Professorial Lecture - Synopsis

The ACFE 2012’s Global Fraud Study 2012 reveals that financial statement fraud represents one of the most costly forms of occupational fraud in the new millennium. It is also one of the most difficult to trace. Although the final responsibility for ensuring the integrity of the financial statements of an organization lies with the board of directors, financial auditors have a very important role to play in mitigating and detecting financial statement fraud. At the professional level, various standards have been formulated and issued by accounting professional bodies to assist auditors. Two important standards that are used by auditors globally (when auditing financial statements) are the Statement on Auditing Standards No 99 (SAS 99) and the International Standards on Auditing 240 (ISA 240).

The “rule-based” SAS 99 was issued by the Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA) in October 2002 and the “principle-based” ISA 240 was issued by the International Federation of Accountants (IFAC) in 2009. Basically, these standards were issued partly in response to various infamous accounting scandals involving Enron, WorldCom, Adelphia, and Tyco. This monograph is presented in five segments. First, an explanation of the basic definitions and concepts underlying financial statement fraud is given. Second, the monograph discusses two financial audit guidelines, SAS 99 & ISA 240 and their implications for auditors and management. In the third segment, relevant fraud theories are discussed to facilitate the development of fraud risk indicators. The fourth segment is premised on the framework underpinning the Fraud Diamond Theory and presents the empirical findings of a Malaysian study involving three groups of auditors, external, internal and government, and how they perceive the importance and usage of fraud risk indicators when auditing financial statements. While the results concerning the importance of risk indicators are fairly positive, there is a gap concerning their usage. Respondents emphasized their need for specialized training in financial fraud detection techniques. The final segment elaborates on the managerial and professional implications of the financial statement fraud on Corporate Malaysia.

Non Profit Organisations Sector

Whilst no one doubts that the work of Non Profit Organisations (NPOs) is important, it is worthwhile to pay attention to the Mutual Evaluation Report produced and published by the Asia Pacific Group of Anti-Money Laundering (APG) which is related to NPOs.

Basically, the APG Mutual Evaluation Report specifies that “the use of charities and NPOs continues to be the leading source of funds for money laundering and terrorism financing”. The NPOs feature a number of vulnerabilities that money launders and terrorist organisations can use. They are: 1. NPOs enjoy public trust. 2. NPOs have access to considerable sources of funds. 3. NPOs are often cash–intensive. 4. Some NPOs have a global presence that provides a framework for national and international operations and financial transactions, often within or near areas that are most exposed to terrorist activity. 5. NPOs may often be subject to little or no governmental oversight (registration, record keeping, reporting and monitoring, check of background of beneficial owners, employees, management). 6. Governmental bodies may have insufficient resources to effectively oversee the sector. 7. NPOs may have limited resources or capacity to withstand demanding regulatory requirements.

Some of the negative economic effects of money laundering and terrorism financing include firstly, they undermine the integrity and soundness of the NPO sector that is critical to economic growth. Secondly, they reduce productivity in the economy's real sector by diverting resources. Thirdly, they distort the economy's international trade and capital flows to the detriment of long-term economic development and finally, the NPO sector can inadvertently become part of the criminal network encouraging criminal activity. Future research may include developing governance framework for NPOs.

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....

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

Money Laundering in NPOs

Today, the master students from the "Money Laundering and Financial Criminology" class presented their cases on money laundering which had involved non-profit organizations. A total of ten local and global cases were presented by the students. For each case, the students need to highlight and explain the three stages of money laundering: placement, layering and integration. Theoretically, the identification seems very straight forward. However, in actual money laundering cases the stages may not be observable, hence making investigation and data collection a challenging process.
Students are also required to assess the internal control system of the organisations involved in each money laundering case and to gauge the pepetrators's personality with suitable fraud theory. All in all, as a facilitator for the course, I am very happy with the students presentations. They have shown maturity and have used suitable analytical tools to assess and evaluate their cases.
Among the NPO cases selected include Baptist Foundation of Arizona, Holy Land Foundation, Benevolence International Foundation, United Charity in Australia and the Universal Church of the Kingdom of God. Congratulations all...

Intellectual Discourse

It was such an honour for Universiti Teknologi MARA (UiTM) when the Regent of Perak, Duli Yang Teramat Mulia Raja Dr Nazrin Shah Ibni Sultan Azlan Muhibuddib Shah agreed to deliver a royal speech titled The Role of the Malay Rulers in Nuturing National Integration". The intellectual discourse was organized by one of the university's Centres of Excellence - IMPAK. The event which was held at the Dewan Agong Tuanku Canselor (DATC) was attended by 5,000 participants, comprising students and staff of the University.

ARI Training Programs

One of the main functions of the Accounting Research Institute (ARI)is to provide training programs and consultancy services in the following areas of expertise:
1) Forensic Accounting and Financial Criminology, 2) Financial Reporting, 3) Financial Statement Analysis, 4) Public Sector Accounting, 5) Accrual Accounting, 6) Accounting Information System, 7) Tax Planning, 8) Corporate & Enterprise Governance, 9) Islamic Accounting & Finance, 10) Shariah Auditing and 11) Intellectual Capital & Knowledge Management. Currently, ARI's operations are supported by researchers and professional experts from eight different research centres. The eight research centres are namely Asia-Pacific Forensic Accounting Research Centre (AFARe), Islamic Accounting & Muamalat Research Centre (IAMRC), Corporate Governance Research Centre (CGRC), Financial Reporting and Taxation Research Centre (FRRC), Asian Management Accounting Research Centre (AMARC), Asia-Pacific Centre of Sustainability (APCeS), Government-Linked Companies Research Centre (GLCRC) and Public Sector Accounting Research Centre (PSARC). Those interested with ARI training programs may contact ARI office at tel no: 603 5544 4925.

Thank You to the New Accountant General

I wish to thank and congratulate the new Accountant General of Malaysia, Datuk Wan Selamah Binti Wan Sulaiman for sharing her thoughts and experiences on the usefulness and relevance of forensic accounting in the government sector.
Her paper which was categorised under the track of "Accountability, Legal Framework and Islamic Perspective" made an interesting discussion point among the participants. One of initiatives to be undertaken by the Accountant General Office is to increase the number of forensic accounting courses for accountants.