Why forensic accountants need to be familiar with the LAW


A 2016 KPMG Survey found fraud in businesses in Australia had reached a total of $363 million in the past two years and noted the majority of frauds were carried out by company insiders (KPMG, 2017). As the incidents of fraud are increasing, forensic accountants are becoming very important in reducing loss and risk and ensuring the appropriate penalty is handed to the offender. I saw an example of this on the news regarding a Sydney woman, Lauren Reddie, who defrauded over $1.3 million from her employer, George Weston Foods, through numerous transactions spanning over two years. She was charged with 65 counts of fraud and 14 counts of money laundering.

Forensic accountants follow the flow of funds to investigate fraud or embezzlement in companies, much like they did in Reddie’s case, and use this to lay a foundation for criminal or civil action (KPMG, 2017). Failure to relay well analysed data as an expert in a court proceeding will greatly effect the outcome of the case. It would effect a company immensely through financial loss, eroded confidence and morale within the company, damaged reputation, loss of clients and potential investors (Latham, 2016). Consequently, I believe an amateur forensic accountant ignorant of the law will hinder the culture of the business and may help future offenders in their rationalisation stage.






Lauren Reddie defrauds $1.3million:

http://www.abc.net.au/news/2016-04-15/sydney-woman-faces-court-on-65-charges-over-$1.3-million-fraud/


References
KPMG, 2017. KPMG survey reveals surge in fraud in Australia. [Online]
Available at: https://home.kpmg.com/au/en/home/media/press-releases/2017/01/surge-fraud-i-aus-fraud-barometer-25-jan-2017.html

KPMG, 2017. Forensic Accounting. [Online]
Available at: https://home.kpmg.com/au/en/home/services/advisory/risk-consulting/forensic.html

Latham, C., 2016. Quill Group. [Online]
Available at: https://www.quillgroup.com.au/blog/fraud-and-the-impact-it-has-on-small-business/#

Comments

Post a Comment

Popular posts from this blog

The Fraud Triangle lives on

Image
Over the years there have been many comprehensive frameworks that relate to fraud such Differential Association theory and the General Strain theory. Despite the rapidly advancing culture of technology, Cressey’s Fraud Triangle continues to be a pivotal model used in many industries (Allbrecht, 2014). The model explains the three components that lead to fraud, bribery or corruption as pressure, opportunity and rationalisation . An example of these components was seen at my Dad’s old workplace. A few members were feeling mistreated by management and felt they were greatly underpaid for all their hard work and service.  They decided to begin stealing money from the cash registers over a period of time and were later caught and dealt with accordingly. The workers were able to rationalise as they thought they deserved to be paid more for all their hard work. They had the pressure of financial difficulties and the resentment towards management and lastly had the opportunity , mo
Read more

The Quantification of Damages role

Image
Damages are a monetary award that the law can impose for breach of duty or a tort (Tam, 2017) . It is imposed so that the plaintiff would still be in the same position if the original breach had not occurred. My friend, who undertook work experience for a forensic accounting, firm told me of a case he worked on involving an old JB Hi Fi. In this instance, JB Hi Fi had to close down a store because the council had built a bypass that blocked off and hid away the store. His role was to determine the resulting damages. Forensic accountants quantify this financial loss, work out a business valuation and calculate other damages resulting from an injury, to use in court proceedings. They deliver an expert unbiased business valuation report in court for disputes or civil action law suits (Giliberti, 2014) . Calculating the loss of profits is yet another measure of damages vital to the role of financial accountants  (Pfeiffenberger, 2016) . This loss is calculated if the business cont
Read more

Out with the old. In with the new!

Image
Whilst a good cop/bad cop has reaped good results over the years, of late a more humanitarian approach such as Motivation Interviewing or PEACE is proving to be more successful, particularly for first time fraudsters. Choosing the right technique can make a significant impact to investigating fraud. An example of the negatives of the good cop/ bad cop approach was felt when I went for an interview a couple of years ago at a clothing store. The interviewers took a good cop/bad cop approach to the interview and it made me feel very intimidated. In turn, I was unable to answer questions properly and found myself even lying in different parts due to the intimidation. This is similar to when good cop/ bad cop approach in legal interviews leads to a false confession.  If the interviewer had taken a more humanitarian approach by building relationship of trust and understanding, I would have felt more relaxed and would have most likely been able to properly and truthfully answer the ques
Read more