The Forensic Accounting Profession

Honourable Kirby AC CMG

Due to the dramatic technology changes occurring in the accounting environment, Honourable Kirby has considered that the need for forensic accountants to address the changes in the regulatory environment is of utmost importance to further strengthen the profession (2011, para. 9). 

Today the challenge for forensic accountants is to keep up to date with the APES 215 Standards for the Provision of Quality and Ethical Forensic Accounting Services (Accounting Professional and Ethical Standards Board, 2013). As the professional standards become stricter, forensic accountants must recognise the development of this new regulatory environment in response to meet the demands in an accounting investigation and the many different services performed (Bawaneh, 2011). Failure to do so can result in a breach of standards following the termination of one’s job. 

Click here for the APES 215 Forensic Accounting Services pdf

Misinterpretation of regulations - Mark Anderson

2 years ago, a family friend didn’t recognise the updated regulations placed by her new boss and lost her job because she actually ended up unintentionally breaching them. Back then, I felt like she was treated unfairly but as I am writing this blog, I’m beginning to understand that a breach in workplace regulations can result in job loss. 

It is recommended that as an employee, it is your job to keep informed with the workplace regulatory environment and the expectations of your profession. If you are unsure of anything, always ask to prevent breaches from occurring! 

It is better to be safe than sorry!

References:

Accounting Professional and Ethical Standards Board. (2013). APES 215 Forensic Accounting Services [Supersedes APES 215 Forensic Accounting Services issued in December 2008]. Retrieved from http://www.apesb.org.au/download.php?code=680

Bawaneh, S. S. (2011). Forensic Accountants in the Digital Age. Interdisciplinary Journal of Contemporary Research in Business, 3(3), 75 – 81.

The Honourable Kirby AC CMG. (2011, March). Forensic Accounting – New rules and opportunities. Conference held at Hilton Hotel, Sydney. Retrieved from http://www.michaelkirby.com.au/images/stories/speeches/2000s/2011/2525-FORENSIC-ACCOUNTING-CONF-MARCH-2011.pdf

COBIT 5 for 'Risk'

With the advances of technology at an influx, risks associated with the IT Governance of organisations have multiplied; where every business activity generates some sort of risk (Crime Bulletin, 2009, p. 1).

COBIT 5 addresses ‘risk’ by providing specific guidelines for the effective management of:

• Risk Management Process(es)
• Risk Scenarios
• How COBIT 5 enablers can be used to respond to unacceptable risk scenarios (Akkeren, 2015)

COBIT 5 available on  http://www.isaca.org/cobit/pages/risk-product-page.aspx

By enabling a holistic approach in fraud risk assessments, it becomes essential for businesses to understand information security as a set of related components and not as an individual system because the system alone cannot deliver reliable risk assessments (Harmer, 2014).

Today many companies still face countless forms of fraud. I recently heard on the news about the ASX-listed K&S Corporation involved in another corporate fraud scandal for the misappropriation of $7.1 million of funds. This surprised me, as they did not learn their lesson after the first incident where K&S has not properly applied fraud risk assessments or considered addressing COBIT 5 for possible scenarios.

Organisations, such as K&S, can minimise fraud by:

• Risk mitigation – implementing a number of IT controls
• Risk assessment procedures – steps for risk management, responding to scenarios
• Internal/External controls and reporting –fraud becomes trickier to conceal
• Segregation of duties – implementing two+ employees checking and signing off financial documents
• Staff education and awareness – adequate training provided for all staff about potential risk/fraud (see video below)                                                                                     (Crime and Misconduct Commission, 2005, p. 6 – 10).

References:

Akkeren, J. V. (2015). AYB115 Governance Issues and Fraud: IT Governance and Management Responsibility [Lecture Notes]. Retrieved from https://blackboard.qut.edu.au/webapps/blackboard/content/listContent.jsp?course_id=_116816_1&content_id=_5376704_1&mode=reset

Crime and Misconduct Commission. (2005). Fraud and Corruption Control: Guidelines for best practice, 1(1), 5 – 16.

Crime Bulletin. (2009). Organised fraud in Queensland: A strategic assessment. Crime Bulletin Series, 10(1), 1 – 3.

Harmer, G. (2014). Governance of Enterprise IT Based on COBIT 5: A Management Guide (1^st ed.). IT Governance Publishing. Retrieved from http://www.ccc.qld.gov.au/research-and-publications/publications/prevention/fraud-and-corruption/fraud-and-corruption-control-guidelines-for-best-practice-1.pdf/download

Setting the Right "Tone from the Top"

“Tone from the Top” is about ‘creating a culture where everyone has the responsibility for doing the right thing’ (Pricewaterhouse Coopers, 2012). It specifically refers to the COBIT 5 enabler 'culture, ethics and behaviour' of individuals – the fundamental success factor of IT Governance. 

This means that any sort of organisation consisting of senior levels adapting or setting a poor ‘tone from the top’ attitude can lead to an increase occurrence of fraudulent activities by employees. 

I recently experienced this firsthand at my job, where my manager sneaked in comments about doing “whatever I wanted to do” as long as the job was completed. However, this included drinking on the job and stealing drinks. For me this was a disaster, because it felt like this dishonest approach was forced onto me as a new employee and I was reluctant to follow my manager’s lead along with the rest of the organisation. 

Many companies face this problem where upper management appears unconcerned with ethics and passes on this attitude to employees who feel that ethical conduct is not a priority and so, are more likely to commit fraud (ACFE, 2006). Therefore, it is recommended that organisations regularly identify, evaluate, test and assess security measures to reflect a no-tolerance attitude towards risky behaviour of upper management. This will aid in the prevention of fraudulent activities committed by employees (Bayuk, 2010, p. 129).

References:

ACFE (Association of Certified Fraud Examiners). (2006). Tone at the Top: How management can prevent fraud on the workplace. Retrieved from http://www.acfe.com/uploadedFiles/ACFE_Website/Content/documents/tone-at-the-top-research.pdf

Bayuk, J. (2010). Enterprise security for the executive: setting the tone from the top (1^st ed.). ABC-CLIO Publishing.

Pricewaterhouse Coopers. (2012). Tone from the Top: Transforming words in actions. Forensic Services, Fraud, Corruption and Business Ethics, 4 – 5.