objective hypotheses, while maintaining professional skepticism.

After concluding an investigation, the Professional shall be in a position to either prove, disprove, or not prove the theory as formulated.