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CA Final · Advanced Auditing, Assurance and Professional Ethics · Due Diligence, Investigation & Forensic Accounting

CA Arjun is asked by the board of Bhavani Steels Ltd to conduct a forensic investigation into suspected diversion of funds. He is also the statutory auditor of the company. He intends to gather evidence by interviewing the accounts staff. Which approach is most consistent with professional requirements?

He should agree the engagement terms, scope and independence in writing, preserve the chain of custody of evidence, and run documented, fair interviews. Destroying notes, promising immunity or alerting the suspects would compromise the evidence and the integrity of the investigation.

  1. ACheck that the engagement terms, scope and independence are agreed in writing, preserve the evidence's chain of custody, and conduct interviews in a documented, fair mannerCorrect
  2. BInterview staff informally and destroy rough notes to maintain confidentiality
  3. CPromise immunity from disciplinary action to staff who confess, to obtain admissions quickly
  4. DShare preliminary findings with the suspected employees to get their reaction before finishing the evidence collection

Explanation

A forensic assignment needs a clear written engagement, documented interviews and a preserved chain of custody so the evidence is admissible. Destroying notes undermines the evidence. Promising immunity is beyond his authority, and tipping off suspects risks tampering with the evidence.

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