Assessment Two - Blog #5

Reflective Thinking Task – Blog #5

I disagree with the statement that if an expert report if structured well, there is really no other preparation needed as an expert witness for court.  I recently participated in a mock trial, State Vs P.Simpson, at the Queensland University of Technology as part of the AYB115 Governance, Fraud and Investigation unit.  I was a ‘mock’ expert forensic accounting witness, hired by the defence for Mr Peter Simpson.

In my own personal experience presenting evidence in the mock trial, I found it to be a daunting process.  Despite having read through both expert reports extensively, and having practised answers for potential questions, I was unprepared.  The moment I took the stand I could not think as clearly and answered questions too quickly without thinking about the appropriate answers.  I saw this scenario occur repeatedly throughout the trial.  Other students also rushed their answers, and sometimes even had reverse their response from something as simple as ‘no’ to ‘yes’.  In these situations, the cross examiner was able to make the expert witness sound incompetent, therefore destroying their credibility as an expert.

The acting judge, Paul Vincent, and the practicing barristers for this mock trial, Andrew O’Brien and Michael De Waard, provided the group with some recommendations for accounting expert witnesses (also backed up by Dr. Larry Crumbley).  Crumbley also states that the lack of the below points are some of the major problems associated with expert witnesses;

1. Preparation is key.  This is not only in relation to the expert report, but also preparing with your barrister on the questions that you may be asked and the appropriate responses. The most important aspect to preparation is having the appropriate evidence (especially source documents).

2. Ensure you understand the questions before you deliver your answer, and never be afraid to ask to hear the question again (doing this is 100% better than answering with incorrect information).

3. Understand that the cross examining barrister will have already examined your expert report thoroughly.  Therefore, before the trial, with your own barrister (examiner in chief), ensure you have practised a cross examination scenario (in an attempt to see where holes are missing, or where you as an expert have a lack of knowledge in your own expert opinions).

4. Ensure you can communicate your evidence in a language the judge and jury will understand.

5. And lastly, the two most important things are to remain honest and never alter your integrity (regardless of how it will affect your case), (Crumbley, L. 2008).

According to Mr Preber in his book, Financial Expert Witness Communication: A Practical Guide to Reporting and Testimony, preparing for the accounting expert witness deposition is vital to ensure the testimony is relevant, clear and understandable, (2014, p.189).  Preber claims that every “expert witness, regardless of experience level, has a professional responsibility to prepare thoroughly for deposition”, (2014). 

References

Crumbley, L. (2008). The Battle of Accounting Expert Witnesses: Judges Can Be Harsh. Forensic

Examiner. 17(2), 48-53. Retrieved from http://search.proquest.com.ezp01.library.qut.edu.au/docview/207654707/abstract/94FDF2B30B3F4267PQ/1?accountid=13380

Preber, B.J. (2014).  Financial Expert Witness Communication: A Practical Guide to Reporting and Testimony. Doi: 10.1002/9781118911778. 

Assessment Two - Blog #4

Reflective Thinking Task – Blog #4

It is extremely important for a forensic accounting expert witness to be well trained, educated and not be partisan.

I am very interested in a career as a forensic accounting expert witness, and therefore have been completing research into the profession, including example cases where expert opinions have been discredited (and why).  I recently came across two interesting cases.

The first case was Makita (Australia) Pty Ltd v Sprowles. The plaintiff stated she fell down a set of stairs at her work place and Professor Morton, the expert witness, provided his opinion that this was due to the stairs being slippery.  This case has been heavily reviewed as to whether this expert opinion should have been accepted by the trial judge despite overwhelming contradicting evidence, (Supreme Court of NSW, 2001).

According to Kumar, an experts opinion is a reasoned conclusion drawn from ‘specialised knowledge’, based upon the facts of which the expert has observed (facts of the case), (2011).  An expert witness must be able to prove to the court that they have the appropriate qualifications, education, training etc. to be providing expert opinions. 

Further into my research, relating to the Van Oord UK Ltd & Anr v Allseas UK Ltd case, the expert witness’s opinion, provided by Mr Lester, was completely disregarded due to extreme bias. The acting judge stated that his evidence presented in court, along with his expert witness report was “entirely worthless” and that he was simply a “mouthpiece” for the claimants, (Hodge, 2016).

Tom Aslin, a partner at Kingston Smith, and an accounting expert witness, stated that “the Van Oord case is a reminder that expert witnesses need to retain their duty of independence to the court rather than act as an advocate for the party that has appointed them”, (Hodge, 2016).

 

References

Hodge, N. (2016). When expert witnesses get it wrong. Forensic an Expert Witness Group. Retrieved from http://www.icaew.com/en/archive/technical/legal-and-regulatory/forensic/expert-witness/when-expert-witnesses-get-it-wrong

Kumar, M. (2011). Admissibility of Expert Evidence; Proving the Basis for an Expert’s Opinion. Sydney Law Review 33(3) 427-447. Retrieved from http://search.informit.com.au.ezp01.library.qut.edu.au/fullText;res=AGISPT;dn=20115175

Supreme Court of New South Wales – Court of Appeal.  (2001). Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 (14 September 2001). Retrieved from http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/nsw/NSWCA/2001/305.html

Useful Link

Check out this article about a toxicologist in America who is thought to have lied on the stand as an expert witness in over 33 cases:

http://www.khou.com/news/local/33-cases-may-be-in-jeopardy-after-expert-witness-education-discredited/315709414 

Assessment Two - Blog #3

Reflective Thinking Task – Blog #3

I disagree with the statement that the Australian Standard 8001-2008 is only relevant to large organisations.  Section 1.2 of this Fraud and Corruption Control Standard specifically states that it is intended to apply to all entities operating with Australia including small to medium sized enterprises (SMEs), (AS 8001-2008).  According to Best, Rikhardsson and Toleman, the standard recommends “the development of systems for targeted post-transactional review and strategic use of computer systems including effective data mining and real-time transaction assessment to identify suspect fraudulent transactions”, (2009).

In my experience in working in a small to medium sized enterprise, the recommendations made by this standard would be a beneficial business investment.  The software company relies heavily upon information systems for day-to-day business activities and currently has no fraud prevention/detections procedures.  This standard allows businesses, like the company I am working for, to adapt through its four step fraud control structure:

-          Planning and resourcing

-          Prevention

-          Detection

-          Response. 

AS 8001-2008 recommends that entities should consider the following factors in relation to their organisations characteristics before adopting the standard:

-          Size

-          Turnover

-          Business diversity

-          Geographic spread

-          Reliance on technology

-          Industry, (AS 8001-2008).

I would recommend that small to medium sized enterprises apply the above to determine which relevant parts of the standard are applicable to the organisations structure, (AS 8001-2008).

SMEs are not exempt from the risks associated with fraud, and therefore must remain active in the on-going prevention and detection procedures.  It is therefore important that SMEs invest in such procedures to ensure the longevity of either organisations. 

References

Best, P.J., Rikhardsson, P., Toleman, M. (2009). Continuous Fraud Detection in Enterprise Systems through Audit Trail Analysis. The Journal of Digital Forensics, Security and Law: JDFSL. 4(1), 39-60. Retrieved from http://search.proquest.com.ezp01.library.qut.edu.au/docview/743860117/abstract/ED6BE9F6EC834EC5PQ/1?accountid=13380

Australia Standard. (2008). Fraud and Corruption Control. (AS 8001-2008).  Retrieved from https://www.saiglobal.com/PDFTemp/Previews/OSH/AS/AS8000/8000/8001-2008.pdf

Useful Links

Check out this article posted by the ABC about a small business (sports equipment manufacturer) that has been left devastated by cyber fraud.  This company had no fraud prevention/detection plan. http://www.abc.net.au/news/2016-12-21/online-charge-back-scam-gutting-small-businesses/8115702 

Check out this cartoon YouTube video that outlines real-time fraud prevention in a real-time world. https://www.youtube.com/watch?v=sMDg7ld1tZU

Assessment Two - Blog #2

Reflective Thinking Task – Blog #2

I agree with the statement that a more humanitarian approach when interviewing a suspect in a fraud, bribery and/or corruption case, can yield successful results. This is however, dependent on the suspect’s personality traits. When conducting an interview, typically three approaches can be taken;

-       R-E-I-D (an aggressive approach that uses interrogation methods)

-       PEACE (a non-aggressive approach that uses evidence to identify inconsistencies within the suspects account)

-       Motivational interviewing (a psychotherapeutic method that obtains information through the use of empathy).

In my experience being interviewed for a part time job, the interviewer was extremely friendly and genuine.  This type of interview suited my personality type, as I tend to over think situations and can quickly become nervous. The interviewer’s approach was able to calm me down and I felt very comfortable talking with her.  If the interviewer had been rude and hostile, I would have likely froze and would not have been willing to answer questions freely and openly.

Jessica Heuback outlined in her thesis, Suspect Interrogation: Strategies and Key Personality Constructs, that during the first stages of any discussion, the interviewer should assess the personality traits of the suspect, (2009).  This analysis should then shape the tone of the interview (i.e. whether or not an aggressive approach will be taken).

I would recommend to a forensic accountant that despite all of these approaches, the most important aspect of interviewing a suspect is to ensure you obtain a confession within the parameters of the law in the jurisdiction in which you are operating (rules of evidence). You must also ensure that a confession obtained is a complete account of facts, signed by the suspect, not just an admission of guilt.

References

Heuback, J. (2009). Suspect Interrogation: Strategies and Key Personality Constructs.

Retrieved from http://www.k-state.edu/actr/wp-content/uploads/2010/12/heuback-thesis_final_120709-editedpdf.pdf.

Useful  Link

This YouTube video outlines the science of integration and talks about interviewing techniques: https://www.youtube.com/watch?v=Lzt8sOMU1WY. 

Assessment Two - Blog #1

Reflective Thinking Task – Blog #1

I disagree with the statement that Cressey’s fraud triangle is an outdated approach to understanding how and why people commit fraud, bribery and corruption because it does not address cyber-crime or how groups form to commit crime. 

Cyber-crime is merely a method of conducting fraud, the three elements of the fraud triangle are still relevant. The triangle approach can still be adapted to cover fraud that is perpetuated through cyber-crime and explain how criminal groups form to commit fraud. 

According to the fraud triangle the three necessary elements are:

-          Opportunity,

-          Rationalisation and,

-          Pressure.

In my experience working at a software company, certain employees within the IT department have the opportunity to commit computer (cyber) fraud because they access to confidential staff passwords (including top management) and the ability to change them.  However, no employee has committed fraud within the organisation, and nor are they likely too.

Employees working at this company are missing two essential elements from the fraud triangle, Rationalisation and Pressure.  It can been seen through my own personal experiences that each element to this triangle is crucial to the crime actually being committed.  The consequences of committing such a crime cannot be rationalised by a person who is experiencing no pressure or will not gain enough incentive.  

Rezaee and Riley state that corporate culture can foster the motivation, and create the opportunities, for employees and top management to commit fraud, bribery and corruption, (2010).  They also put fraud down to the lack of responsible corporate governance within organisations. I would suggest that organisations focus their attention on these aspects of business in an attempt to prevent fraud.

References

Rezaee, Z., Riley, R. (2010). Financial Statement Fraud: Prevention and Detection, Second Edition. Retrieved from http://library.books24x7.com.ezp01.library.qut.edu.au/toc.aspx?bookid=33786. 

Useful Link

Check out this TED-Ed video explaining the fraud triangle (this video also talks about Parmalat’s fraud scandal): https://youtu.be/Tb6QX9Yy1GM. 

Reflective Writing Task - Blog #5

Reflective Writing Task - Blog #5

I agree with the statement that an important part of the forensic accounting role is the quantification of damages in the civil courts when a person has been wronged. 

According to the Forensic CPA Society, engagement relating to civil law disputes includes;

• The calculation and the quantification of losses and economic damages
• Any disagreements relating to company acquisitions, for example of breach of warranties, and
• Business valuation, (n.d.).

Upon my research into the complexity of the forensic accounting role when considering civil action law, I came across the Labelmakers Group Pty Ltd v LL Force Pty Ltd [2012] FCA 512 case.  Labelmakers claimed a number of employees were in conflict of their contractual and fiduciary obligations to the company, (Federal Court of Australia, 2012). The forensic accountants assigned to this case were responsible for the quantification of damages based upon the applicants claim for compensation for a loss on profit on multiple counts.  

Following on from this example, a forensic accountant must also consider different elements to the law of damages, including taxation.  In the case stated above, to ensure a true figure was derived in relation to the calculation of the damages, it is required taxation be accounted for, (Hines, 2008).  

References

Labelmakers Group Pty Ltd v LL Force Pty Ltd (No 2) [2012] FCA 512. (2012). Federal Court of Australia. Retrieved from https://jade.io/article/265542

Forensic CPA Society. (n.d.) What is a Forensic Accountant? Accessed April 10, 2017. https://www.fcpas.org/about-us/what-is-a-forensic-accountant/

Hines, M. (2008). Tax Implications of Litigation. Victorian Bar Professional Standards Scheme. Retrieved from http://www.deverslist.com.au/Tax%20Implications%20of%20Litigation.pdf

Reflective Writing Task – Blog #4

Reflective Writing Task - Blog #4

I agree with the statement that strict or vicarious liability is the only way to make directors and senior management serious about minimizing fraud, bribery and corruption. 

During my research I came across the Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd [2016] case.  A manager at Pioneer was authorised as part of her employment to make customer redraws via the company’s software system.  This employee made multiple fraudulent redraws from customer accounts into her husband’s account.  The court held Pioneer liable on the basis of vicarious liability.  Despite executives of Pioneer having nothing to do with the fraud, the circumstances illustrate a very close connection between the fraud committed and the acts of employment.  Her fraud was only possible due to her management authority and access to the software system, (Young, 2016).

Vicarious and strict liability attempts to address incidences of crime by making executives more accountable for employee actions.  Executives may be willing to spend more capital on corporate and IT governance mechanisms to reduce the threat of crime.

The major categories of crime include;

1. White Collar crime (e.g. false accounting, money laundering, theft)
2. Organised crime (e.g. illegal drugs, illegal services)
3. Computer crime (e.g. unauthorised access, internet fraud)
4. Regulatory, Corporate and Compliance Offences (e.g. insider trading, competition offences) (Latimer, 2012, p.96).

References

Latimer, P. (2012). Australian Business Law (31^st Ed.). Sydney, NSW: CCH Australia Limited. 

Young, S. (2016). Federal court affirms an employer’s vicarious liability for fraudulent acts of employees. Moray & Agnew Lawyers. Retrieved from http://insurance.moray.com.au/publication/can-a-mortgage-intermediary-be-vicariously-liable-for-the-fraudulent-acts-of-its-employee/.