skill set, ethical conduct and professional communication for forensic accountant
TRANSCRIPT
Skill Set and Ethical Conduct for Forensic Experts
Compiled and Presented
By:
Chief Godwin Emmanuel, Oyedokun ND (Fin), HND (Acct.), BSc. (Acct. Ed), MBA (Acct. & Fin.), MSc. (Acct.), (MSc. Fin.), MTP (SA), ACA,
FCTI, ACIB, AMNIM, CNA, FCFIP, FCE, CICA, CFA, CFE, CPFA, ABR, CertIFR
Chief Technical Consultant/Managing Partner
OGE Professional Services Ltd
GOE Professional Practice
[email protected], +2348033737184, +2348095491026
Chairman, IIFCFIP Nigeria
President, ACFE Lagos Nigeria Chapter
Being a paper presented at 3RD ANNUAL GLOBAL FORENSIC CONFERENCE & EXHIBITION OF IICFIP
•August 9 – 11, 2016
This presentation will cover the following major sub topics as
follows:
Introduction
Forensic Accounting - Overview
Skills set for forensic accountants
Ethics and ethical conduct
Theories of Ethics
Ethical dilemma
Conclusion
2
Contents
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The surge in corruption cases in recent times coupled with highly risky nature of today’s business has necessitated stern response and preparedness, in terms of the development of human and other resources, around the world, on the part of different stakeholders.
In their survey, McMullen and Sanchez (2010) concluded that the demand for forensic accountants would increase well into the foreseeable future, particularly in the area of fraudulent financial reporting.
The need for forensic accountants both in the public and private sector is expected to continue to grow (Harris, 2012).
The place of ethics and ethical conduct cannot be underestimated when we talk of forensic accounting, the techniques and skill involved does guarantee the sound professional opinion when resolving allegation of fraudulent activities or other related forensic accounting engagements.
Introduction
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Forensic accountant must be a good communicators, as a good case could be lost due to poor presentation while a bad case could be won if the expert observes the communication and reporting rules.
This presentation explores the skill set, ethical conduct and professional communication for forensic accountants.
The participants/readers would learn these skills and be able to approach their forensic accounting engagements well prepared and produce experts’ reports that are suitable for court use in proofing and disproving facts in issues.
Introduction
According to Oyedokun (2013), Forensic accounting is a scientific Accounting method of uncovering, resolving, analyzing and presenting fraud matters in a manner that is acceptable in the court of law.
Shanikat and Khan (2013) opines that forensic accounting, given its peculiar investigative stance, requires a specific skills set on the part of the forensic accountant, that integrates accounting, auditing and investigative skills.
The National Institute of Justice (2007) also in Shanikat and Khan, (2013) asserts that forensic accountants’ success in terms of objective evaluation of clients’ work for authenticity and correctness is primarily dependent upon their expertise in accounting and skills in investigation and litigation.
Therefore, demand for forensic accountants with required expertise has surged over the past decade or so, to deal with a variety of cases and industries. 5
Forensic Accounting
6
“One of the most fundamental business ethical issues is trust between a
company and its customers”
by Kenneth V. Oster
Zysman (2004), opined that the integration of accounting, auditing and investigative skills yields the speciality known as Forensic Accounting.
While Enyi (2012) opined that in forensic accounting, a man is expected to know the trick of the monkey in order to catch it, but he should ensure that he did not become the monkey in the process.
Impeccable character must be weaved around ethical considerations in forensic accounting for it to succeed.
This implies that for effective investigation to be carried out, the investigator must understand the tricks being employed by the perpetrator, hence forensic accounting skill is required.
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Forensic Accounting
Akintoye (2008) said that forensic accounting is accounting that is suitable for legal review, offering the highest level of assurance, and including the new generally accepted connotation of having been arrived at in a scientific fashion and providing the needed findings in settling disputes.
He said the primary orientation of forensic accounting is explanatory (cause and effect) analyses of phenomena including the discovery of deception (if any) and its effects introduced into an accounting system.
Forensic accounting as defined by Zysman (2004) is "accounting analysis that can uncover possible fraud that is suitable for presentation in court. Such analysis will form the basis for discussion, debate, and dispute resolution."
Forensic accounting, sometimes referred to as investigative accounting, is a unique career field that combines accounting with information technology.
A forensic accountant uses his knowledge of accounting, law, investigative auditing and criminology to uncover fraud, find evidence and present such evidence in court if required.
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Forensic Accounting
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Forensic Accounting
Forensic accounting thus provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution. Forensic Accounting encompasses both litigation support and investigative accounting (Zysman, 2004).
Forensic accounting according to Black law dictionary is stated as “used in or suitable for court of law or public debate”. Zysman (2004) stated that forensic accountants, utilize accounting, auditing and investigative skills when conducting an investigation.
They equally have ability to respond immediately and communicate financial information clearly and concisely in a courtroom setting while serving as expert witness.
Forensic accounting is different from the old debit or credit accounting as it provides an accounting analysis that is suitable to the organization which will help in resolving the disputes that arise in the organization (Owojori and Asaolu, 2009).
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Forensic Accounting
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Forensic Accounting
Qualities and Qualifications of Forensic Accountants
Characteristics
• Curiosity;
• Persistence;
• Creativity;
• Discretion;
• Organization;
• Confidence; and
• Sound professional judgment.
A capable Forensic Accountant should have the following characteristics (Zysman, 2011):
• A Forensic Accountant must be open to consider all alternatives, scrutinize the fine details and at the same time see the big picture. In addition, a Forensic Accountant must be able to listen effectively and communicate clearly and concisely.
Forensic Accountant
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Forensic accountant must have skills in many areas.
Some forensic accountants, of course, specialize in certain areas such as information technology.
However, all well-trained forensic accountants have at least a minimum level of knowledge and skills in the following areas:
Auditing skills are of paramount importance to the forensic accountant because of the information-collecting and verification nature of forensic accounting. Well-trained forensic accountants must be able to collect and analyse relevant information so that the cases on which they are working will be well supported in court.
Investigative knowledge and skills, such as surveillance tactics and interviewing and interrogation skill, assist the forensic accountant beyond the skills related to auditing and blend the financial and legal aspects of forensics.
Forensic Accounting Skills
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Skills Forensic Accounting
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Criminology, particularly the study of the psychology of criminals, is important to the forensic accountant because effective investigative skills often rely on knowledge of the motives and incentives experienced by the perpetrator.
Accounting knowledge helps the forensic analyse and interpret the financial information necessary to build a case in a financial investigation, whether it is a bankrupt setting, a money-laundering operation, or an embezzlement scheme.
This includes knowledge of proper internal controls such as those related to corporate governance.
Skills Forensic Accounting
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Legal knowledge is critical to the success of the forensic accountant.
Knowledge of laws and court procedures enables the forensic accountant to identify the type of evidence necessary to meet the legal standards of the jurisdiction in which the case is to be adjudicated and preserve evidence in a manner that meets the criteria of the court.
Information technology (IT) knowledge and skills are necessary tools of the forensic accountant in word filled with paperless crimes.
At a minimum, forensic accountants must know the point at which they should contact an expert in computer hardware or software.
Forensic accountants use technology skills to quarantine data, extract data through data mining, design and implement controls over data manipulation, accumulate baseline information for comparison purpose, and analyse data.
Skills Forensic Accounting
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Communication skills are required of forensic accountants so that the results of their investigation/analysis can be correctly and clearly conveyed to users of their services.
Bronner (2014) concluded that forensic accounting techniques such as interviewing, computer assisted reviews such as data mining, and document review techniques are also useful to detect fraud.
Because of the unique legal aspects of forensic accounting investigations, there are special auditing protocols that must be followed since the audit’s conclusions and findings may be subject to challenge in an adjudication
proceeding, or in more formal court proceedings.
Skills Forensic Accounting
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Theories related to Forensics:
Agency Theory - Jensen, and Meckling, (1976)
Theory of Triangle of Fraud Triangle- Cressey, (1940)
Theory of Triangle of Fraud diamond- Wolfe & Hermanson (2004)
Theory of Triangle of Fraud Action- Albrecht et. al (2006)
Fraud scale theory- (personal integrity” instead of rationalization)- Albrecht,
Howe, and Romney (1984)
Theory of Triangle of Crime and Corruption- criminogenic- Gross (1963)
Deterrence theory- ACFE (2015)
Theory of Ear and Mouth- Oyedokun (2016)
Theory of profession- Pollock & Amernic, (1981), Larson, (1977), Canning &
O’Dwyer, (2001)
Skills Forensic Accounting
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Theory of profession- Framework- Attributes:
test of competence;
further study and relevant training;
a register of qualified members;
enforcement of a high standard of professional conduct;
and
organisation within a specific occupation.
Skills Forensic Accounting
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Theory of profession- Framework- Attributes
Skills Forensic Accounting
Source: (Canning & O’Dwyer, 2001) and Robust Model of Profession (Candilis 2009)
Source: (Canning & O’Dwyer, 2001) and Robust Model of Profession (Candilis 2009)
Thursday, August 25, 2016 21
Reasoning skills- Let do it together in class
Skills Forensic Accounting
Thursday, August 25, 2016 22
Reasoning skills- Let do it together in class
Skills Forensic Accounting
Thursday, August 25, 2016 23
Reasoning skills- Let do it together in class
Skills Forensic Accounting
Thursday, August 25, 2016 24
Reasoning skills- Let do it together in class
Skills Forensic Accounting
Thursday, August 25, 2016 25
Reasoning skills- Let do it together in class
Skills Forensic Accounting
Thursday, August 25, 2016 26
Take Home- 151, 131, 51
Skills Forensic Accounting
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Ethics is defined as a moral philosophy or code of morals practiced by a person or group of people.
An example of ethics is a code of conduct set by a business.
Ethics is the study of standards of conduct and moral judgment; moral philosophy, a treatise on this
study, the system or code of morals of a particular person, religion, group, profession, etc. (Webster's
New World College Dictionary)
Ethics refers to well-founded standards of right and wrong that prescribe what humans ought to do,
usually in terms of rights, obligations, benefits to society, fairness, or specific virtues.
Ethics, refers to those standards that impose the reasonable obligations to refrain from rape, stealing,
murder, assault, slander, and fraud.
Ethical standards also include those that enjoin virtues of honesty, compassion, and loyalty.
Ethical standards include standards relating to rights, such as the right to life, the right to freedom from
injury, and the right to privacy.
Such standards are adequate standards of ethics because they are supported by consistent and well-
founded reasons.
Ethics and ethical conduct
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Ethics refers to the study and development of one's ethical standards.
As mentioned above, feelings, laws, and social norms can deviate from what is ethical.
So it is necessary to constantly examine one's standards to ensure that they are reasonable and well-
founded.
Ethics also means, then, the continuous effort of studying our own moral beliefs and our moral
conduct, and striving to ensure that we, and the institutions we help to shape, live up to standards that
are reasonable and solidly-based. (Velasquez, M., Andre, C., Shanks, T. S.J., and Meyer, J. M., 1987;
2010)
Being ethical is also not the same as following the law.
The law often incorporates ethical standards to which most citizens subscribe.
But laws, like feelings, can deviate from what is ethical. Being ethical is not the same as doing
"whatever society accepts."
In any society, most people accept standards that are, in fact, ethical.
But standards of behaviour in society can deviate from what is ethical.
An entire society can become ethically corrupt.
Ethics and ethical conduct
Theories of Ethics
Ethics evolved as means of applying logic and analysis to ethical dilemmas (Oduyoye, 2014) viz:
Divine Command Theory: this has to do with the resolution of dilemmas based on religious beliefs.
Ethical Egoism Theory: this holds that everything we do is determined by self-interest. End result of this theory = chaos.
Utilitarian Theory – minimize harms, and resolve ethical issues by the greatest good to the greatest number of people. Opposite of EET.
Theories of Ethics Kantian Theory – it was proposed by Immanuel Kant -
ethical dilemmas should not be resolved at the risk of other less-endowed human beings e.g. min. wage, slavery, etc. Be fair for only the right reasons.
Rights Theory – a) everyone has a set of rights, b)
governments must protect those rights.
Moral Relativism – ethical dilemmas resolved depending on time and place. Adoption of lesser of two evils e.g. steal to solve a school fees problem, commit arson to drive away drug dealers, etc.
Theories of Ethics
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Ethics and ethical conduct
Ethics- Key ideas
Ethics- Key ideas
Ethics- Key ideas
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Ethical Dilemmas
Ethics means different things to different people, but it generally boils down to a
basic sense of societal right and wrong.
Within the business and professional context, ethics involves making decisions
that align with that sense of right and wrong, as well as with the law.
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Ethical Dilemmas
Discrimination
You are the boss in a predominantly male environment.
The presence of a new female employee stirs up conflict because your company has
not had a chance to conduct sensitivity training. Some of your male employees
make inappropriate remarks to your new employee. She complains to you; in
response, you sanction those responsible for the conduct.
You also wonder if it would be wise to move your new female employee to another
position where she would be less likely to draw attention.
Treating your female employee differently based on her gender or in response to a
harassment complaint may be considered discriminatory and unethical conduct.
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Ethical Dilemmas
Partners
You are a partner in a business and see a great deal of profitability on the
horizon.
You don't believe that your partner deserves to profit from the business'
future success, because you don't like his personality.
You may wonder if you could simply take his name off the bank accounts,
change the locks and continue without him.
If you proceed with this course of action, you would likely be in violation of
your ethical and legal obligation to act in good faith concerning your partner.
The better course of action may be to simply buy out his interest in the
business.
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Ethical Dilemmas
Gross Negligence
You are on the board of directors for a publicly traded corporation.
You and your fellow board members, in hopes of heading off early for the
holidays, rush through the investigatory process involved in a much-
anticipated merger.
As a board member, you have a duty to exercise the utmost care respecting
decisions that affect the corporation and its shareholders.
Failing to properly investigate a matter that affects their interests could be
viewed as gross negligence supporting a breach of your ethical and legal duty
of care.
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Examples of Ethical Dilemmas
Accounting
Your supervisor enters your office and asks you for a check for $150.00 for
expenses he tells you he incurred entertaining a client last night. He submits
receipts from a restaurant and lounge.
At lunch your supervisor’s girlfriend stops by to pick him up for lunch and
you overhear her telling the receptionist what a great time she had at dinner
and dancing with your supervisor the night before.
What will you do?
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Examples of Ethical Dilemmas
Bank Teller
You have worked as a bank teller for several months when one of the other
tellers who has become a good friend tells you that her daughter is extremely
ill and that she must have an operation to survive.
She also tells you that she has no insurance and the operation will cost
$10,000. Sometime later you ask her about her daughter and she tells you she
is just fine now.
She then confides in you that she took $10,000.00 from a dormant account at
the bank to pay for the operation.
She assures you that she has already started paying it back and will continue
to do so until it is all returned.
What will you do?
42
Examples of Ethical Dilemmas
Computers
In your spare time at work, you have developed a new spreadsheet program
on the personal computer in your office. It is even more powerful, yet easier to
sue than anything on the market.
You share your new program with a friend who encourages you to market it on
your own because you could probably make an incredible profit in a very
short time.
This is a very attractive option, yet you developed it using company
equipment and during time that you were at work.
What will you do?
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Examples of Ethical Dilemmas
Journalism/Advertising
Your newspaper has published a report on a national study, which concluded
that bottled water has virtually no health advantages over the tap water in
more cities, including yours.
The study included comments from local health storeowners and water
distributors challenging the study.
The AquaPure Bottled Water Company, advertising account worth over
$75,000. a year, has threatened to pull its account with your newspaper unless
you run another story of equal prominence, focusing on the benefits of
bottled water.
What will you do?
44
Examples of Ethical Dilemmas
Law Enforcement
You are a rookie officer assigned to a training officer for the first six months of
your employment.
The training officer is a 20-year veteran and is a close friend of the Assistant
Chief of Police and the brother-in-law of the Watch Commander.
The third day that you are working with him you respond to a burglary call at
a local convenience store. It is 2:30 am and the manager has been notified.
You are directed to wait 30-35 minutes for his arrival.
A short time later you observe your partner take a soda, candy and a bag of
chips. He consumes the soda and chips.
What will you do?
45
Examples of Ethical Dilemmas
Personnel
Your company has a firm policy regarding cases of theft of company
property.
Used company equipment is on a table to be sold by bid each month.
You see a valued employee who is 2 months from retirement slip an
electric drill from the table and put it in his car before the day of the
sale.
What will you do?
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Examples of Ethical Dilemmas
Teacher
You have a student who is from a single parent family.
The student must work to attend college.
However, the job is interfering with the student’s performance and
several assignments have not been turned in.
You have determined that a “D” is all the student can make when a
counsellor informs you that the student needs a “C” to qualify for an
academic scholarship.’
What do you do?
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Any Video?
Communication
Thursday, August 25, 2016 48
Any Video?
Communication
Thursday, August 25, 2016 49
Any Video?
Communication
Thursday, August 25, 2016 50
Any Video?
Communication
Thursday, August 25, 2016 51
Communication
Thursday, August 25, 2016 52
While effective communication is a learned skill, it is more effective
when it’s spontaneous rather than formulaic.
A speech that is read, for example, rarely has the same impact as a
speech that’s delivered (or appears to be delivered) spontaneously.
Of course, it takes time and effort to develop these skills and become an
effective communicator.
The more effort and practice you put in, the more instinctive and
spontaneous your communication skills will become.
Communication
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Communication
Professional Communication
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Professional Communication
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Thursday, August 25, 2016 56
Barriers to effective interpersonal communication
Improving communication skills
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Communication sounds so simple: say what you mean. But all too often, what we try to communicate gets lost in translation despite our best intentions.
We say one thing, the other person hears something else, and misunderstandings, frustration, and conflicts ensue.
Fortunately, you can learn how to communicate more clearly and effectively.
Whether you’re trying to improve communication with your spouse, kids, boss, or coworkers, you can improve the communication skills that enable you to effectively connect with others, build trust and respect, and feel heard and understood.
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Conclusion
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Forensic accounting techniques are useful in prevention, detection, and
deterrence in the area of fraud, money laundering, investigations, crime
and terrorist financing.
These techniques includes, investigative skills, audit skills, legal skill etc.
It is now clear that audit, investigation and forensic accounting are much
related but they cannot be used interchangeably.
It is hereby recommended that all would be forensic
accountants/investigators, fraud/forensic auditors, statutory auditors,
and investigative accountants, should be well equipped with forensic
accounting techniques in obtaining admissible evidence suitable for
litigation purposes.
Conclusion
62
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