I. TITLE
"The Forensic Accounting Model and its Contribution to the Fight Against Fraudulent Facts"
II. GRADUATING NAME
III. PLACE WHERE THE THESIS WILL BE DEVELOPED
This work will be carried out at the Ministry of Economy and Finance, Lima-Peru.
IV. PROJECT DESCRIPTION
4.1. BIBLIOGRAPHIC BACKGROUND
The existence of the following bibliographic information has been determined:
Bravo (2006) Background to Forensic Accounting: Indicates that its origin is not yet clear, but it is said that it may be so old that it was born when the legal is linked to accounting records and evidence.
The Code of Hammurabi of Babylon (1692 BC in Ancient Mesopotamia) is the first legal document known to man in some of its fragments to understand the basic concept of Forensic Accounting: to prove a fraud or lie with accounting documentation.
Catillos (2006) Red Contable, indicates with the historical fact of the 30s of catching Al Capone, a character dedicated to criminal practices and money laundering, when an accountant from the tax department went looking for evidence, finding a large number of Evidence, such as the payment book, with which it was possible to verify that the sales volume exceeded the theoretical capacity of the scrubber business, in fact, the actual sales volume and the declared sales volume were far away. With which the prosecution was able to demonstrate fraud in the payment of taxes in Al Capone, in its scrubbers and thus dismantle this organization.
But at this time there was not enough momentum given to this branch of accounting sciences, which was deferred until the 70s and 80s; When the analysis of fraud in the financial statements began with the Watergate case in 1972, as soon as this scandal came to light, a series of parallel illegal activities were revealed, resulting in the resignation of President Richard Nixon and the formulation of an accusation against the president of some high official of the government of the United States. The United States Treadway Commission (National Commission on Fraudulent Reporting) gave significant impetus and direction to administrative fraud and misleading financial disclosures and some of the International Standards on Auditing (NIAS) issued by the International Federation of Accountants IFAC,Fraud and error refer to audit evidence, additional considerations on specific items, with respect to the disclosures of the Financial Statements to the observation of physical inventories, confirmation of accounts receivable, investigation of litigation and claims.
Forensic accounting then arises with the attempts to detect and correct fraud in the Financial Statements, its initial function is strictly economic-financial, and the immediate cases are found in the judicial appraisals and the hiring of expert accountants by Official Banks; Currently, it has expanded its field of action as it has developed techniques to combat crime and work closely with the application of justice, in which the official of the Jurisdictional Branch bases his decisions on evidence provided to experts, but they must become accountants. forensics in which the product of Forensic Accounting is specialized accounting expert evidence.
Republic of Ecuador General Law of the Institutions of the Financial System. It is indicated that the Financial Audit is the original, traditional, fully regulated and most widespread of the audits, since with it the profession of the auditor was born and because in almost all countries it is legally obligatory for certain companies. In the case of Ecuador, financial auditing is mandatory for all financial institutions and for all companies.
Superintendencies of Companies of the Republic of Ecuador (2002): Rules on minimum amounts of Assets in cases of compulsory external audit. It is indicated that the audit is carried out by external auditing firms and focuses on the analysis and study of the financial statements in order to issue an opinion (opinion) on two fundamental aspects.
1.) Reasonableness of balances; and
2.) Compliance with GAAP (Generally Accepted Accounting Principles)
The Financial auditor applies the necessary audit procedures to determine if the balances are reasonable; that is, if they are well presented, free of significant (material) distortions that can be caused by error or fraud.
Sources of Distortion of Financial Information
Fraud Error
Distortion of information Distortion of information
financial with no intention of causing financial with the intention of causing
damage. damage.
In the event of detecting fraud, the financial auditor is concerned with establishing the incidence that these have on the financial statements, and, therefore, must determine whether or not said frauds affect the reasonableness of the balances involved. It is the responsibility of the auditor to report the fraudulent facts found to management, the board, the audit committee or the corresponding control bodies.
Maldonado (2003) Prevention and Investigation of Forensic Corruption, the term "forensic" comes from the Latin "forensis" which means "public and manifest" or "belonging to the forum"; in turn, “forensis” is derived from “forum”, which means “forum”, “public square”, “market square” or “place outdoors”.
Formerly in Rome and in the other cities of the Roman Empire, public assemblies were held in the main square. In these forums (squares) public business was also discussed and trials were held; for this reason, when a profession served as support, advice or support to justice so that the commission of a crime is judged, it was called forensic, such is the case of the following disciplines:
Medicine, psychology, graphology, biology, genetics, auditing and others.
DEFINITION OF FORENSIC AUDITING
When in the execution of audit tasks (financial, management, information, tax, environmental, governmental) significant financial frauds are detected; and, if it is (mandatory) or wishes (optional) to delve into them, they are entering the so-called forensic audit. The investigation will be mandatory depending on 1.) the type of fraud; 2.) the environment in which it was committed; and 3.) applicable legislation. Forensic audit work can also be initiated directly without the need for a prior audit of another kind, for example in the case of specific complaints.
Forensic audit is that audit work that focuses on the prevention and detection of financial fraud; for this reason, the results of the forensic auditor's work are generally placed before the courts, which is in charge of analyzing, judging and sentencing the crimes committed (financial, public or private corruption).
In his book "Forensic Audit" Milton Maldonado points out the following:
“The Forensic Audit” is the other medal of the auditor's work, trying to prevent and study acts of corruption. As most of the results of the Auditor are known to the judges (especially criminal), the term forensic is usual (…) As the list of acts of corruption is very extensive, it should be noted that the Forensic Audit for professionals with training as a Public Accountant, should be oriented to the investigation of malicious acts at the financial level of a company, the government or any organization that manages resources.
Cano Miguel and Danilo Hugo (2005) Forensic Audit in the Criminal Investigation of Money and Asset Laundering ” present the following definition:
“(…) The forensic audit is initially defined as an audit specialized in discovering, disclosing and attesting fraud and crimes in the development of public and private functions, (…).
(…) Forensic auditing is, in accounting terms, the science that allows gathering and presenting financial, accounting, legal, administrative and tax information, so that it is accepted by a court or a judge against the perpetrators of an economic crime (…).
Alberto Mantilla (2005) Audit 2005. The author mentions the following:
"Forensic Auditing is relatively new but increasingly important."
As a result of globalization, it has also been accentuated in the phenomenon of corruption, especially in upper management (“white collar crime”), with structures as complex as those used for money laundering in its various forms.
Initially, forensic auditing arose with attempts to detect and correct fraud in the financial statements. Subsequently, it has expanded its field of action as specific techniques have been developed to combat crime and it works closely on the application of justice.
It starts, then, from the assumption that there is no company (which makes crime detection extremely difficult) and that the intention is fraud.
Therefore, a whole new set of techniques for detecting and analyzing corruption is required.
The problem of proof (in general), as well as of (audit) evidence, acquires a completely new dimension since they are useful insofar as they can be accepted in the courtroom. Companies have problems in fulfilling their social responsibility, therefore it is necessary to strengthen neighborhood participation to generate these positive impacts on the part of the neighborhood community.
4.2 STATEMENT OF THE PROBLEM
4.2.1. SYSTEMATIZATION OF THE PROBLEM
MAIN PROBLEM:
How to implement the forensic audit to avoid accounting fraud?
SECONDARY PROBLEMS:
1. How does Forensic Accounting facilitate forensic auditing to detect fraud?
2. How can forensic auditing detect accounting fraud?
3. How should forensic accounting provide forensic audit information?
4.3. THEORETICAL AND CONCEPTUAL FRAMEWORK
4.3.1. DEFINITION
Delgado (2005), The term forensic initially relates to legal medicine and those who practice it, even most people identify this term with:
Necropsy (necro which means dead or death)
Pathology (medical science that studies the causes, symptoms and evolution of diseases)
Autopsy (examination and dissection of a corpse, to determine the causes of its death).
The forensic term corresponds to the Latin forensis, which means public, and its origin from the Latin forum, which means forum, public square where public assemblies and trials were dealt with, where the courts hear and determine the causes; therefore, forensics is related to the law and the application of the law, to the extent that a suitable professional is sought to assist the judge in legal matters that concern him and for this he provides public evidence to present in the forum, which today would become the court.
Forensic accounting is a science that allows the collection and presentation of accounting, financial, legal and administrative information, which provides an accounting analysis that will be accepted by the court, since it will be part of the debate and finally the judgment of the guilty parties of a economic crime.
It is also a specialized discipline that requires expert knowledge in accounting theories, auditing, and criminal investigation techniques. It is an important branch of investigative accounting, used in the reconstruction of financial events, fraud investigations, calculations of economic damages and returns on financial projects.
4.3.2. CAUSES AND ORIGIN
The relationship between accounting and auditing terms with forensics becomes closer when speaking of criminal evidence, therefore, forensic auditing is initially defined as an audit specialized in discovering fraud and crimes in the performance of functions. public and private. It also studies the consequences of events that may or may not be criminal, to provide the judge with evidence involving accounting records, particularly technical and scientific evidence, of utmost importance in the current period of full scientific development of judicial investigation.
This discipline is criminal in nature due to its procedural and criminal origin, because its scientific application contributes to knowing the facts and reaching the penalties determined by the judges.
4.3.3. OBJECTIVES OR FIELDS OF ACTION
Forensic accounting is considered exclusive as a field of action in the public sector, but in the private sector, the sophistication and speed that globalization imposes on businesses and forces companies to prepare themselves with new procedures and with adequate information to manage risks, using Forensic Accounting for this, which has become in a very short time the great hope to discover and prevent the most varied crimes.
The main role of Forensic Accounting deals with the application of the study of financial facts to legal problems, assisting companies in identifying key areas of insecurity and getting involved in investigations and legal proceedings.
The Forensic Accountant goes beyond audit evidence, reasonable security, evaluates and investigates one hundred percent, focusing on the wrongful act and bad faith of the people, involves at least: analysis, quantification of losses and research. Unlike traditional auditing that is based on good faith, on-going business, and evidence to obtain "reasonable assurance." For this reason, the forensic auditor's fields of action are specialized and with very precise objectives.
Forensic Accounting is oriented to the courts (courts of justice) and to serve as a source of evidence for them, it is closely linked to criminal actions, so the forensic accountant must rely on the judicial processes determined by law.
To discover the irregularities, the forensic accountant makes the deductions and relates the discovered clues to the possible motives of the people involved in the fraud, is interested in the hidden or in revealing the aspects of the evidence examined, seeks to discover anomalies and models of action You do not always know what you are looking for, what particular path should you follow, but trust your intuition or suspicion.
4.3.4. FRAUD
To start talking about this topic, we must clarify that it is part of the class of crimes, which are:
Disloyalty or treason
Felony (stripping the owner of what rightfully belongs to him, without his consent or knowledge)
Bad behavior
Fraud is an economic, social and organizational phenomenon, applied to accounting fraud consisting of any act or omission of an act of a fraudulent nature and therefore in bad faith, or gross negligence. Fraud can then be classified as felony or criminal misconduct.
Accounting fraud is called by some authors administrative fraud and is classified into two groups:
a) Deceptive Financial Disclosures: In this sense, Administrative Fraud is defined as the wrong and international presentation of amounts or disclosures in the financial statements, with the purpose of deceiving the users of the same.
b) Embezzlement of Assets; set of unethical practices carried out within the organizations by the employed managers, whether due to external financial pressures, inequities in the workplace or general moral weakness.
c) Fraud is also considered as improper actions resulting from an incorrect or false statement in the financial statements and that damages shareholders or creditors, due to embezzlement and embezzlement committed by employees against employers and their own actions.
The reasons for committing fraud according to the "fraud triangle" (named after psychologists) are:
- Opportunity, arises when controls are weak and / or when individuals are in a position of trust.
- Financial pressure, to meet the objectives.
- Rationalization, as everyone else does, because I don't.
International Auditing Standard (ISA) 240 is intended to establish standards and provide guidance on the auditor's responsibility to consider fraud and error in an audit of financial statements.
The auditor should document the fraud risk factors identified as present during the evaluation process as well as document the response to any of those factors.
Several authors affirm that the best method to avoid fraud is to stop it before it occurs, for which it is necessary to create not only alert controls but at all levels of the organization, the purpose of the control is to preserve the existence of any organization, support its development and contribute with the expected results. However, it must be borne in mind that prevention activities must be proportional to the risk involved.
Fraud auditing is not the only approach, because Forensic Accounting offers a wide range of opportunities within which three areas that require specialized professionals such as investigative accounting, expert opinions and tax processes can be identified.
4.3.5. APPROACHES TO FORENSIC ACCOUNTING
Research is a creative process made up of different interrelated stages, which range from the detection of a problematic situation to the socially useful modification of said situation in practice. The starting point is the information that can be obtained from anywhere, the means to identify and obtain it are diverse.
The characteristics of economic crimes, the participation of the accountant is final in the previous stage, to carry out the investigations and calculations that determine the existence of the crime and, if possible, its amount to define whether the initiation of a process is justified, likewise, it is linked to criminal proceedings. The most common case is perhaps the one that has to do with fraud based on records and accounting supports. Here the intervention of the Forensic Accountant can vary, from the quantification of fraud and the collection of evidence, to participation as a witness, going through activities as diverse as the development of systematized applications to present the evidence before the courts.
4.3.6. APPROACHES TO FORENSIC ACCOUNTING
An expert who has his knowledge and experience in accounting terms, covers not only the processes before the alternative justice, as the processes before the tax authorities.
The accounting expertise is a critical and systematic diagnosis of disputed facts of an economic-financial nature, to be investigated through accounting and auditing, adhering to the standards established in the Code of Criminal and Civil Procedures. For the participation of the expert accountant is relevant and constitutes an aid, academic preparation is not enough, it is also required that she has achieved professional development and experience in the subjects on which she must express her opinion.
4.3.7. ACCOUNTING EXPERT
He is the person who possesses technical, scientific, and practical knowledge and who is sought for an opinion, so that as an advisor, he provides the judge with the knowledge that is necessary or convenient for a better appreciation of the facts. The elements of accounting evidence and evidence, constitute the fundamental basis of an accounting expertise, because through its critical and systematic examination, the accountant expert will reach conclusions that will be helpful, to those who request it, in the compatibility and evaluation of evidence around what he investigates. Then, to the extent that you have all the elements of judgment related to the expert opinion, your opinion will have the validity that the case requires.
Then Forensic Accounting produces the specialized accounting legal test, which will be considered as a means of providing certain types of data and public evidence. The problem of proof (in general), as well as that of (audit) evidence, acquires a completely new dimension since they are useful insofar as they can be accepted in the courtroom.
Public Accountants, as legal assistants, develop expert opinions on financial events or events of economic events that affect public or private funds, determine the false actions or omissions of public officials or executives in the exercise of their responsibilities.
The Public Accountant is an assistant to the justice in the cases in which the law indicates, as an expert expressly designated for it. Also in this condition the Public Accountant will fulfill his duty having the highest aims of his profession, the importance of the task that society entrusts to him as an expert and the search for the truth in a totally objective way.
In this case, one of the disciplines that have scientific technical competitiveness in the investigation of crimes must be taken into account, the scientific study of the indications or material evidences such as Criminalistics, which provides information of vital importance to technically prosecute any investigation of some allegedly criminal act, in order to prove or disapprove any questioned aspect about the author, the victim, the scene of the event.
4.3.8. JUDICIAL PROCESSES
The participation of the Forensic Accountant in the processes is not limited to the quality of the Expert. It can also be called by one of the parties (to advise it in the preparation and presentation of the evidence or in the calculations aimed at quantifying the facts demanded) or even the judges, on specialized issues, up to direct participation in the collection of evidence intended to prove crimes. In this case, the accountant is required based on his experience, his knowledge of the specialized subjects that are the subject of discussion in the processes, and his image and trajectory within the community.
4.3.9. TAX PROCESSES
One of the main objectives of financial activity is to obtain the resources to apply them in satisfying the demands of public services made by society. The Tax Administration cannot work alone demonstrating efficiency if it does not have the participation of professionals who manage the sources of income that would be the Accountants day by day.
Public Accountants actively participate in tax processes, from the moment the information intended for entities is generated in the accounting records. But his participation as a Forensic Accountant occurs when there are differences between the treasury and the taxpayers on the value of the sums to be paid for taxes or penalties.
According to International Standards on Auditing, the glossary of International Standards on Auditing (NIA) defines fraud as follows:
"Fraud.- The term fraud refers to an intentional act by one or more individuals within the administration employees, or third parties, which results in an erroneous representation of the financial statements."
As indicated above, the responsibility of the internal auditor regarding fraud in the organization is fundamentally to possess the necessary knowledge to identify the indicators of fraud, however, this does not constitute a limitation so that if it is considered necessary and appropriate, it is incorporated into the unit. of internal audit one or more forensic auditors to strengthen the responsibility for fraud, in the aforementioned terms, or even collaborating or leading fraud investigations (forensic audit) that are carried out within the organization.
Association of Certified Fraud Examiners, explain the cases of financial fraud are many and very varied, as an example the following can be mentioned:
- Alteration of records
- Misappropriation of cash or company assets
- Misappropriation of the company's collections by delaying the deposit and accounting for them (called: jineteo, centifuga, lapping). Financial punishment of loans linked to senior management.
- Tax fraud.
- Inclusion of non-existent transactions (false)
- Money and asset laundering.
- Obtain illegal economic benefits through the commission of computer crimes.
- Concealment of a shortage of cash through the overvaluation of cash in banks taking advantage of the periods of transfers between accounts.
- Omission of existing transactions.
- Fictitious losses or gains.
- Over or under valuation of accounts.
- About valuation of shares in the market.
The percentage of fraud losses is higher the higher the level within the organization of those who commit it; therefore, an inverse relationship is established between the percentage of personnel at a certain organizational level and the percentage of losses due to fraud it causes.
4.4. JUSTIFICATION AND IMPORTANCE OF WORK
Achieve that by performing the forensic audit on the financial statements, by applying procedures and with the appropriate information to manage risks, using Forensic Accounting to discover and prevent the most varied crimes.
4.4.1. IMPORTANCE OF WORK
Through forensic auditing, it will be possible to contribute to the fight against fraudulent events carried out in the financial statements.
V. OBJECTIVES
5.1. OVERALL OBJECTIVE
Establish procedures in the forensic audit in such a way that they contribute to the fight against accounting fraud.
5.2. SPECIFIC OBJECTIVES
- Determine that forensic accounting facilitates the detection of accounting fraud. Point out the way in which the forensic audit allows detecting accounting fraud that allows continuous improvement in the Ministry. Define forensic accounting in such a way that it facilitates the information to the forensic audit.
SAW. HYPOTHESIS FORMULATION
6.1. MAIN HYPOTHESIS
If the procedures are implemented in the forensic audit then it will contribute to the fight against accounting fraud in the Ministry.
6.2. SPECIFIC HYPOTHESES
1. If the procedures are determined in the forensic audit then it will facilitate the detection of fraud in the Ministry.
2. If the forensic audit allows fraud to be detected, then fraudulent acts will be avoided.
3. If information is provided in forensic accounting, then it will make the job easier for the forensic audit.
6.3. VARIABLES AND INDICATORS
| VARIABLES AND INDICATORS |
| VARIABLE |
| INDEPENDENT: |
| X. FORENSIC AUDIT |
| INDICATORS: |
| X.1. FORENSIC ACCOUNTING |
| X.2. DETECT ACCOUNTING FRAUD |
| X.3. SUPPLY INFORMATION |
| VARIABLE |
| DEPENDENT: |
| Y. EFFECTIVENESS |
| INDICATORS: |
| Y.1. ACCOUNTING FRAUD |
| Y.2. CONTINUOUSLY IMPROVE |
| Y.3. INFORMATION TO THE FORENSIC AUDIT |
VII. METHODOLOGY
7.1. KIND OF INVESTIGATION
This work will be of the application type, to the extent that it is applied by the Ministry to strengthen forensic auditing, in order to contribute to the fight against fraudulent acts.
7.2. INVESTIGATION LEVEL
The investigation to be carried out will be of the descriptive-explanatory level, since the forensic audit will be used to facilitate the detection of accounting fraud in the Ministry.
7.3. INVESTIGATION METHODS
The following methods will be used in this investigation:
1) Descriptive.- So that the information collected serves to support fraud detection in the Ministry.
2) Dogmatic.- Through the information obtained, the level of the crime can be established and the respective sanction applied.
7.4. DESIGN OF THE INVESTIGATION
Design is the plan or strategy that will be developed to obtain the information required in the investigation. The design to be applied will be the Non-Experimental, Transectional or transversal, Descriptive, Correlational-causal.
Non-experimental design is defined as the investigation that will be carried out without deliberately manipulating the variables. In this design, phenomena are observed as they occur in their natural context, and then analyzed.
The cross-sectional or cross-sectional research design to be applied consists of data collection. Its purpose is to describe the variables and analyze their incidence and interrelation at a given moment.
The descriptive transectional design that will be applied in the work, aims to investigate the incidence and the values in which the research variables are manifested.
The correlative-causal Transectional research design that will be applied will serve to relate between two or more categories, concepts or variables at a given moment. It will also be about descriptions, but not about categories, concepts, objects or individual variables, but about their relationships, whether they are purely correlational or causal relationships. Through this type of design the research elements are associated.
7.5. POPULATION OF THE INVESTIGATION
The population will be made up of authorities, officials, workers of the Ministry of Economy and Finance.
7.6. INVESTIGATION SAMPLE
7.6.1. TYPE OF SAMPLING APPLIED
The type of sampling applied is STRATIFIED SAMPLING. Sampling in which the population is previously divided into a number of sub-populations or strata, prefixed beforehand. Then, within each stratum, a simple random sampling is carried out to determine the corresponding sample.
STRATIFICATION OF THE POPULATION
| SUB-POPULATIONS OR STRATUMS | TOTAL |
| MINISTER | one |
| VICE MINISTER | one |
| MINISTRY ADVISORS | 4 |
| MINISTRY WORKERS | 100 |
| PEOPLE RELATED TO THE MINISTRY | 35 |
| TOTAL | 141 |
Source: self made.
VIII. BIBLIOGRAPHIC REFERENCES
1. Bravo Huatuco, Ivett (2006), Background of Forensic Accounting.
2. Castillo Silva, DA (2006) Red Contable, History of Forensic Accounting, Berrio publications, Lima.
3. Republic of Ecuador (2001), General Law of Institutions of the Financial System; article 84; Official registration No. 250.
4. Superintendency of the Company of Ecuador (2002): Rules on minimum amounts of assets in cases of External audit
5. Maldonado, Miltón (2003) Forensic Audit: “Prevention and Investigation of Financial Corruption”, Editora Luz de América.
6. Cano, Miguel and Lugo, Danilo (2005) Forensic Audit in the Criminal Investigation of Money and Asset Laundering ”, Ecoe, Ediciones, Bogotá - Colombia.
7. Mantilla, Alberto (2005) "Forensic Audit 2005", Ecoe Ediciones, Bogota - Colombia.
8. Delgado, Rafael, 2005, http // auditoriaforense.net.
9. International Standards of the Auditor and Government Control. Lima, Editora Gráfica Bonilla Bernilla.
10. Association of Certifed Fraud Examiners - ACFE, www CFE.net.com.
Bravo Huatuco, Ivett (2006) Background of Forensic Accounting, Calpa Edition.
Castillo Silva, DA (2006): Red contable, Historia del Contador Forense
Republic of Ecuador (2001): General Law of Institutions of the Financial System; article 84; Official Registry No. 250
Superintendency of the Company of Ecuador (2002): Rules on minimum amounts of assets in cases of External Audit
Maldonado, Miltón (2003) Forensic Audit: Prevention and Investigation of Financial Corruption ”, Editora Luz de América
Cano, Miguel and Lugo, Danilo (2005) Forensic Audit in the Criminal Investigation of Money and Asset Laundering ”Ecoe Ediciones, Bogotá - Colombia;, p. 16.20.
Mantilla, Alberto (2005) 2005 Forensic Audit, Ecoe Ediciones, Bogota - Colombia, p. 708.
Delgado, Rafael, 2005, http // auditoriaforense.net
International Standards on Auditing Government audit and control. Lime. Bernilla Graphic Editor.
Association of Certified Fraud Examiners - ACFE; www.CFEnet.com
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