Legal knowledge is critical to the success of forensic accounting work

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legal knowledge

Forensic Accounting and Investigation (FAI) engagements may arise when the Professional is appointed in accordance with some specific law or regulation. Sometimes by a court of law or competent authority. This may provide both, the mandate and the process, of conducting the assignment.

However, there are some cases where the client appoints the Professional through a contractual arrangement. It may have certain mandate which is subject to the provisions of various laws and regulations.

Requirement to understand the law

Moreover, each engagement is unique. There are some cases, subject to relevant applicable statutes.The Professional is expected to adhere to the provisions. It also include the generally applicable laws which are a part of any engagement.Hence the requirement to understand the law and discover suitable evidence in such engagements is critical.

Certified Forensic Accounting Professional appointed under any specific laws or regulations,
shall ensure that the objectives of the engagement are in line with the provisions of those laws and regulations.
Forensic Accountants should always ensure that any mandate, agreed with the stakeholders through a contractual arrangement, shall be consistent with the relevant laws and regulations.
Moreover, while conducting an engagement, the Professional should consider the provisions of various laws and regulations. It stipulate the manner in which such engagement work needs to be conducted. The evidence or testimony needs to be presented.

However, Certified Forensic Accounting Professionals shall implement a process driven approach. It shall avoid checklist approach. CFAP help to assist in identifying any significant deviations or non-compliances concerning laws and regulations. It will impact the subject matter of engagement .

Legal Aspect

Though all laws are an integral part of the forensic accounting assignment, certain laws are specifically applicable to investigation assignments. These laws form an essential basis
for the Professional to conduct the engagement.

Therefore, as an example, there are certain statutes with provisions relating to white collar crime, corruption and money laundering. Also the certain contract or company related laws with specific provisions concerning frauds and irregularities. The Professional should have a basic understanding of the direct impact laws to plan and conduct the engagements.

At the time of planning and execution of the engagement, certain specific laws would apply.  These engagement specific laws shall govern the overall conduct of the engagements in such situations.

As an example, there are certain statutes like data privacy laws or some laws concerning insolvency and bankruptcy which codify the manner in which investigation procedures need to be conducted to discover evidence and laws concerning how evidence needs to be admissible in a Court of law. The Professional is expected to have a basic understanding of these engagement specific laws for proper conduct of work procedures.