Accounting a Helpful Way to Fight Against Corruption

8/10/2019 Accounting a Helpful Way to Fight Against Corruption

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Accounting a helpful way to fight against corruption

As the complexity and scope of commerce has expanded throughout the world, the need to track

money and financial information has grown. But in such case corruption is the disease that

gradually demolish the ethics of an organization as well as the people of its territory. Fraud

includes all the multifarious means human ingenuity can devise that are resorted to by one

individual to get an advantage over another by false suggestions or suppression of the truth. It

includes surprises, tricks, cunning or dissembling, and any unfair way by which another is

cheated. According to the FBI !hite "ollar #raining $anual,% white&collar crime encompasses

those criminal acts characterized by fraud, concealment, or a violation of trust that are not

dependent upon actual or threatened physical force or violence.

'ow we can define in that an organization is running smoothly with out being affected by

corruption( It is hard to find out from an organization but possible to )ustify whether its

activities are being legal or illegal.

Accounting is the weapon that can identify any corruption in any field of an organization. It is a

service activity which function is to provide *uantitative information primarily financial in

nature, about economic activities that is intended to be useful in making economic decisions, in

making choices among alternative courses of action.

Accounting an aid to manage corruption:

Accounting helps the management in many cases to find out any mistakes or unethical activities

which can cause huge problem in an organization. $anagement can easily find out kind of

mistake as+


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Accounting follows ouble entry system that analysis debit and credit and check

transactions calculation of ledger to modify whether it is correct or not.

-eople can find their daily transactions report accounting. It shows their daily purchases

and sells, income and expenditure, liabilities or debt to resolve. o with such report in hand it is

hard for any one to take any advantage from any transactions.

If any kind of forgery, deceit, and trick occurs accounting can extirpated and take

obstruction measures as remedy of such situation. In this case eligible knowledge of accounting

provides great support.

ifferent expenditure of financial institution and /overnment is being reported by an

accountant. Although he0 she can initially do mistake in order to fulfill his or her own desire.

#hey can create different false information about different cost and wastage many income of an

organization or a government by poring profit in to their pocket. #his kind of situation can be

stopped if+ 1

& irect and indirect cost is being analyzed by the auditor.

& Fixed and variable cost is being analyzed.

& "ontrollable and uncontrollable cost is being analyzed.

& Auditor reports to the higher authority for any corruption.

& "reate awareness so that such situation can be stopped.

!hen there is a lack of evidence there is chance of mistrust and often the probability of

having corruption. Accounting information system provides information about different

evidence through we can identify any kind of doubt. It provides necessary information of an

organization through which we can find out right the culprit.


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As accounting information system is based on such rules and regulation2 -articipative

law, company law, ecurity and exchange law, income tax , Business and industry law of an

organization so any depraved can be captured easily.

In an organization if there is no accountability or value people will do unethical activities

to maximize their own benefit. Accounting creates accountability that forces them to clarify

actual situation and makes them careful in case of expanses of money and making any decision.

ebt e*uity ratio provides information about debt and balance sheet shows the total

liabilities and total asset of an organization. !hether it3s a private or public organization we can

easily find out the how much asset or liabilities there should be and lessen the opportunity of

doing any unethical act.

Accounting is the tool of making values and accountability that helps people tom

moderate their activities and also raises responsibility that can eradicate the effects of

corruption.

Although we have talked about accounting the entry&level )ob recipients should need to know

how to determine whether an individual has failed to report income to the appropriate taxing

authorities. #hey should understand how assets can be hidden, and how to locate hidden assets.

A dynamic tool for combating corruption+

#here has been a corresponding increase in illegal financial activity, according to separate

surveys by the 4..epartment of 5ustice, -ricewaterhouse&"oopers, and the Association of

"ertified Fraud 6xaminers 7A"F68. Ironically, illegal businesses and perpetrators of financial

crimes also need to keep track of their cash flow and manage their operational performance to

generate profits, fund activities, and avoid detection, prosecution, and seizure of their assets.

In fact these have prompted businesses houses to hire forensic accountants to discover through

investigation, various types of wrongdoing, on one hand and prevent such occurrence, on the


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other. #he plague of fraud has accelerated the need for a specialist trained specifically in

investigation and detection.

Forensic accountinghas established itself as dynamic and strategic tool in combating

corruption, crime and frauds through investigations and resolving allegations of frauds and

embezzlements. It is seen to be engaged in evidence gathering, document findings, provide

internal control assessment, internal risk assessments, design, implement and monitor fraud

policies, loss recovery, due diligence and compliance studies, lost profit analysis, damage

calculations, shareholder disputes, business damages, valuation, settlement negotiations,

mediation, search for hidden assets, business or pension plan, etc. Forensic accounting includes+

#he use of accounting, auditing, and investigative skills to assist in legal matters.

It consists of two ma)or components+ litigation services that recognize the role of an

accountant as an expert consultant, and investigative services that use a forensic accountant3s

skills and may re*uire possible courtroom testimony.

eveloped by the AI"-A3s Forensic and 9itigation ervices "ommittee, forensic accounting

may involve the application of special skills in accounting, auditing, finance, *uantitative

methods, the law, and research. It also re*uires investigative skills to collect, analyze, and

evaluate financial evidence, as well as the ability to interpret and communicate findings.

I# encompasses litigation support, investigation, and dispute resolution and, therefore, is the

intersection between accounting, investigation, and the law. Fraud examination is a

methodology for resolving fraud allegations from inception to disposition, including obtaining

evidence, interviewing, writing reports, and testifying. #he A"F63s manual states that fraud

examiners also assist in fraud prevention, deterrence, detection, investigation, and remediation.

9ike most forensic sciences, fraud and forensic accounting may include using financial

information to piece together or reconstruct past events in instances where that reconstruction is

likely to be used in some )udicial proceeding 7e.g., criminal or civil court, deposition, mediation,

arbitration, or settlement negotiation8.


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Fraud and forensic accounting is a broad area that includes occupational fraud, corruption and

abuse, financial statement fraud, and civil litigation matters. !hile the reconstruction activity

tends to look backwards, the impact may have implications for the future, particularly in civil

torts and breach of contact claims.

An understanding of effective fraud and forensic accounting techni*ues can assist forensic

accountants in identifying illegal activity and discovering and preserving evidence. Forensic

accounting is the application of accounting knowledge and investigative skills to identify and

resolve legal issues. It is the science of using accounting as a tool to identify and develop proof

of money flow. #hese tools and techni*ues can be invaluable for fraud and forensic accounting

investigators

Fraud and Forensic Accounting for eradicating complexity:

Because employee and management fraud, theft, embezzlement, and other financial crimes are

increasing, accounting and auditing personnel must have training and skills to recognize those

crimes. In addition, high&visibility corporate scandals, such as 6nron, !orld"om, and Adelphia,

demonstrate the need to better prepare entry&level accounting graduates and practicing "-As in

the areas of fraud prevention, deterrence, detection, investigation, and remediation. Finally, news

reports following the eptember :: attacks depicted how terrorists used the international banking

system to fund their activities, transfer money, and hide their finances, and signaled a need for

investigators to understand how financial information can provide clues as to future threats.

#hese events raised public awareness of fraud and forensic accounting, and highlighted theimportance of ensuring that financial professionals have the necessary training and skills to

understand and act appropriately on any important evidence generated from financial

information.


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Forensic accounting;, provides an accounting analysis that is suitable to the court which

will form the basis for discussion, debate and ultimately dispute resolution. It encompasses

both 9itigation upport and Investigative Accounting.

As a discipline, it encompasses financial expertise, fraud knowledge and a sound

knowledge and understanding of business reality and the working of the legal system.; #his

implies that the forensic accountant should be skilled not only in financial accounting, but

also in internal control systems, the law, other institutional re*uirements, investigative

proficiency, and interpersonal skills. "orporations can rely on these skills for developing a

consistent system of corporate governance, disseminating such information within and

outside the company, ensuring that governance policies and ob)ectives are interwoven into

the internal control system, setting up fraud prevention systems, and investigating any

existing fraud 7>?8.

#he forensic Accountant is a bloodhound of bookkeeping. #hese bloodhounds sniff out

fraud and criminal transactions in bank, corporate entity or from any other organization@s

financial records. #hey hound for the conclusive evidences.

6xternal Auditors find out the deliberate misstatements only but the Forensic Accountants

find out the misstatements, which have been created deliberately.

6xternal auditors took at the numbers but the forensic auditors took beyond the numbers.

Forensic accountants take a more proactive, skeptical approach to examining the books of

accounting. #hey make no assumption of management integrity 7if they assume so, then there

is no need for their appointment8, show less concerns for the arithmetical accuracy and have

nothing to do with the accounting or assurance standards but are keen in exposing any

possibility of fraud.

Forensic accounting is focused, therefore, upon both the evidence of economic

transactions and reporting as contained within an accounting system, and the legal

framework, which allows such evidence to be suitable to the purpose7s8 of establishing

accountability or valuation. Forensic accountants are typically "-A0"A0"/A0"$A that

specialise in those types of engagements where there is a need for such evidence.


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6ngagements are wide&ranging, and include transaction reconstruction and measurement2

bankruptcy, matrimonial divorce, and probate asset identification and valuation2 falsifications

and manipulations of accounts or inventories or in the presentation thereof and accountability

within the statutory audit and other environments2 among many others. Forensic accountants

are called upon to play important pre&emptive roles 7as of right, without cause8, offering

independent assurance in such diverse areas as audit committee advisory services, merger

and underwriting due diligence, investment analyst research, and enterprise risk

management. Forensic Accountants are trained to look beyond the numbers and deal with the

business reality of the situation

If a dispute reaches the courtroom, the forensic accountant may testify as an expert

witness. Investigation is the act of determining whether criminal matters such as employeetheft, securities fraud 7including falsification of financial statements8, identity theft, and

insurance fraud have occurred. As part of the forensic accountant@s work, he or she may

recommend actions that can be taken to minimise future risk of loss

Investigation may also occur in civil matters. For example, the forensic accountant may

search for hidden assets in divorce cases.

Model Curriculum Outline:

#he model curriculum developed for fraud and forensic accounting should ensure that entry&level

forensic accountants have the knowledge, skills, and abilities necessary to begin work in the

specialized area of fraud and forensic accounting. $ore specifically, entry&level fraud and

forensic accounting professionals should possess knowledge, skills, and abilities in the following

areas+

"riminology specifically oriented to the nature, dynamics, and scope of fraud andfinancial crimes2 the legal, regulatory, and professional environment2 and ethical issues.

Fraud prevention, deterrence, detection, investigation, and remediation in the

following areas+ asset misappropriation, corruption, and false representations2 financial

statement fraud2 and fraud and forensic accounting in a digital environment, including


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computer&based tools and techni*ues for detection and investigation, electronic case&

management tools, and other issues specific to computerized environments.

Forensic and litigation advisory services, including research and analysis,

valuation of losses and damages, dispute investigation, and conflict resolution 7i.e.,

arbitration and mediation8.

Other necessary steps of Forensic Accounting:

Forensic accounting plays an important role in different cases which can be clarified as follows+

important facet of fraud and forensic accounting is the use of computer software,

referred to as "A##s 7computer&aided tools and techni*ues8, to aid in the detection and

investigation of fraud and other white&collar crimes. #his includes the use of generalized

audit software for data extraction and analysis2 spreadsheet, database, and statistical

software use for fraud detection and analysis2 investigative tools such as data mining,

link analysis software and case management software2 as well as use of the Internet.

ince 0:: Forensic Accountants have been playing a ma)or role in tracing terrorists

around the world. #here is currently immense public pressure on the auditing profession

to bridge this expectation gap coupled with regulatory support.

In the 4nited tates of America, has led to a dramatic increase in the number of

forensic accountants with an expanded rote and the enhancement of accounting

curricula to improve the fraud detection skills of statutory auditors.

It is also high time for Bangladesh to consider the Forensic Accounting as strategic

tool in combating as well as identifying fraud and corruption at all level of public and

private sectors. #he new caretaker government of Bangladesh following :0:: has

declared a crusade against corruption, which is likely to be assisted by Forensic

Accounting.

#hrough the development and implementation of the #!/6&FFA7#echnical

!orking /roup for 6ducation in Fraud and Forensic Accounting8, accountants will have

one more tool to effectively and efficiently deal with the challenges faced in detecting


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financial crimes and tracing ill&gotten gains from illegal activities.

Drivers of Curriculum Choices :

#he outcome of the efforts of the #!/ is a model curriculum for fraud and forensic accounting

that identifies those areas of knowledge, skills, and abilities necessary to enter the field given the

multiple career paths outlined in the 6xhibit. In an applied discipline such as accounting, student

placement and initial on&the&)ob investigative success are usually viewed as key performance

indicators. #herefore, consideration was given to what potential employers re*uire of entry&level

employees and typical initial assignments.

early all of the experts agree on certain essential skills and abilities for entry&level individuals.

#his list includes+

4tilizing a variety of techni*ues to prevent, detect, and investigate fraud and

financial crimes2

/athering, analyzing, and reporting evidence and other information2 and

Avoiding becoming a victim of fraud.

In addition to the core foundation of knowledge, these skills and abilities are essential for initial

success in the field of fraud and forensic accounting.

Accounting a Helpful Way to Fight Against Corruption

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