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(RE)DEFINING THE FORENSIC ACCOUNTANT: MERGING PRACTICE, RESEARCH AND EDUCATIONCONNECT: THE SECOND NATIONAL FORENSIC ACCOUNTING TEACHING AND RESEARCH SYMPOSIUM

12–14 February 2012

Building 67, Level 1University of Wollongong

THE 2ND NATIONAL FORENSIC ACCOUNTING TEACHING AND RESEARCH SYMPOSIUM: (RE)DEFINING THE FORENSIC ACCOUNTANT

WELCOMEI welcome delegates and guests to the 2nd National Forensic Accounting Teaching and Research Symposium. The School of Accounting and Finance at the University of Wollongong enthusiastically fosters engagement between interested community members and academics and is pleased to be able to host this event. In your pursuit of the symposium’s theme, (Re)defining the Forensic Accountant; merging practice, research and education, your academy serves the public interest in developing both the protection of national and international financial systems and the forensic accounting profession. All participants are invited to apply their intellect, innovation, and communication skills to the sessions and their emergent discussions. I thank you for your enthusiasm for this event, and wish all participants a successful symposium.

DR KATHY RUDKINACTING HEAD, SCHOOL OF ACCOUNTING AND FINANCE

INTRODUCTION

The 2nd National Forensic Accounting Teaching and Research Symposium follows the inaugural event hosted by the Australian National University in 2010. The theme, (Re)defining the Forensic Accountant: merging practice, research and education, reinforces: the role of forensic accounting; the importance of engagement with practitioners and professional bodies; the need for collaboration and dialogue; and the opportunities for research across a range of disciplines. To this end, the Symposium will provide a forum for articulation of the views with the objective of promoting collaborative, interdisciplinary research between forensic accounting and legal educators and practitioners, law enforcement, prosecutors, members of the judiciary and others working in this area.

The Symposium highlights include:

1. A Panel Discussion: Effective and Efficient Forensic Accounting Evidence, drawing on the expertise and experience of the judiciary, the legal profession and forensic accountants, on Sunday 12 February 2012;

2. Presentations and keynote addresses on the three areas of practice, research and education, on Monday 13 February 2012;

3. A Research Forum to stimulate and foster interest and ideas for future research collaborations, on Tuesday 14 February 2012.

ABOUT THE UOW MASTER OF FORENSIC ACCOUNTING PROGRAM

Established in 2004, the Master of Forensic Accounting emphasises the holistic integration of legal, investigative and accounting skills to resolve disputes in a variety of organisational contexts. Students study the nature and purpose of forensic accounting applied to commercial asset valuations, economic loss, litigation support and financial crime. Students learn to:

• recognisegovernanceshortcomings;

• identifydysfunctionalbehaviours;

• mitigateinherentrisksininternalcontrolfailure;

• operatewithinanappropriatelegalframework;and,

• prepareandpresentanexpertreport.

For information regarding subject availability and delivery, please contact the Master of Forensic Accounting Program Coordinator, Associate Professor Kathie Cooper on (02) 4221 3718 or email [email protected]

4 Second National Forensic Accounting Teaching and Research Symposium

CONNECT: PROGRAM

SUNDAY 12 FEBRUARY 2012

Panel Discussion—Effective and Efficient Forensic Accounting Evidence (sponsored by CPA Australia) Location: Building 67, Room 104

1.00 PM Welcome & Introduction Kathy Rudkin

1.30 PM Panel Discussion—Part 1

Chair: Hugh Selby

Panel: Christopher Freeman Brendan Halligan His Honour Judge Michael Rackemann Andrew Ross Her Honour Justice Julie Ward

Topics: Preparation for settlement/hearing Preliminary Jousts

2.30 PM Break

2.45 PM Panel Discussion—Part 2

Topics: Trial Issues Advocate’s perspective Expert’s perspective

3.30 PM Close and Afternoon Tea

Symposium Official Opening and Cocktail FunctionLocation: Building 67, 67 Dining

6.00 PM Official Opening onwards

(Re)defining the Forensic Accountant 5

PANELLISTS

Chair: Hugh Selby Australian National University, Canberra, ACT

Hugh Selby teaches a range of techniques useful to advocates and witnesses in court and tribunal and has written about the law as it affects expert witnesses, principles of advocacy and pleading, appellate practice, coronial law and practice, contemporary issues in the law, and industrial law.

Panel: Christopher Freeman Barrister, Culwulla Chambers, Sydney, NSW

Christopher Freeman primarily practises in the area of large commercial disputes with an emphasis on mining litigation and international arbitration in Asia. He has acted for and against major international mining companies and equipment suppliers to the mining industry, both in domestic proceedings and in international arbitrations.

Brendan Halligan Halligan & Co., Sydney, NSW

Brendan Halligan specialises in business valuation and forensic accounting and has taken a leadership role in the forensic accounting and business valuation professions through his involvement in the Forensic Accounting Special Interest Group and the Business Valuation Special Interest Group of the Institute of Chartered Accountants Australia.

His Honour Judge Michael E. Rackemann District Court, Queensland

His Honour Judge Michael Rackemann is the former convenor of the Planning and Environment Subcommittee of the Bar Association of Queensland. In 2004 he was appointed as a Judge of the Planning and Environment Court of Queensland and the District Court of Queensland.

Andrew Ross Korda Mentha, Sydney, NSW

Andrew has over 22 years experience in the provision of financial advice, valuation and forensic accounting and has been Chair of the Forensic Accounting Special Interest Group of the Institute of Chartered Accountants Australia. He is a writer and frequent speaker on topics related to expert evidence and valuations and has prepared expert reports for, and given evidence in, both Federal and State Courts.

Her Honour Justice Julie Ward Supreme Court of New South Wales

Her Honour Justice Julie Ward was the first female solicitor appointed directly to the New South Wales Supreme Court in 2008. As a former partner of Mallesons, she has a reputation as an outstanding litigator specialising in the area of corporate and commercial law.


CONNECT: PROGRAM

MONDAY 13 FEBRUARY 2012

8.30 AM 67 Foyer Tea and coffee on arrival

9.00 AM 67.101 Ron DurkinThe Expert, The Prosecutor and Doing What Is Right: The Lindsay Case

11.00 AM 67.101 Concurrent Session A — Practice Towards a Better Credit Card Fraud Prevention Strategy in IndonesiaHendi Prabowo

Tackling the Financial Consequences of CrimeTom Jambrich

Applied Forensic Accounting — Experiences from the Papua New Guinea Financial Intelligence UnitJohn Chevis, Bernard Barrum

67.102 Concurrent Session B — Research Emerging Issues for the Forensic Accountant: Foreign BriberyNathan Renwick

Corporate Disclosure on Combating Bribery: A Study of Two Global Companies in the Telecommunication IndustryStephen Dellaportas

12.00 PM 67.101 Wayne LonerganForensic Accounting and the Expert Witness

1.00 PM 67 Foyer Lunch

2.00 PM 67.101 Concurrent Session C — Research The Theory of Profession: Accountability, Qualifications, Entry and Ethics — A Preliminary Discussion and Early Findings on the Current State of Forensic Accountancy in AustraliaSarah Chen, Jeanette Van Akkeren

An Analysis of Financial Statement Fraud at the Audit Assertion LevelIsobel Wang

The Litigation Cost Rule and its Implications for Auditing and Financial Statements: The ‘American System’ versus the ‘British System’Paul Barnes

67.102 Concurrent Session D — Valuation & Education The ‘Value to the Owner’ Objective and its Implications in the Separate Recognition of Personal and Commercial Goodwill in Australian Family Law DecisionsIan Fargher, Brett Goodyer

Simulating the Courtroom Experience in the Classroom: Reflections on Training Legal Counsel and Expert Witnesses for Expert Witness ExaminationJudith Marychurch, Lagnesh Kumar

3.00 PM 67 Foyer Afternoon Tea


3.30 PM 67.101 Peter HughesHow to Spot a Lie and a Liar

5.00 PM Close

Symposium Dinner sponsored by the ICAA

6.00 PM 67 Dining Pre-Dinner Drinks and Dinner

7.00 PM 67 Dining Dinner

KEYNOTE SPEAKERS

Ron Durkin

Ron Durkin is a Partner with CliftonLarsonAllen, Los Angeles, California, assisting clients with fraud detection, prevention and internal investigation. With more than 30 years experience in public accounting and as a Special Agent for the Federal Bureau of Investigation (FBI), he has been responsible for investigating a range of forensic accounting issues including: whitecollar crime; political and public corruption; money laundering; and, organised crime. In honour of his achievements Ron Durkin was recently awarded the AICPA Forensic Litigation Services Lifetime Achievement Award.

Peter Hughes

Peter Hughes has more than 35 years experience in internal audit including Director of Internal Audit with the Orange County Internal Audit Department, the California Institute of Technology (Caltech), NASA’s Jet Propulsion Laboratory (JPL) and the Oregon University System of Higher Education. He has personally conducted and directly supervised over 1000 investigations into allegations of waste, fraud, defalcations and abuse with several investigations leading to criminal prosecutions and convictions.

Wayne Lonergan

Wayne Lonergan is a distinguished practitioner in corporate and business valuations and loss assessment both in Australia and internationally, with over 35 years experience in the field. Having written over 100 technical papers, with publications in leading valuation texts, his expertise extends to public and private companies and government departments. He has served on a range of national and international committees including the Companies and Securities Advisory Committee, the Australian Accounting Standards Board, and the International Financial Reporting Interpretations Committee. Wayne Lonergan has also held senior roles in the Securities Institute of Australia.


CONNECT: PROGRAM

TUESDAY 14 FEBRUARY

Research Forum sponsored by SAARC

8.30 AM 67 Foyer Tea and coffee on arrival

9.00 AM 67.101 Strategic DirectionSimon Ville

9.30 AM 67.101 Panel DiscussionFighting Fraud — A Unified Effort by the Government (Law Enforcement and Regulators), Practitioners and AcademiaRon Durkin

Chair: Ian Fargher

Panel: Kathie Cooper Ron Durkin Grant Goodyer Peter Hughes Judith Marychurch

11.00 AM 67 Foyer Morning Tea

11.30 AM 67.101 Research OpportunitiesMary Kaidonis

12.15 PM 67.101 Host for 3rd National Forensic Accounting Teaching and Research Symposium

Close

12.30 PM 67 Foyer Lunch


CONCURRENT SESSION ABSTRACTS

Concurrent Session A — Practice

Towards a Better Credit Card Fraud Prevention Strategy in IndonesiaHendi Prabowo

For years, credit card fraud has been a major problem in the Indonesian payments system. Numerous efforts have been made to mitigate this payment crime. Nevertheless, the high fraud losses recorded in particular by banks and other parties in credit card networks suggests that more actions still need to be taken. For this, formulation of a sound fraud prevention strategy is paramount to the success in combating credit card fraud in a payments system. Such a strategy will ensure that available resources are allocated effectively and efficiently. This article, which is based on the author’s PhD research, seeks to assess the soundness of the credit card fraud prevention strategy in the Indonesian payments system. For analytical purpose, references are made to similar practices in other countries such as the United States, the United Kingdom and Australia. The study was conducted using document review and interviews and was focusing on the period of 2003 through 2007 The discussions in this article conclude that just as in other countries such as the United States, the United Kingdom and Australia, the essentials of credit card fraud prevention practice in Indonesia comprise six key areas of resource allocation: understanding of the real problems; fraud prevention policy; fraud awareness; technology-based protection; identity management; and, legal deterrence. These six key areas are mainly supported by four pillars: user; institution; network; and government and industry. However, credit card fraud prevention practice in Indonesia is still at a lower level of robustness than those in benchmark countries. Deficiencies in the credit card fraud prevention practice in Indonesia are indicated, inter alia, by a lack of reliable fraud data collection, management

and distribution mechanisms as well as a lack of effective and efficient identity management practice. Deficiencies and weaknesses in the system should be identified and action taken to make it more consistent with credit card fraud prevention practices of other countries.

Author is the Director of the Centre for Forensic Accounting Studies at the Department of Accounting of the Islamic University of Indonesia. He obtained his Masters degree and PhD in Forensic Accounting from the University of Wollongong Australia.

Tackling the Financial Consequences of CrimeTom Jambrich

There are fundamental challenges for society in disrupting organized crime. This paper explains how, by focusing on the unexplained wealth of organised criminals, forensic accountants are now a key tool of law enforcement. It discusses the case law surrounding the use of accounting methodology as opinion evidence in Australia. It also explains recent changes to the law in various Australian and international jurisdictions in relation to Unexplained Wealth Orders.

Applied Forensic Accounting — Experiences from the Papua New Guinea Financial Intelligence UnitJohn Chevis, Bernard Barrum

In combating grand corruption in developing countries, forensic accounting finds itself on the frontline in the battle against financially motivated crime. Papua New Guinea, Australia’s nearest neighbour and a developing country, has suffered a collapse in fiscal management to such an extent that a Parliamentary Inquiry recently claimed that corruption and poor fiscal management pose a direct threat to civil stability and the health and welfare of the country’s citizens.

The work that the authors were involved in with the Papua New Guinea Financial Intelligence Unit directly addressed this problem using anti money laundering processes for the first time, and resulted in a measurable change in criminal behaviour and a reduction in the observed incidence of corruption.


Concurrent Session B — Research

Emerging Issues for the Forensic Accountant: Foreign BriberyNathan Renwick

Bribery and corruption are not only corrosive to the free market, but are major obstacles to economic development and the alleviation of global poverty. As a global citizen and member state of both the United Nations and the OECD, Australia has a significant responsibility to help thwart such evils.

The recent emergence of foreign bribery on the Australian psyche is unequivocally the result of Australia’s first ever charges for the offence being issued on 1 July 2011. No doubt it also has a little something to do with the fact that two of those charged were subsidiary companies of one of Australia’s most respectable institutions, the Reserve Bank; and that journalists from Melbourne’s The Age newspaper published such allegations for over a year.

Despite becoming a signatory to the OECD Convention on Combating Bribery of Public Officials in 1997, the charges are the first genuine public foray Australia has made towards demonstrating its true commitment to the convention.

Global reporting body Transparency International also rates Australia’s bribery enforcement efforts to date as extremely poor. It will take not only a successful prosecution, but a raft of improvements to Australia’s enforcement strategy to make any marked difference to Australia’s current scorecard on foreign bribery.

Corporate Disclosure on Combating Bribery: A Study of Two Global Companies in the telecommunication industryThusitha Dissanayake, M. Azizul Islam, Stephen Dellaportas

Purpose:

The purpose of this paper is to examine the influence of media scrutiny and a networked governance of National and International Government Organisation (IGOs) on the extent of voluntary corporate disclosure in the global telecommunication sector in response to incidents of corporate bribery.

Design/Methodology/Approach:

An anti-bribery disclosure categorisation index was developed from various anti-bribery guidelines developed by IGOs, to collect and analyse the data used in this study. This study relied on a content analysis of news media articles, corporate annual reports and standalone sustainability reports (from 1995-2010) of two global telecommunication companies [Alcatel-Lucent — a French based global company; Siemens AG — a German based global company], to understand corporate performance disclosures on combating corporate bribery.

Findings:

The findings, underpinned by a joint consideration of legitimacy theory, media agenda setting theory and responsive regulation theory, show that the change in corporate disclosures on combating bribery were positively associated with the extent of negative media attention and the movement of IGOs in combating corporate bribery in global corporations. A system of networked- governance with IGOs appears to have a significant influence on international business practice.

Originality/Value:

In the context of the literature on social accounting, this is believed to be the first known study to document and understand the trend in anti-bribery related performance disclosures and the influence of external stakeholders on such practices.


Concurrent Session C — Research

The Theory of Profession: Accountability, Qualifications, Entry And Ethics — A Preliminary Discussion and Early Findings on the Current State of Forensic Accountancy in Australia.Sarah Chen, Jeanette Van Akkeren

This paper presents an exploratory study on the current structure of the forensic accounting industry in Australia. Extant literature identifies the complex nature and role of forensic accountants, and identifies the broad areas of expertise that may be required of a forensic accountant due to the many services they offer. Using the Theory of Profession to guide data collection and analysis from archival research, Australian forensic accounting websites were analysed using qualitative content analysis to determine whether this relatively new career path can be considered a ‘profession’ in its own right. Findings demonstrate that there is a lack of consistency within the industry in regard to formal qualifications, skills and experience. Further, there is no formal control of entry, and although the ICAA created the Forensic Accounting Special Interest Group (FASIG) to address such issues, only forensic accountants choosing to join this group are held accountable for their actions.

An Analysis of Financial Statement Fraud at the Audit Assertion LevelIsobel Wang, Renee Radich, Neil Fargher

Prior literature has examined financial statement fraud at the account balance and transaction level. This study increases our understanding by narrowing the focus to the audit assertions violated. Using a sample of companies with alleged involvement in accounting manipulations as documented in Accounting and Auditing Enforcement Releases, the descriptive analysis suggests that the Occurrence and Cutoff assertions about classes of transactions are the major assertions at risk for revenue transactions and Accuracy for expense transactions. The results from a multivariate analysis indicate that the factors influencing fraud vary across assertions. Occurrence assertion

is more likely to be violated when there is greater concentration of managerial power. The findings emphasise the importance of considering concentration of managerial power and potential management override of controls in detecting fraudulent financial statements at the assertion level.

The Litigation Cost Rule and its Implications for Auditing and Financial Statements: The ‘American System’ versus the ‘British System’Paul Barnes

The litigation cost rule relates to which of the two parties in a civil lawsuit has to pay the legal costs. In those countries where the American system applies, each has to pay their own legal costs. In most other countries, the British system applies and the loser pays all the legal costs. By means of a single person decision-theoretic model, we examine the effects of this on auditing and financial statements. We find that under the American system, this has the effect of restraining shareholders from suing unless they are able to cover their legal costs, thereby providing scope for under- or over-statements, depending on management’s wishes. This scope is denied under the British system and, as a result, audited financial statements will not be similarly biased.

This result is also examined in the context of uncertainty where there is asymmetric information leading to difficulties for the auditor to ascertain the true position in the face of management who may wish to mislead, difficulties for shareholders and investors in knowing whether the financial statements are misleading, and whether they are likely to win an action against the auditor who is likely to have superior knowledge when deciding whether to defend the suit. Although the results here are more complex, depending on such factors as whether the legal fees are fixed or ‘contingent’ on success, they also demonstrate significant differences in the effects of the two systems. Finally, the welfare effects are examined where it is shown that the two systems provide different incentives affecting the likelihood and frequency of lawsuits.


Concurrent Session D — Valuation & Education

The ‘Value to the Owner’ Objective and its Implications in the Separate Recognition of Personal and Commercial Goodwill in Australian Family Law DecisionsIan Fargher, Brett Goodyer

The Court is often confused when duelling valuation experts present apparently different evidence. Without a recognised theory, valuation evidence can appear disorderly and potentially contradictory.

In the absence of theory The Family Court of Australia has attempted to clarify the valuation objective, articulating the ‘value to the owner’ concept. Born out of minority shareholder issues this paper reflects on the gestation of ‘value to the owner’ through reviewing the Court’s guidance. However it is noted that there is some tension with this objective given its application to professional services businesses.

This paper explores a particular application of value to the owner in professional services businesses where the distinction between personal and commercial goodwill can be at issue. The importance of this distinction is in the consideration of capitalisation as property, or future income as financial capacity. This has implications in Court decisions applying section 79 and/or section 75(2) such that duplication is avoided.

Simulating the Courtroom Experience in the Classroom: Reflections on Training Legal Counsel and Expert Witnesses for Expert Witness ExaminationJudith Marychurch, Lagnesh Kumar

This paper will explore the experiences of students and teachers in an assessable mock expert witness examination based on a forensic accounting case study. The focus of the paper is on a joint learning activity devised to meet the needs of students enrolled in the Masters of Forensic Accounting (MFA) and the Master of Laws (Criminal Prosecutions) (LLM) offered at the University of Wollongong. In 2010 and 2011, the students enrolled in the MFA subject ACCY 958 Evidence & the Forensic Accountant and in the LLM subject LWPD 926 Experts & Their Evidence have participated in joint and individual training sessions focussed on their role in a proceeding based on a case study raising issues that require an expert witnesses specialising in forensic accounting to assist the court. MFA students take on the role of the expert witness and LLM students the roles of both a prosecuting and a defence lawyer so that all students experience both an examination in chief and a cross-examination. The paper will address considerations relevant to both the design of a case study for this type of exercise and the development of learning activities to prepare and support students in both programs to develop professional skills in expert witness examination and to establish a reflective learning cycle based on their experience in the classroom that they can continue with as they gain real-world experience in their chosen careers. Both students and teachers can gain tangible benefits from a learning activity of this nature, and engage in continuous refinement to benefit future learners.


NOTES


OUR SPONSORS

Social Accounting and Accountability Research Centre (SAARC) explores the impact of accounting within its organisational, social and political contexts. SAARC’s sponsorship of this Symposium brings together accounting, criminology and legal skills required of forensic accountants, which help to merge practice, research and education.

The Faculty of Commerce has also sponsored this Symposium through its Conference Convening Grant. This grant enabled overseas experts to actively participate as keynote speakers. Such support reinforces the Faculty’s commitment to making connections with its communities at all levels, local, national and international.

SCHOOL OF ACCOUNTING AND FINANCEFACULTY OF COMMERCE

UNIVERSITY OF WOLLONGONG

+61 4221 3718

[email protected]

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