With corporate accounting frauds on the rise, the ICAI has decided to promote forensic accounting to equip chartered accountants with adequate tools to detect white-collar crimes and identify malpractices like money laundering and routing terrorist funds.
Pointing out that it is difficult to detect sophisticated frauds through traditional accounting methods, Institute of Chartered Accountants of India (ICAI) President Ved Jain said, "Forensic accounting will help professionals to deal with this new problem in the corporate world."
The emphasis of the ICAI on forensic accounting comes in the backdrop of the US financial meltdown, caused due to misreading risks involved in complex derivative instruments by credit rating agencies and other investors.
Similar, the $50bn (around Rs 2,50,000 lakh crore) fraud by Wall Street trader Bernard Madoff reinforces the need for a stronger accounting system. Madoff siphoned off billions of dollars through fake bogus investment schemes.
Forensic accounts, Jain said, "will encompass the use of accounting and auditing skills and will use computers as an audit tool. Chartered accountants will be trained in forensic accounting."
Forensic accounting, which includes data mining and fraud detection, will provide India Inc, private equities (PE) and other stakeholders an effective tool to verify the accounts of companies and present a clear and transparent picture of the financial health of the entity concerned, Jain said.
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