Forensic Accounting & Auditing by Sharp & Tannan INDIA

Forensic Accounting & Auditing
Assurance | Consulting | GRC | Taxation

Ahmedabad | Bengaluru | Chennai | Coimbatore | Delhi | Goa | Mumbai | Pune| Vadodara 1
Todays Discussion
Contents Slide No
Forensic Accounting Vs Forensic Auditing 3
Occupational fraud snapshot – Asia Pacific 2020 4

Red flags 5
Fraud Detection 6
Fraud Prevention 7
Speaker’s profile 14
Acknowledgment 15

Forensic Accounting Vs Forensic Auditing
• Forensic accounting largely covers frauds against business:
Frauds generally committed by employee or vendors or

customers or in connivance of all these parties.
• Forensic Auditing largely covers frauds for business
Frauds generally committed by the promoters and shareholders

of business to deceit the bankers, revenue authorities and
regulators

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3
Occupational fraud snapshot – Asia Pacific 2020
The 2020 global study by the ACFE examined 2,504 cases of occupational
fraud reported from 125 countries throughout the world including 198 cases
from the Asia pacific reason.

The red Flags
Lifestyle Changes Personality Traits Behavioral Changes Other Flags
• Expensive / Multiple • Unwilling to share duties • Brags about purchases • Illogical/inconsistent

Vacations • Doesn’t like work being • Unusual cash possession decisions and actions
• Upgraded / Expensive reviewed • Outside business calls at • Frequent work issue
Vehicles • Strong desire for work complaints
• Multiple homes / personal gain • Becomes irritable / • Decreased productivity
renovations • Unable to relax moody • Irregular schedules
• Multiple Investments • “Beat the system” • Irregular timing
• Recreational Activities attitude

Fraud Detection
Tip Off
40%
Suspicious
Internal
Transaction
Audit
Reporting
25%
8%
How is a fraud
detected?
Fraud Risk
By Chance
Management
13%
14%

Fraud Prevention
Ombudsman
Setting up
whistleblowin
g mechanism
Counter
Surveillance
Prevention
Methods Fraud Risk
Assessment
Employee
and vendor Data
Reference Analytics
Check

1. Ombudsman and whistle blower policy
Creation of whistle blower policy, its awareness and its review
Appointing an ombudsman for the q The whistle blower policy should include details of the
company procedures and process of investigating the complaints
followed by the Audit Committee of the company subject to
them finding the concern and compliant genuine in nature.
q A neutral person will become the q Furthermore, the whistle blower policy should clearly define
ombudsman of the company and the rights and duties of the whistle blower and procedures
surrounding filing a complaint.
receive all the whistle blows and q The awareness of the whistle blower policy across the
pass it on to the top management company is important. The policy should preferably be
placed prominently on the landing page of the company's
for their perusal or follow the website and well documented on the company's intranet. In
protocols as decided in the policy. addition, the policy should be visible throughout the
company's corridors including all remote locations where
there are operations.
q This will help the company maintain q To ensure widespread awareness of the policy, the company
secrecy and neutrality. should include a course about the policy in the compulsory
annual learning and development courses. In the situation
where a company does not have a formal training
q The acting ombudsman will also programme, the whistle blower policy can be included in
quarterly emails as well as delivered to new joiners during
help and support with the best initiation.
possible methods and industry q A review of the whistle blower policy should be conducted on
a periodic basis by the company, even by appointing a third-
practise in cases as it may be. party risk consultant.

2. Operating whistle blowing mechanism
q Setting up channels of communication for filing complaints through Inhouse software

system or third party whistle blower management software programs could be as
follows:
o Designated phone lines that are open all the time with a secure voicemail system
where the whistle blower can record their complaint. Companies can make use of
artificial intelligence tools to record the complaints in an effective way, which would
have their own in-built intelligence to answer and ask the complainant questions
surrounding the standard details about the complaint, provide procedural
clarifications to the whistle blowers, and help record the statement in an effective
way.
o A designated email address or a web portal is provided where a whistle blower can
submit complaints. The designated web portal on the intranet page of the company
should have certain mandatory fields to be filled in by the whistle blower, which
becomes easier for the designated authority of the company to comprehend the
complaint. Often, the whistle blower complaint is lost if not drafted properly.
q Access to the whistle blower shall be controlled by the restricted authority of the
company. The authority may in turn delegate the review of the complaint to an internal
risk team, or appoint a law firm or a consulting firm to assist in conducting a fact review.
q In certain companies, the process of reviewing the complaints received under the
whistle blower policy is outsourced to maintain independence.

3. Fraud Risk Assessment

4. Data analytic &
automation
• Fraud is costing organizations 2.1 trillion USD per
year? That’s more than Brazil’s total GDP—the
eighth largest world economy.
• Recent survey found that 44% of respondents plan

to increase spending toward advanced fraud
detection software and data analytic and
automation tool.
• Proactive data monitoring was associated with 52%

lower losses and frauds detected in half the time.”
—Association of Certified Fraud Examiners

11
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5. Employee and vendor Reference Check
Education
Confirmation of Education Qualification
of the candidate from respective Employment (through HR Dept.)
educational institution’s records.
Confirmation of Employment details
provided by the candidate or Client with
the HR Dept. of the respective
employer.
Address site visit
Confirmation of
current/permanent/past residential Other Database Searches
address provided by the candidate. Servicer Provider as a subscriber to
various proprietary and public online
databases performs a search against the
Court Record Search available records to check if the
candidate has any adverse history
Records to be searched against
matching the candidate's name, address
candidate's Identifiers (name, father’s
and father’s name provided by
name, date of birth / age and address)
candidate or Client. The search includes
through online eCourt database and
publicly available online databases of
applicable secondary databases to
criminal records, civil litigation records
identify any civil / criminal records
and credit and reputational records.
pertaining to the candidate.

6. Counter Surveillance
Challenge the surveillance using the counter surveillance methods and
machines which are capable of doing counter surveillance and detect the bugs
installed in your premises including your car and office. Some of the gadgets
include -
The radio frequency detector (RF detector) Metal detector, which is capable of finding any
detects any instrument which emits radio metal within its range. This has the range of
frequencies. This detects frequency of more than detecting 6 meters and frequency of 10 MHz
8 MHz

Speaker’s Profile
§ Qualified C.I.A from Institute of Internal auditors (Florida - USA.) since July 2006
§ Qualified C.A from Institute of Chartered Accountants of India, since July 2002.
§ B.com (Hons) from S P University – Gujarat - INDIA
§ 21 Years of Experience / Proficiency in COSO based Risk based internal

audit/Management audit Management consulting areas of ERM /Risk
Assessment, IFC, Business process design & documentation, Forensic
Investigation/due diligence, Legal compliance area etc.
§ Have handled more then 30+ Forensic/Investigation cases.
§ Working as Ombudsman in Group of Chemical / Listed Co.
§ At present, along with other Partners, currently manage firm’s Gujarat
operation having staff around 70+ people.
Mr. Hemal Modi
Partner – Sharp and Tannan Associates,
India.


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Forensic Accounting & Auditing

Assurance | Consulting | GRC | Taxation

Forensic Accounting Vs Forensic Auditing 3

Occupational fraud snapshot – Asia Pacific 2020 4

Assurance | Consulting | GRC | Taxation

• Forensic accounting largely covers frauds against business:

Frauds generally committed by employee or vendors or

• Forensic Auditing largely covers frauds for business

Frauds generally committed by the promoters and shareholders

Assurance | Consulting | GRC | Taxation

Assurance | Consulting | GRC | Taxation

Lifestyle Changes Personality Traits Behavioral Changes Other Flags

• Expensive / Multiple • Unwilling to share duties • Brags about purchases • Illogical/inconsistent

Assurance | Consulting | GRC | Taxation

Assurance | Consulting | GRC | Taxation

Assurance | Consulting | GRC | Taxation

Assurance | Consulting | GRC | Taxation

q Setting up channels of communication for filing complaints through Inhouse software

Assurance | Consulting | GRC | Taxation

Assurance | Consulting | GRC | Taxation

• Recent survey found that 44% of respondents plan

• Proactive data monitoring was associated with 52%

Assurance | Consulting | GRC | Taxation

Assurance | Consulting | GRC | Taxation

Assurance | Consulting | GRC | Taxation

§ 21 Years of Experience / Proficiency in COSO based Risk based internal

Assurance | Consulting | GRC | Taxation

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