Benford's Law

BENFORD'S LAW is a statistical-based analytical application that can be used to detect irregularities. It provides a data analysis method that can help alert forensic accountants to possible errors, potential fraud, manipulative biases, costly processing inefficiencies or other irregularities. Putting it to work, here are some possible practical applications for Benford's law and digital analysis:
(i) Accounts payable data.
(ii) Estimations in the general ledger.
(iii) The relative size of inventory unit prices among locations.
(iv) Duplicate payments.
(v) Computer system conversion (old to new system; accounts receivable files).
(vi) Processing inefficiencies due to high quantity/low value transactions.
(vii) New combinations of selling prices.
(viii)Customer refunds

Thanks Mr Ken

I wish to thank Mr Ken Pushpanathan, a senior partner in one of top accounting firms in Malaysia for inviting me to his Deepavali do recently. Mr Ken is a regular guest speaker to my Money Laundering and Financial Criminology Master in Forensic Accounting and Financial Criminology class. Very often, he would share his experiences as an auditor and how he discovers financial statement fraud during his audit jobs. His Deepavali do was a splendid 1Malaysia concept. Thanks again Ken and his wife Uma for your great hospitality...

AG Audit Report 2010

The Auditor General Report 2010 contains some very interesting findings. The following excerpts were taken from The Sun daily newspaper on the summary of the audit report:
"...The audit showed that last year, 17 ministries were ranked 'very good' in this category compared to just 10 in 2009, while government departments also showed encouraging progress, with 13 departments ranked 'very good' compared to only four the previous year. However, Auditor-General Tan Sri Ambrin Buang said the performance could be improved further if the head of departments or supervisors do not only take corrective action but also preventive measures to overcome weaknesses".
Sample financial shenanigans have also been highlighted by the AG Report 2010:
(1) Giatmara, a subsidary of Majlis Amanah Rakyat (MARA), bought equipment for its skills training programmes at grossly inflated prices;
(2) Nine ministries were found to have overspent RM3.73 billion of its operational allocation;
(3) 11 government-linked companies (GLCs) only paid dividends to the government in certain years despite making profits for three consecutive years;
(4) Deals worth millions of ringgit made by Tourism Promotion Board via direct negotiation, without approval of the Finance Ministry;
(5) More than half of the 143 Kemas kindergartens in Johor, Kelantan, Kedah and Sabah do not adhere to the menu prepared by the Rural and Regional Development Ministry;
(6) More than 130 of about 1000 health ministry staff quarters have been abandoned for up to 12 years;
(7) RM2.57 million pension paid out to about 2,000 dead pensioners.

Congratulations Two PhD Graduates

The Accounting Research Institute (ARI) congratulates two of our recent PhD graduates: (1) Dr Rose Shamsiah Binti Samsuddin "The Oversight Function of the Public Account Committee in Reporting the Audited Statements of the State Government". The PhD project was supervised by Associate Professor Dr Nafsiah Mohamed; (2) Dr Zaleha Binti Othman "Integration of Ethics in Malaysian Corporate Governance Practices". The project was jointly supervised by Prof Dr Rashidah Abdul rahman and Prof Alan Lovell. Congratulations all...

New PhD Students at ARI

The Accounting Research Institute (ARI) and I wish to welcome new post graduate students who have just registered with us this semester. Post graduate research programs in Islamic Financial Criminology (IFC) are offered jointly by both ARI and the Faculty of Accountancy, Universiti Teknologi MARA. Effectively, research programs in IFC are divided into two main components namely (i) Islamic Accounting & Muamalat and (ii)Financial Criminology. Topics of interest in Islamic Accounting & Muamalat include Shariah Auditing, Islamic Financial Reporting, Zakat Investment, Islamic Unit Trust, Islamic Microfinancing etc. Meanwhile for financial criminology, topics of interest include Anti-Money Laundering & Counter Terrorism Financing in financial Institution, Cost Effectiveness of AML initiatives, AML/CFT in charity and non profit organizations and STR in money changing businesses. Financial assistance in the forms or research assistantship or graduate research assistantship are available at ARI.

Industry Lecture Series on AML/CFT

The Accounting Research Institute (ARI) and I wish to thank Mr Nor Khizam Sulaiman for accepting our invitation for him to give an industry lecture to our post graduate students. Mr Nor Khizam is currently Vice President/Head, Prudential and Governance Supervision at RHB Investment Bank. His responsibility includes performing compliance and supervisory function for capital markets and corporate regulatory requirement for investment banking business and operations. He is also the appointed Compliance Officer of AML/CFT for regulatory monitoring and reporting to regulatory bodies. In his lecture, Mr Nor Khizam shares his experiences in dealing and handing AML/CFT cases. We were told that in reality, the three stages of ML involving "placement", "layering" and "integration" are more complex as they include multiple transactions and multiple ML "players". In addition to the AML/CFT system available in financial institutions, "people skills" and "Ingenuity" are "must have" added characteristics of an effective AML/CFT officers.

Applied Research Presentations

For the September Semester 2011, twelve students registered for the Applied Research Course. The applied research projects mainly focus on financial criminology cases. With specific research issue or research problem at hand, our post graduate students conduct the applied research projects and find solutions to the problems. Some of cases explored this semester include topics such as "governance of money changers in mitigating money laundering and terrorism financing", "effectiveness of the whistle-blowing programs of a PLC", "Cost Effectiveness of AML/CFT Program in Financial Institutions", "Risk Management Analysis of AML/CFT Programs", "Evaluation of the Internal Audit Function in Preventing ML/TF" and "Fraud Risk Indicators for Tax Exasion". Throughout the semester, students present their progress during four scheduled meetings with me, who act as the supervisor for the projects. Today, the students presented their research instruments and they are preparing themselves for their field work and data collection. I foresee some very interesting findings from the research projects this semester....

Thank You and Good Bye

On behalf of the Accounting Research Institute (ARI), I wish to thank ARI's couple researcher Dr Rashid Ameer and Dr Radiah Othman who will be moving to New Zealand in November 2011. As research fellows at ARI, they have contributed significantly driving research and publications in the area of Islamic Financial Criminology. Dr Rashid was spearheading ARI's publication through the "C-Cure Publication" initiative. Meanwhile, Dr Radiah was head of ARI's "C-Cure PhD" initiative. Moving on, we hope to foster more international collaborations with universities and research centres in New Zealand through both of them...

Industry Lecture on Enforcement of AML/CFT

The Accounting Research Institute (ARI) thanks Inspector Mohd Nor Firdaus, Investigating Officer (IO)from the AMLA unit of the Royal Malaysia Police (RMP) for delivering an industry lecture series to our Master in Forensic Accounting and Financial Criminology students. As an investigation officer, Mohd Nor shared his personal experiences in investigating money laundering and terrorism financing (ML/TF)cases. It was highlighted that one of the most challenging tasks in conducting ML/TF cases is the gathering of relevant evidences, which in most cases have to be obtained from multiple sources. RMP is enhancing its IO competency through training programs in forensic accounting and financial criminology by collaborating with professional agencies, research entities, regulatory bodies, reporting entities and universities. In fact ARI is one of those entities that have collaborated with RMP in developing training modules in Financial Criminology... from