Ind AS is bringing biggest accounting revolution in India

For Ind AS Training contact vivek@skagrawal.co.in.

Ind AS requires valuation as per Ind AS 113

For Any Valuation under Ind AS contact vivek@skagrawal.co.in.

Ind AS is required to be Implemented by an expert

We have a dedicated Ind AS team who are doing Implementation for some big companies.

Ind AS is a futuristic accounting standard

Dont run away from Ind AS, get trained by our trainers.

Is your company Ind AS compliant ??

Get Ind AS implementaion done and understand its Impact on your tax.

Ind AS 116 - Leases : Detailed Impact Analyses

The objective of the standard Ind AS 116 Leases is to specify the rules for recognition, measurement, presentation and disclosure of leases.

But, why is there a new lease standard when we had an older Ind AS 17 Leases?

We have already discussed the Transition from Ind AS 17 to Ind AS 116 and Ind AS 116 Lease : a bird eye view

Ind AS 116 - Lease : a bird eye view


In April 2019, the new standard about lease accounting Ind AS 116 will be applicable and it introduced a few major changes. The most significant are:
  • New definition of the lease can cause that some contracts previously treated as “service contracts” can now be treated as “lease contracts”,
  • Accounting for leases in the lessee’s financial statements changes and lessees do not classify the lease anymore into operating and finance. Instead, they would account for all the leases in the same way.
I wrote an article highlighting these changes and illustrating them on examples some time ago, but you might want to check that out here.

In this article, I’d like to sum up the main requirements of the new Ind AS 116.

Transition from Ind AS 17 to Ind AS 116 : The Lease Accounting is Changing.


In April 2019 Ind AS 116 Leases will replace Ind AS 17.

Ever since then I receive lots of e-mails asking me to sum up what’s new.

OK, so here you go.

In this article, you’ll learn about the main changes that Ind AS 116 introduces to the accounting for leases, illustrated on a very simple example.

The effective date of the new Ind AS 116 is 1 April 2019.

Advanced Leadership Program for CA by IIM Ahmedabad

The MoU will benefit the chartered accountants in acquiring a number of skills required in today’s digitised and fast-changing business environment. 

The chartered accountants apex body ICAI has signed an MoU with the Indian Institute of Management, Ahmedabad, for conducting management training programmes for CAs. The objective of the initiative is to establish mutual cooperation between the institutes for offering and co-hosting open enrolment and customized training programs exclusively for Chartered Accountants (CAs).

“Mutual collaboration will bring a new
dimension to the area of accounting and management education in the country. Courses conducted under the MoU will provide opportunity for chartered accountants to enhance their management skill sets required for key positions in business and industry,” said Naveen N D Gupta, President, Institute of Chartered Accountants of India (ICAI) to media.

“The MoU will benefit the chartered accountants in acquiring a number of skills required in today’s digitised and fast-changing business environment. Participants will be exposed to emerging concepts, technology and business practices in achieving operational excellence,” he said. As part of the MoU, a five-day residential programme ‘Advanced leadership programme for Chartered Accountants’ is being organised at IIM Ahmedabad from December 24 to 28

Forensic Audit - Need of the hour

What is a Forensic Audit?


A Forensic Audit is an examination of a company’s financial records to derive evidence which can be used in a court of law or legal proceeding.

For example, ABC Ltd , on the recommendation of its Chief Financial Officer (CFO), entered into a contract with XYZ ltd for the supply of goods. At the time, XYZ ltd was not authorized to conduct business, as its license was suspended due to certain irregularities in taxes paid. The CFO had knowledge of this fact, but still recommended that ABC ltd enter into a contract with XYZ ltd because he was secretly receiving compensation from XYZ ltd for doing so.

A forensic audit can reveal such cases of fraud.

Why is a  forensic audit conducted?


Forensic audit investigations are made for several reasons, including the following:

Corruption
In a Forensic Audit, while investigating fraud, an auditor would look out for Conflicts of interest , Bribery and any other form of corruption

Asset Misappropriation
This is the most common and prevalent form of fraud. Misappropriation of cash, raising fake invoices, payments made to non-existing suppliers or employees, misuse of assets, or theft of Inventory are a few examples of such asset misappropriation.

Financial statement fraud
Companies get into this type of fraud to try to show the company’s financial performance as better than what it actually is. The goal of presenting fraudulent numbers may be to improve liquidity, ensure top management continue receiving bonuses, or to deal with pressure for market performance

A forensic auditor has to prove above with evidence which can be produced in court of law
 

Procedure for a forensic audit investigation


A forensic auditor is required to have special training in forensic audit techniques and in the legalities of accounting issues.

A forensic audit has additional steps that need to be performed in addition to regular audit procedures.

Plan the investigation– When the client hires a Forensic auditor, the auditor is required to understand what the focus of the audit is. For example, the client might be suspicious about possible fraud in terms of quality of raw material supplied. The forensic auditor will plan their investigation to achieve objectives such as:

  • Identify what fraud, if any, is being carried out
  • Determine the time period during which the fraud has occurred
  • Discover how the fraud was concealed
  • Identify the perpetrators of the fraud
  • Quantify the loss suffered due to the fraud
  • Gather relevant evidence that is admissible in the court
  • Suggest measures that can prevent such frauds in the company in future

Collecting Evidence – By the conclusion of the audit, the forensic auditor is required to understand the possible type of fraud that has been carried out and how it has been committed. The evidence collected should be adequate enough to prove the identity of the fraudster(s) in court, reveal the details of the fraud scheme, and document the amount of financial loss suffered and the parties affected by the fraud.

A logical flow of evidence will help the court in understanding the fraud and the evidence presented. Forensic auditors are required to take precautions to ensure that documents and other evidence collected are not damaged or altered by anyone.

Common techniques used for collecting evidence in a forensic audit include the following:

  • Substantive techniques– For example, doing a reconciliation, review of documents, etc
  • Analytical procedures – Used to compare trends over a certain time period or to get comparative data from different segments
  • Computer-assisted audit techniques-  Computer software programs that can be used to identify fraud
  • Understanding internal controls and testing them so as to understand the loopholes which allowed the fraud to be perpetrated.
  • Interviewing the suspect(s)

Reporting – A report is required so that it can be presented to a client about the fraud. The report should include the findings of the investigation, a summary of evidence, an explanation of how the fraud was perpetrated, and suggestions on how internal controls can be improved to prevent such frauds in future. The report needs to be presented to a client so that they can proceed to file a legal case if they so desire.

Court Proceedings – The forensic auditor needs to be present during court proceedings to explain the evidence collected and how the suspect was identified. They should simplify the complex accounting issues and explain in layman’s language so that people who have no understanding of the accounting terms can still understand the fraud that was carried out.

To summarize,  a forensic audit is a detailed engagement which requires the expertise of not only accounting and auditing procedures but also expert knowledge regarding the legal framework. A forensic auditor is required to have an understanding of various frauds that can be carried out and of how evidence needs to be collected.

If you feel you are not ready for Forensic audit, then get ready, as Forensic audit is the future. A mix between technology and Internal Audit, with proper evidence collection.

Start giving Forensic Audit service and move out of old school of Internal Audit.

If you have any query, feel free to contact me.

Regards
Vivek Agarwal
www.vivekonline.com