Weekly Blog #1
I agree that
Cressey’s fraud triangle is an outdated approach to understanding fraud and
does not address cybercrime or how groups are formed to commit fraud. Based on learning
experiences in a university unit it is evident that elements beyond the fraud
triangle need to be addressed. Bristol Myers Squibb (BMS) is a US company that
committed health insurance fraud through inflated earnings management and other
schemes which include evidence that sub-groups have been formed, an element not
considered in the fraud triangle. General strain and differential association
theory are emerging theories that consider why fraud is committed and how
groups are formed.
In the BMS
case, strain was identified as employees were threatened, creating pressure on
senior executives to heighten performance to display favourable results to
compete with rivals at all costs. The existence of a deviant sub-culture was evident
in BMS as company executives were aware of and perpetuated the fraud knowingly.
Fraud has increased as some organisations have eliminated some internal
controls to reduce costs as a consequence of the competitive economy. Consequently, embezzlement is increasing given
the increased financial pressure on employees to maintain their position in
organisations. In addition to this, the incentive for executives to maximise
their compensation has grown as the percentage of pay linked to stock price has
increased, presenting a motivation of manipulating financial information (Dorminey,
Fleming, Kranacher, & Riley, 2010).
With internal
controls such as the following; composition and role of the board of directors,
tone from the top, internal control environment, internal and external audit
function and strength and composition of audit committees, corporate crime
should be greatly reduced (Kaplan,
2010).
http://www.acfe.com/fraud-triangle.aspx
Figure 1: The Fraud Triangle
I agree that in recent
times it is more successful to use a more humanitarian interview approach as
opposed to techniques traditionally used. After viewing the interviewing
techniques in the Russell Williams case, it is evident that motivational
interviewing produced a successful result in regards to obtaining a confession.
Regardless of the
approach used, a confession must be obtained within the parameters of the law
in the jurisdictions in which they are operating in, as confessions resulting
from “fear of prejudice, oppression or hope of advantage” will be made
inadmissible (AICPA, 2017).
REID is non-accusatory
interview, followed by a behavioural analysis interview, designed to prompt
verbal/ non-verbal cues to identify deception. An interrogation commences if
there is sufficient evidence to suggest the suspect is guilty. This technique
is criticised as it promotes psychological coercion and in recent times this
approach is ineffective. The PEACE model was developed given the issues with
the REID technique and is where the interviewer asks the suspect for their account
of events, which are challenged by the interviewer. While this is a
non-interrogatory approach that results in fewer inadmissible questions,
effectiveness remains a contentious issue.
While there are many factors
that lead to confessions, it has been shown that strong evidence is the primary
reason suspects decide to confess and where contextual and criminological
factors have a reduced impact. Despite this, empathy and rapport-building is of
critical importance as confessions were associated with a humanitarian
approach, where suspects feel respected and acknowledged (Porter & Crumbley, 2012). Therefore I
do not believe good cop/bad cop techniques should be used in the current
environment and motivational interviewing produces the most successful results.
https://www.youtube.com/watch?v=s3MCJZ7OGRk
Figure 2: Interviewing
Weekly Blog #3
I
disagree with the statement that Australian Standard 8001-2008 is only relevant
to large organisations, not SMEs. A family friend of mine ran a small business
and all accounting responsibilities were delegated to their cousin. Three
months later, she began to pay herself false overtime and use her business
purchases card for personal expenses, due to minimal oversight. The $50,000
fraud was only discovered a year later when the owner accessed the system to
check an invoice to a customer whilst the cousin was on vacation.
Australian
Standard 3001-2008 is extensive and has four main elements; planning,
prevention, detection and response, while the entire standard would not apply
to SMEs, it is recommended to implement certain parts in each of the elements. Fraud
is a major issue for SMEs as these victims are unable to recover the losses as
larger corporations can which compromises revenue, reputation and long-term
health of the business (CPA Australia Ltd, 2015). Small
businesses are more often victims of risk as they do not have the appropriate measures
in place to combat fraud. (Bowman & Gilligan, 2007). Figure 3 is
a generic risk management process which establishes the context, identifies,
analyses and evaluations risks and then how to treat the risks, which should be
implemented by SMEs to reduce the risk of fraud.
Had
such a system been in place for my family friend it would have been
acknowledged that having one person in charge of all the book-keeping duties is
not viable and internal controls such as segregation of duties or an
independent person cross-checking records the fraud would not have begun, or
progressed to the level that it did.
https://www.saiglobal.com/PDFTemp/Previews/OSH/AS/AS8000/8000/8001-2008.pdf
Figure 3: Risk Management Process
Weekly Blog #4
The
role and reputation of forensic accountants and the level of qualifications,
skills and experience that is required has been continually questioned in court.
The expert witness has a paramount duty to the court to provide an unbiased
opinion on factual information based on the expert’s competence in a subject (APESB, 2013). Preparing
and presenting evidence in an unbiased manner requires a significant level of
knowledge, training and experience to provide admissible evidence (Stockdale & Jackson,
2016).
Expert
witnesses are to follow five rules; expertise, common knowledge, area of
expertise, ultimate issue and the basis rule, these will be elaborated on by
providing case law examples. In a unit at university I learnt of a number of
expert witness cases where claims provided by a forensic accountant expert
witness were made inadmissible, two examples are; Asic v Rich and Makita v
Sprowles. Following these cases, the court re-enforced the expert’s report must
disclose the facts on which an opinion is based and provides the reasoning by
which the opinion has been reached, the report must not contain unexplained
assumptions and must explain how it reaches the conclusions that it did in each
case respectively. In these cases, the expert witnesses failed to provide
reasonable explanations as to how their opinion was formed, making the evidence
inadmissible.
As the forensic accounting profession is still
relatively new there are substantial limitations in the level of certification
that is attainable. Despite this guidance there is not currently a professional
program to provide further certification beyond tertiary level, which makes forensic
accountant expert witnesses difficult to be relied on in court proceedings
given there nature of the industry environment.
http://www.apesb.org.au/uploads/standards/apesb_standards/13092014103232p1.pdf
Figure 4: Expert Evidence
After participating in a mock trial I disagree with the statement that
an expert witness report is sufficient preparation for a court appearance due
to the many problems faced by an expert witness. An expert witness can never be
too prepared as an expert witness and the report is not sufficient to rely on
during examination in chief and cross examination (Rahman, 2016). An expert
witness in preparation for a court appearance would be expected to confer with
other people involved, in order to assist the barristers in having an
understand of strengths and weaknesses in both arguments (Russell & Reddy, 2004).
The barristers are trained to identify and exploit all weaknesses in
your argument, therefore you must be familiar with all the material prepared
and will need to explain them without the use of accounting jargon. While two
expert reports are prepared for the prosecution and defence it is crucial to
remain impartial to either side, as the role of an expert witness is to provide
unbiased evidence to the court to assist in reaching a verdict.
During examination in chief, the barrister will ask open-ended questions
to allow the expert witness to elaborate on the most important points of
testimony. Conversely, the cross examination barrister often phrases the
questions to have “Yes” or “No” answers, which often ends with the expert
witness being unable to argue against the proposition addressed.
When I was giving expert evidence, I was given insight into the stress
and pressure that is felt by being questioned on the stand. The two areas where
I could have improved on most that would have benefitted from better
preparation was being able to confidently and fluently present my evidence in
chief and being able to explain the thought process of the report as trust is
gained through development. The class found it difficult to link diagrams to
fraud which impacted on the ability of the witness to explain certain parts of
the report, some also struggled to remain an unbiased person, showing signs of
partiality in their responses. Relationships between suspects and evidence were
not linked, an area that was exploited by the barrister in the cross-examination.
Paul Vincent, the presiding judge provided us with a range of techniques that
would assist us if we were to ever become an expert witness in court. There was
emphasis in being consistent in examination in chief and cross-examination, be
familiar with both reports (prosecution and defense) to not be blindsided by
questions.
When answering a question it is of utmost importance to listen to the question
asked carefully and if you still do not fully understand it, ask the barrister
to clarify what they are asking you. This prevents an expert witness from
anticipating a question and responds prematurely before the question is asked. It
is also recommended to not answer more than the question that is asked as this
provides too much weight and will often confuse the judge or jury. Another
important consideration is that a forensic accountant expert witness must maintain
integrity and honesty at all costs. Given the issues above, it is recommended
that a forensic accountant expert witness be as prepared as possible through
strategies addressed previously and they should not rely solely on the expert
report.
https://www.youtube.com/watch?v=iPF8dgB9fGg
Figure 5: Expert Witness
Reference List
AICPA. (2017). Conducting
Effective Interviews. Retrieved May 15, 2017, from QUT Blackboard:
https://blackboard.qut.edu.au/bbcswebdav/pid-6608229-dt-content-rid-7738557_1/courses/AYB115_17se1/AYB115_17se1_ImportedContent_20170109101145/AICPA_Conducting%20Effective%20Interviews.pdf
APESB. (2013). APES 215 Forensic Accounting Services.
Retrieved May 20, 2017, from APESB:
http://www.apesb.org.au/uploads/standards/apesb_standards/13092014103232p1.pdf
Bowman, D., & Gilligan, G. (2007). Public awareness of
corruption in Australia. Journal of Financial Crime , 14 (4),
438-452.
CPA Australia Ltd. (2015). Financial investigation and
forensic accounting. Retrieved May 14, 2017, from CPA Australia:
https://learn.cpaaustralia.com.au/public_content/CPA/PRODUCTION/PD/Extracts/Fin%20investigation%20and%20forensic%20accounting_Extract%20April2015.PDF
Dorminey, J., Fleming, S., Kranacher, M.-J., & Riley,
R. (2010). Beyond the Fraud Triangle. The CPA Journal , 80 (7),
17-23.
Kaplan, J. (2010). Why corporate fraud is on the rise.
Retrieved May 10, 2017, from Forbes:
https://www.forbes.com/2010/06/10/corporate-fraud-executive-compensation-personal-finance-risk-list-2-10-kaplan.html
Porter, S., & Crumbley, L. (2012). Teaching
Interviewing Techniques to Forensic Accountants is Critical. Journal of
Forensic & Investigative Accounting , 4 (1).
Rahman, M. (2016, September 26). Preparing your expert
witness for trial- a checklist. Retrieved May 20, 2017, from The Expert
Institute:
https://www.theexpertinstitute.com/preparing-expert-witness-trial-testimony/
Russell, C., & Reddy, P. (2004). Assessment of the
expert evidence of accountants. Australian Accounting Review , 14
(1), 73-80.
Stockdale, M., & Jackson, A. (2016). Expert Evidence in
Criminal Proceedings. The Journal of Criminal Law , 80 (5).
