All About on Code of Conduct in Forensic Audit

Code of Conduct in Forensic Audit:

Introduction:

A forensic audit is a specialized examination that investigates financial records to uncover potential fraud or illegal activities. Given the sensitive nature of this work, a strict code of conduct is essential to ensure integrity, professionalism, and fairness throughout the audit process.

• The Association of Certified Fraud Examiners (ACFE) establishes ethical guidelines for its
• Auditors uphold professional responsibility to clients, the public, and each
• These standards guide auditors in fulfilling their duties and demonstrate commitment to

By adhering to these principles and standards outlined in the code of conduct, forensic auditors can uphold the integrity and credibility of their investigations and contribute to the fair and effective resolution of financial disputes or misconduct allegations.

Applicability:

• The code applies to all Certified Fraud Examiners (CFEs) of the
• Associate Auditors should strive to adhere to the standards but are not bound by

Standards of Professional Conduct:

1. Integrity and Objectivity:

• Upholding Integrity: CFEs must act with integrity, prioritizing it over personal or public interests.
• Conflict of Interest: CFEs must identify and disclose actual or potential conflicts of interest before accepting an engagement.
• Maintaining Objectivity: CFEs must remain objective throughout the scope of their work, avoiding bias.
• Upholding Professional Reputation: CFEs must avoid actions that discredit the ACFE or their profession.
• Honesty and Compliance: CFEs must be truthful under oath and comply with lawful orders while refraining from criminal acts.

B. Professional Competence:

• Demonstrating Competence: CFEs must be competent for the assignments they undertake, seeking consultation or referral when necessary.
• Continuous Learning: CFEs must maintain their competence through continuing professional education as required by the ACFE.

C. Due Professional Care:

• Exercising Due Care: CFEs must perform their services with diligence, critical analysis, and professional skepticism.
• Supporting Conclusions with Evidence: Conclusions drawn by CFEs must be supported by relevant, adequate, and sufficient evidence.
• Adequate Planning: Fraud examinations must be appropriately planned, including developing strategies and objectives.
• Supervising Others: When working with assistants, CFEs must provide adequate supervision based on the complexity of the work and their qualifications.

D. Understanding with Client or Employer:

• Defining Scope and Limitations: At the beginning, CFEs must agree with the client or employer on the scope, limitations, and responsibilities related to the investigation.
• Adapting to Changes: Any significant changes in scope, limitations, or responsibilities require a revised agreement with the client or employer.

E. Communication with Client or Employer:

• CFEs must communicate significant findings made during the investigation to the client or employer.

F. Confidentiality:

• Maintaining Confidentiality: CFEs must not disclose confidential or privileged information obtained during the examination without explicit permission or lawful court orders.
• Exceptions: Sharing information is allowed for professional practice or investigative body reviews, provided those reviewing parties agree to confidentiality restrictions.

Standards for Forensic Audit and Certified Fraud Examiners (CFEs) Standards of Examination:

• Fraud Examinations:
  • Conducted legally, professionally, and thoroughly, aiming for complete, reliable, and relevant
  • Start with prediction and scope priorities, reassessing them throughout the
  • Be aware of potential bias and consider both inculpatory and exculpatory

·  B. Evidence:

• Maintain control and document evidence handling, including chain of
• Strive to preserve evidence integrity and document extent based on client’s needs.

Standards of Reporting:

• General:
  • Reports can be oral, written, or expert witness testimony in various formats, but not

·  B. Report Content:

• Based on sufficient and relevant evidence supporting all conclusions, opinions, and
• Confined to areas within the CFE’s expertise and avoid expressing legal guilt or

Code of Ethics for Certified Fraud Examiners:

1. 1. Commitment to professionalism and
   2. Avoid illegal, unethical conduct, and conflicts of
   3. Maintain integrity and accept assignments with a reasonable expectation of completing them
   4. Comply with lawful court orders and testify truthfully and without
   5. Obtain evidence to support opinions and avoid expressing legal guilt or
   6. Maintain confidentiality of information obtained during an
   7. Disclose all material matters discovered in an
   8. Continuously improve the competence and effectiveness of professional

Note Points:

• • Fraud: Deceptive act for personal or financial
  • Certified Fraud Examiner (CFE): Highly qualified professional investigating fraud

·  Roles of a Certified Fraud Examiner:

• Identify evidence of
• Conduct interviews and write
• Proactively assess fraud

·  Certified Fraud Examiner’s may also:

• Design and maintain fraud detection
• Train others in fraud detection and

The Rise of Forensic Accounting in India The Need for Forensic Accounting: Growing cybercrime, failed regulatory oversight, and financial scandals highlight the increasing demand for forensic accounting, even if its necessity isn’t fully understood.

• Unlike law enforcement officers who analyze physical evidence, forensic accountants analyze digital evidence to uncover the “what, why, and how” behind financial figures and

Why is it Gaining Traction in India?

• Increasing incidents of fraud and cybercrime are driving the demand for specialists in this
• Forensic accounting utilizes accounting, auditing, data analysis tools, and investigative skills to detect financial
• Various sectors, including government bodies, public sector undertakings, banks, insurance companies, and investigative agencies, are utilizing forensic accounting

Current Landscape and Future Potential:

• Though relatively new in India, forensic accounting is a growing field with the potential to contribute significantly to the revenue of accounting
• The increasing number of regulators and stricter accounting standards will further necessitate the use of forensic accounting services.
• This trend aligns with global observations – nearly 40% of top US accounting firms are expanding their forensic
• The high prevalence of fraud cases globally (7 billion USD loss in 2018, with 72 cases from India) creates a significant demand for professionals who can identify and prevent

Key Players and Drivers:

• Central investigating agencies like CBI currently handle much of the forensic accounting work.
• Cost accountants are likely to be increasingly involved due to the changing nature of accounting and auditing
• High-profile cases like those involving Vijay Mallya and Nirav Modi have increased public awareness of “forensic audit.”
• RBI published this comic book which nicely explains how online frauds are happening now

Essential Qualities of a Forensic Accountant:

• Professional Skepticism: As Dave Cotton, a CFE, suggests, remaining alert and skeptical is crucial for identifying potential
• Financial Expertise: Deep knowledge of finance, including internal financial controls, is essential to pinpoint vulnerabilities and areas susceptible to

Upskilling Opportunities:

• The Institute of Cost Accountants of India offers an Advanced Diploma in Forensic Audit, providing valuable insights and skill development in this growing

Conclusion:

Forensic accounting is rapidly gaining prominence in India due to the growing complexities of the financial landscape and the need for robust fraud detection and prevention mechanisms. By equipping themselves with the necessary skills and qualifications, individuals can capitalize on this emerging opportunity and contribute to a more secure financial environment.