ACC4712

Forensic Accounting
AY 2021/22, Semester 2
Week 1

Adjunct A/P Tay Puay Hui

Adjunct A/P Iain Potter
Forensic Accounting

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Course Outline

Introduction
The complex nature of modern fraud has fueled a growing impetus for the rise of antifraud specialists and
leaders in understanding and implementing internal controls, as well as conducting forensic investigations.
Over the past decade, the world of forensic accounting has become more specialized in skills and broader
in scope, bridging the gap between perception and reality. From antifraud measures and financial crime
investigations, the forensic accounting profession has evolved into specialized services including but not
limited to damage assessment, expert testimony, due diligence, valuation and appraisals, insurance claims
investigation and analysis as well as commercial and marital dispute resolution.

Thanks to burgeoning technology, the adaptive use of an advanced technology arsenal comprising
electronic discovery, big data analytics and data visualization serves to augment the skill sets of the
forensic accounting profession in delivering the necessary value in a faster and more cost-effective manner
amid a rapidly changing business world.

The increasing complexity and sophistication of a digitally connected world will continue to propel the
growing importance of the forensic accounting profession in catching criminals, settling disputes and
financial crime risk management.
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Course Outline

Objectives
The objective of this course is to equip our students with:

1. The requisite knowledge and fundamental expertise in applying your accounting knowledge in
forensic accounting,

2. Competencies in forensic investigations:

• Insights into the various types of financial crimes
• Effective investigative techniques for financial crime detection
• Harnessing technology to power your investigations
• Forensic investigation engagement planning and reporting

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Course Outline

Objectives
The objective of this course is to equip our students with:

3. Specialised skill sets in quantum engagements:

• Damage assessments
• Application of business valuation skills in commercial and personal disputes resolution
• Investigation and analysis of insurance claims

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Course Outline
Learning Outcome
By the end of the course, you will be able to:
1. Distinguish the roles between fraud examiners and forensic accountants

2. Explain the role and ethical and professional obligations of forensic accountants in the context
of investigations and disputes;

3. Outline the context of financial crimes and analyse the various types of financial crimes, the
perpetration and dissipation methods, and lessons learned through real-life case studies

4. Apply the Fraud Risk Management Programme in a real-life context and evaluate red flags
signalling the existence of financial crimes

5. Develop a forensic investigation engagement plan

6. Apply the appropriate investigative methodology in the execution of a forensic investigation

engagement

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Course Outline

Learning Outcome
By the end of the course, you will be able to:
7. Demonstrate the effective use of digital forensics and data analytics in investigations

8. Prepare a concise forensic investigation report

9. Explain how forensic accounting techniques are used to assist in a range of disputes scenarios,
and

10. Apply common accounting and business valuation principles to quantify damages.

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Course Guidelines

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Course Guidelines Module Assessment

Assessment Components

(i) Group Project Presentation^ 25%

(ii) Group Project Report^ 25%

(iii) Seminar participation 20%

(iii) Final Test (2 hours)* 30%

Total Assessment 100%

^ Please refer to Project Instructions

* Week 13 (the exact date, time and venue will be confirmed and announced during the course of the module)
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Assigned Project Group Formation

Objective, Basis and Principles

1. Simulate the real-life working environment,

2. Forge new working relationships with persons with whom you are less or not familiar,

3. Discover, learn and collaborate as a team,

4. Engineer creative solutions by harnessing the power of diversity and inclusion

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Group Project Presentation (“GPP”)

1. Practice-based educational approach with six (6) case study presentations

2. Please note that hyperlinks to the case studies are intended solely to provide you with initial
leads to the cases. You are required to conduct further research on the cases to address the
respective case requirements.

3. Each presentation should not take more than 40 minutes, following by five (5) minutes of
Question & Answer (Q&A) session.

4. You are required to upload your GPP onto LumiNUS by 5 pm at least two business days prior to
the date of your presentation

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Group Project Report (“GPR”)

1. Design, establish and execute value driven forensic investigation and accounting process for
corporates in selected industries.

2. Covers the spectrum of the internal audit process:

• Financial crime compliance
• Forensic investigation planning
• Forensic investigation reporting and communications
• Damage assessments
• Business valuations
• Disputes resolution

3. Recommended word count should not exceed 6,000 words (excluding appendices), although
the actual length will depend on the richness of the research or issues in the case

4. Submission deadline is 5 p.m. on 22 April 2022.

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Group Project Report (“GPR”)

5. Please take note of the university rules regarding plagiarism. If any material is found to
be used without proper referencing, a zero mark will be awarded.

6. Only endnotes, and not footnotes, should be used.

7. Be sure to cite all sources accurately using endnotes.

8. Please refer to Group Project Instructions for further details and requirements.

9. Peer evaluation form should be submitted separately to Adjunct A/P Tay Puay Hui and Adjunct
A/P Iain Potter latest by 5 pm on 22 April 2022 if one or more students reasonably consider(s)
that the contribution by individual student(s) in the group has been inequitable.

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 Introduction to
Forensic Accounting

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 Enron’s Values
(RICE)

Respect
Integrity
Communication
Marked-to-Market
Excellence
Special Purpose Enterprises
Related Party Transactions
Inflated assets and profits

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 The “ONE BIG LIE”

Bernie Madoff, financier behind largest Ponzi scheme in history, dies in prison
Fraudster sentenced to 150 years in jail dies from natural causes
New York financier ran scheme that cheated investors of billions

- The Guardian, Apr 14, 2021

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Lesson Outline

Objectives
The objective of this lecture is to equip our students with:
1. an overview of Forensic Accounting

2. an understanding of fraud examination vis-à-vis forensic accounting

3. an appreciation of the roles and responsibilities of fraud examiners and forensic accountants,

4. an inventory of the professional standards governing forensic accountants and fraud

examiners

5. an overview of the applicable legislation and regulations

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Lesson Outline

Learning Outcome
By the end of the lecture, you will be able to:
1. Distinguish between fraud examination and forensic accounting

2. Recite the roles and responsibilities of fraud examiners and forensic accountants

3. Describe the relevant professional standards governing fraud examination and forensic
accounting.

4. Quote the applicable legislative and regulatory requirements.

5. Consider diverse career pathways in the field of forensic accounting.

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Introduction to Forensic Accounting

Forensic accounting is the application of technical

accounting, investigative, and law as well as analytical and
communication skills for the purpose of resolving financial
and non-financial issues in a manner that meets the
standards required by courts of law

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Forensic Accounting

Fraud
Auditing examinatn Investigative Collect

Accounting Criminology

Analyse
Business Law

Expert Forensic
Valuation Evaluate
witnessing accounting

Research Quantitative
Interpret

Communi-
Litigation cate
Analysis Psychology

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Forensic Accounting

Clients

Counterparties
Financial transactions Analyse and
and numerical data Evaluate Lawyers
Present

Judge/Jury

Non-financial Regulators
information
General
public

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 Forensic Accounting: Perception & Reality

Valuation and damages Data visualisation uses

calculation use reality to perception to observe
establish perception reality

Reality Perception

Perception Reality

Due diligence compares

Fraud investigations the reality of a subject
bring perception close to company to its
reality perception

Reality Perception

Reality
Perception

Source: Rechtman, Yigal, “The Past, Present and Future of Forensic Accounting, The CPA Journal 22
Fraud Examination

Fraud Fraud risk

response governance

Fraud Fraud risk

detection assessment

Fraud
prevention
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 Forensic
Accounting
vs
Auditing

Source: Forensic accounting and financial statement fraud, Vol. 1, 24

Fundamentals of forensic accounting, BEP
Key Attributes and Skill Sets of a Forensic Accountant

Fraud
Creativity identification
“Out of the box” Investigative
skills
Confidence & Curiosity Interviewing
collaboration ”Desire to solve skills
”Self-believe + the jigsaw
teamwork” Independence puzzle” Investigative
and objectivity mentality
“Balance Professional
conflicting skepticism
Pragmatism & opinions” Financial
sound Integrity acumen
judgement “Pursuit of the Evidence
”real-world truth” knowledge
perspective”
Perseverance Interpretative
“Find the needle skills
in the haystack” Presentation
skills

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Essentials of a Fraud Examiner

Human element

Organizational behaviour

Knowledge of fraud

Evidence and standards of proof

Awareness of fraud potential

Appreciation of red flags

Communication

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Applicable Standards and Guidelines

Professional Accounting Valuation Risk Expert

standards standards standards Management Witness

• ISCA and other • SFRS • International • COSO internal • APIEx code of

accountancy bodies • IFRS Valuation Standards controls conduct (to be
(ICAEW, ACCA, CIMA, • Widely accepted framework COSO released 2022)
AICPA, CAANZ etc) principles ERM framework • EWI / Academy of
• Association of • IVAS / NACVA / ASA • Sarbanes-Oxley Experts’ guidance
Certified Fraud / CIBV standards & Act (SOX) and standards
Examiners (ACFE) guidance

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ACFE Professional Standards
Standards of Professional
Conduct
Standards of Examination
Standards of Reporting
• Integrity and objectivity • Understanding with client
•
•
Professional competence
Due professional care •
and employer
Communication with client
and employer
• Confidentiality
• Predication and scope • Control over
priorities evidence
• Evidence complete, reliable • Chain of custody
and relevant • Preservation
• Alert to conjecture, unsubstantiated opinion and bias
• Oral or written
• Not misleading
• Evidence based
• Within scope of knowledge, skill, experience,
training and education
• No opinion on legal guilt or innocence
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ACFE: Integrity & Objectivity

• Impartial
Integrity Objectivity • Unbiased

Business partner or
Friends & colleagues past relationships
Honesty
(e.g. consulting)
Fairness

Transparency

Materially false

Materially misleading

Furnish information
Investigation Related party Contingency fees
recklessly without
(e.g. spouse, siblings,
regard for its accuracy
relatives)
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ACFE: Due Professional Care

• Objectives
Planning • Strategy
• Resources

• Best interests
• Diligence
Performance • Critical analysis
• Professional
skepticism

• Reliable evidence
• Relevant evidence
Conclusion • Sufficient evidence
• Reasonable
conclusion
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 ACFE: Confidentiality

• Legally protected relationship

• Attorney – client - advisors
Privileged
info

• Technical, business,
financial
• Professional engagement Confidential
• Non-publicly available info

• ”Tipping off” provisions

Court order, • Client’s legal challenge
Statutes • Whistleblower protection
Regulations

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 Key Practice Standards
• Role, purpose, scope
• Parameter changes • Delegate
• Sufficient expertise • Supervise • Reasonableness &
• Exceptional circumstances • Responsible consistency • Nature & level of reliance
• Estimates & assumptions • Knowledge, expertise & • Purpose & use
(including others) competence • Sufficient support for
• Professional reputation findings & conclusions
• Objectivity & independence • Objective & unbiased
• Scope of competence
• All relevant info
• Not false or misleading

• Sufficient understanding of
circumstances & context
• Hypotheses, approach &
techniques
• Expert reliance & legal advice
• Nature & timing of reporting
• Investigative mindset to info,
approach, procedures,
techniques
• Possibly false, bias, unreliable,
incomplete?
• Substance over form
• Test hypotheses
• Info reliable, relevant & • Research
sufficient • Accounting, banking, business
• Alternative theories, • Pleadings, claims, charges
approaches & • Affidavits, discovery transcripts
methodologies • Interviews, meetings, discussions
• Key issues & assumptions 32
Key Practice Standards

Special reporting circumstances

• Independence: role, relationship, conclusion
• Different approaches -> different results => range of results
• Scope limitations, reasons, impact

Expert testimony
• Transparency in decision making
• Impartiality in testimony (objective & unbiased)
• Within expertise; disclose otherwise
• Never assume the role of an advocate
• Information, assumptions & limitations

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 Penal Code

Criminal Procedure Code

Evidence Act
Applicable Legislation and Regulations

Corruption, Drug Trafficking

& Other Serious Crimes Act
(CDSA)

Prevention of Corruption Act

Securities & Futures Act (SFA)

Anti-Money Laundering
and Countering the
Financing of Terrorism

Companies Act
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Forensic Accounting: Trends and Challenges

Cyber
crime

Technology Forensic Crypto

arsenal Accounting

Financial
Crimes
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Colonial Pipeline confirms it paid USD 4.4m ransom to hacker gang
after attack – The Guardian, 20 May 2021
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Digital
Transformation
– Risk
Management

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Silk Road allowed people to
buy and sell drugs and other
illegal goods, and use bitcoin to
anonymously fund those
transactions. The dark web
marketplace was shut down by
U.S. federal authorities in 2013
and its founder, Ross Ulbricht,
was sentenced to life in
prison two years later.
CNBC, Nov 6, 2020

Record $1 billion worth of bitcoin linked to the Silk Road seized by U.S. government

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 pr o b e Feb 2, 2018
r upt i o n me,
i n co r Stra its Ti

r re ste d
exe c s a
Ke ppe l
key
Fo rmer

Several former key executives of Keppel Corp and its offshore and
marine units have been arrested in connection with the Singapore
authorities' investigation into the corruption scandal involving Keppel
Financial Crime
Offshore & Marine (Keppel O&M).
…they include Mr Tay Kim Hock, former president and chief executive
Compliance
of Keppel Fels Brasil, a wholly owned unit of Keppel O&M. He was
arrested by the Corrupt Practices Investigation Bureau (CPIB) and is
currently out on bail.
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 Microsoft apologises after
Twitter chat bot
experiment goes awry
- Business Times, Mar 26, 2016

Amazon scrapped 'sexist AI' tool

- BBC, Oct 10, 2018

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Career Pathways

Government
CAD, CSA
Management

Consulting

Tertiary

Finance

Internal Audit Public accounting firms

Forensic

Risk Management
Financial
Tech security institutions
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Quantum Engagements

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Quantum

Roles
• Expert witness (single / joint / court or tribunal appointed) – SIAC Roleplay: https://bit.ly/31Bezns
• Expert advisor / consulting expert
• Expert determination
• Arbitrator
• Mediator

Key types of quantum engagement

• Loss of profits
• Valuation
• Personal injury / fatal accident
• Business interruption
• Event studies

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Role of Expert Witnesses (1)

Overriding duty
• Owed to court/tribunal
• Singapore: Order 40A - https://bit.ly/3F6UOSz
• Overseas equivalents: CPR Part 35 - https://bit.ly/3f2mqgX / FRCP 26(a)(2)(B) - https://bit.ly/3n95ytr
• Applies in most jurisdictions and for most forms of proceedings
• Most common consequence of breach is criticism in judgment
• Reynolds v Stanbury [2021] EWHC 2506 (Ch) - https://bit.ly/3HKLdCz

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Role of Expert Witnesses (2)

• Precedent for finding expert’s personally liable for wasted costs

• Robinson v Liverpool University Hospital NHS Trust F95YJ11 - https://bit.ly/3HMH7d4

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Role of Expert Witnesses (3)

Other duties
• Jurisdiction specific
• Contractual and tortious duties owed to client and no absolute immunity from suit
• Jones v Kaney [2011] UKSC 13 - https://bit.ly/3f4UdGg

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Role of Expert Witnesses (4)

• Generally no fiduciary duty owed to client

• Secretariat Consulting Pte Ltd v A Company [2021] EWCA Civ 6 - https://bit.ly/34mWfzu

• Owed to Profession
• Codes of conduct

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Conclusion

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Appendix 1:
Reading materials

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Prescribed Reading Materials [F = Full reading]

1. ACFE Code of Professional Ethics

https://www.acfe.com/uploadedFiles/ACFE_Website/Content/documents/rules/Co
de-Of-Ethics-Current-2018-03-05.pdf

2. ACFE Code of Professional Standards https://www.acfe.com/standards/

3. ACFE Guidance on the Code of Professional Standards

https://www.acfe.com/uploadedFiles/ACFE_Website/Content/documents/rules/G
uidance%20on%20the%20CFE%20Code%20of%20Professional%20Standards%20-
%202020-11-01.pdf

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