31 March 2016

Directors' strict liability to address fraud, bribery and corruption

Last year, the Commonwealth Bank notified me that there were several fraudulent transactions on my debit card at a church in the United States. I was the victim of cybercrime, and this happened despite the steps I take to protect my details, highlighting just how easy it is for perpetrators. Our company is increasingly vulnerable as potential victims of white-collar crime and cybercrime, and you should understand what these mean. White-collar crimes are non-violent crimes committed in the course of a person’s work or profession, such as fraud (Polk 1999, 5). Cybercrime is a broad term that encompasses crimes involving computers and other information communications technologies, such as hacking or identity theft (Attorney-General’s Department 2013, 4).

(Swayne 2013) 

The legislature has attempted to minimise these incidences of fraud, bribery and corruption by introducing strict liability to hold directors liable when they are not at fault. Strict liability applies to offences where the prosecution is not required to prove mens rea (Australian Law Reform Commission 2016, 287). As a result, it is essential that directors in our company exercise care and diligence to put adequate controls in place and protect against these offences. This is a mechanism to address the continuing problem in the corporate world, and if directors take all reasonable steps, they are less likely to be held personally liable.

(Clifford Chance 2015)

Relevant Links
To learn more about white-collar crime and why adequate controls are important, you can read about the high-profile case of Joel Morehu-Barlow here:
http://www.theaustralian.com.au/news/nation/fake-prince-joel-morehu-barlow-admits-theft-of-16m-from-queensland-health/story-e6frg6nf-1226600526411

To find out how to protect your credit card, you can read tips from the Commonwealth Bank here:
https://www.commbank.com.au/personal/can/credit-cards/tips-for-credit-card-security.html

References
Attorney-General’s Department. 2013. National Plan to Combat Cybercrime. Accessed April 11, 2016.
https://www.ag.gov.au/CrimeAndCorruption/Cybercrime/Documents/national-plan-to-combat-cybercrime.pdf.

Australian Law Reform Commission. 2016. Traditional Rights and Freedoms Encroachments by Commonwealth Laws. Accessed April 11, 2016. https://www.alrc.gov.au/publications/freedoms-alrc129.

Clifford Chance. 2015. “Directors' duties under Australian law.” YouTube video, posted January 22. Accessed April 19, 2016. https://www.youtube.com/watch?v=e97IiYN2wl0.

Commonwealth Bank of Australia. “Tips for credit card security.” Accessed April 19, 2016.
https://www.commbank.com.au/personal/can/credit-cards/tips-for-credit-card-security.html.

Elks, Sarah. 2013. “Fake prince Joel Morehu-Barlow sentenced to 14 years for theft of $16m from Queensland Health.” The Australian, March 19. Accessed April 19, 2016.
http://www.theaustralian.com.au/news/nation/fake-prince-joel-morehu-barlow-admits-theft-of-16m-from-queensland-health/story-e6frg6nf-1226600526411.

Polk, Ken. 1999. “White collar crime.” Legaldate 11 (2): 5-7. Accessed April 11, 2016.
http://search.informit.com.au.ezp01.library.qut.edu.au/fullText;dn=19994333;res=AGISPT.

Swayne, Matthew. 2013. “White Collar Crime's Glass Ceiling: It's Still a Man's World.” Image. Accessed April 19, 2016.
http://vitaminw.co/business/white-collar-crime-still-boys%E2%80%99-club.

24 March 2016

New regulatory environment for forensic accountants

The role of forensic accountants has evolved in recent decades as today’s digitised world makes it easier for perpetrators to commit fraud (Kirby 2011, 1). The regulatory environment must keep up with this and the increased demand for forensic accountants (Kirby 2011, 5). APES 215 Forensic Accounting Services replaced two standards dating back to 2002, and was issued in 2008 and revised in 2013. It outlines the mandatory quality and ethical standards that forensic accountants must follow (Accounting Professional & Ethical Standards Board 2013, 2).

Forensic accountants are frequently engaged to act as expert witnesses in court, both in the civil and criminal jurisdiction. Their role involves investigating and analysing information to present their findings and opinion in a report across a wide variety of cases (Warshavsky 2013, 9). This could be relevant in our company if we are ever the victims of white-collar crime.

(Raffa PC 2013)

I recently read a case where the forensic accountant clearly didn’t understand his role, and his report was rendered inadmissible. In ASIC v Rich (2005) 53 ACSR 110, the expert failed to disclose his previous involvement in assisting ASIC, which questioned his independence. To avoid this happening, all forensic accountants must understand and keep up with the development of this new regulatory environment, particularly given their crucial role in providing an expert opinion.

Relevant Links
If you would like to read a copy of APES 215, you can do so here:
http://www.apesb.org.au/uploads/standards/apesb_standards/13092014103232p1.pdf

If you would like to read the Supreme Court of New South Wales' judgment in ASIC v Rich (2005) 53 ACSR 110 or download a copy, you can do so here: https://www.caselaw.nsw.gov.au/decision/549fbce03004262463ba18a6

References
Accounting Professional & Ethical Standards Board. 2013. Forensic Accounting Services. APES 215. Accessed March 26, 2016. http://www.apesb.org.au/uploads/standards/apesb_standards/13092014103232p1.pdf.

Kirby, Michael. 2011. “Forensic Accounting – New Rules and Opportunities.” Paper presented at the Business Valuation and Forensic Accounting Special Interests Groups Conference, Sydney, March 11.
http://www.michaelkirby.com.au/images/stories/speeches/2000s/2011/2525-FORENSIC-ACCOUNTING-CONF-MARCH-2011.pdf.

New South Wales Supreme Court. 2005. “ASIC v Rich.” Accessed April 19, 2016.
https://www.caselaw.nsw.gov.au/decision/549fbce03004262463ba18a6.

Raffa PC. 2013. “What is Forensic Accounting?” YouTube video, posted October 30. Accessed April 18, 2016.
https://www.youtube.com/watch?v=_DLg_3rXkHM.

Warshavsky, Mark S. 2013. “The Role of Forensic Accountants in Litigation Cases.” The CPA Journal 83 (6): 58-61. Accessed March 26, 2016.
http://search.proquest.com.ezp01.library.qut.edu.au/docview/1417579770/abstract/E8E153DFC2D6481DPQ/1?accountid=13380.

17 March 2016

Need for information security to minimise fraud, bribery and corruption

The number of incidents involving fraud, bribery and corruption are rising every year, emphasising the need for addressing security in our company. According to a survey conducted by KPMG (2013), there has been an 82% increase in individual cases of fraud exceeding $1 million, with 68% of cases from 1997 to 2012 occurring in the financial services industry.

Total fraud by industry: 15 year average
(KPMG 2013)

Here at the Bank of Australia, we are vulnerable and risk management should be our top priority. In today’s global marketplace, there are always new opportunities for fraudulent activity due to the obsolescence and developments of IT infrastructure (Singh 2007, 32).

To protect myself at home, I ensure that my laptop and mobile phone always have up-to-date virus protection software, and passwords that are changed frequently. Our organisation has similar controls in place, but this only protects against some electronic instances of fraud. The threats that organisations face are on a much larger scale, and further protection is necessary. COBIT 5 for Risk is one of the available products that builds on the COBIT 5 framework to establish the risk governance and management functions in an organisation. Our company could implement this to optimise risk and ‘identify, analyse, respond to and report on risk on a daily basis’ (ISACA 2013, 9), thereby minimising fraud, bribery and corruption.

COBIT 5 Product Family
(ISACA 2013)

Relevant Links

You can read a copy of KPMG's survey of fraud, bribery and corruption here:
https://www.kpmg.com/AU/en/IssuesAndInsights/ArticlesPublications/Fraud-Survey/Documents/fraud-bribery-corruption-survey-2012v2.pdf

If you would like to read more about COBIT 5 for Risk or purchase a copy of the guide, you can do so here:
http://www.isaca.org/COBIT/Pages/Risk-product-page.aspx

References
ISACA. 2013. “COBIT 5 for Risk Preview.” Accessed March 24, 2016. http://www.isaca.org/COBIT/Documents/COBIT-5-for-Risk-Preview_res_eng_0913.pdf.

ISACA. “COBIT 5 for Risk.” Accessed April 18, 2016. http://www.isaca.org/COBIT/Pages/Risk-product-page.aspx.

KPMG. 2013. A survey of fraud, bribery and corruption in Australia and New Zealand 2012. Accessed March 24, 2016.
https://www.kpmg.com/AU/en/IssuesAndInsights/ArticlesPublications/Fraud-Survey/Documents/fraud-bribery-corruption-survey-2012v2.pdf.

Singh, Subash. 2007. “Fraud Risk Management Protecting Your Corporate Reputation and Value.” Accountancy SA 32-33. Accessed March 24, 2016. http://gateway.library.qut.edu.au/login?url=http://search.proquest.com/docview/215224668?accountid=13380.

10 March 2016

Separating management from governance policy-making

Here at the Bank of Australia, we realise the importance of separating management from governance policy-making, and I want to ensure that you understand why. You may have heard of the collapse of Enron in 2001 where the board of directors, including the CEO, allowed the CFO to use off-balance sheet transactions and manipulate the accounts (Stewart 2006, 118). This enabled senior level management to commit fraud and cause one of the world’s worst corporate accounting scandals. The same threats occur in financial institutions, and we need to prevent this from happening in our organisation. I haven’t experienced this firsthand, but Enron was mentioned repeatedly by academics when I attended university, highlighting its significance.

(BBC News 2016)

COBIT 5 is a framework that recognises the distinction between governance and management. A key responsibility of governance is to evaluate, direct and monitor. Management then plans, builds, runs and monitors activities to support the governance objectives (Escoute Consulting 2014).

(Fox IT 2016)

Without this separation, our company would be susceptible to fraud, bribery and corruption, which can have devastating consequences. From April to September 2015, out of 91 fraud cases with a value of just over $128 million, 34% were committed by management (KPMG 2015). Our industry experiences the greatest number of fraud incidents (Grant Thornton 2015), and that is why we must reduce this risk.

Relevant Links
For more information on the collapse of Enron, you can view a timeline here:

If you would like to read more about COBIT 5 or request a copy of the framework, you can do so here:

References
BBC News. “ENRON: Timeline.” Accessed April 17, 2016.

Escoute Consulting. 2014. “The difference between governance and management.” Accessed March 20, 2016. http://www.escoute.com/2014/03/14/the-difference-between-governance-and-management/.

Fox IT. “COBIT 5 Training Courses.” Image. Accessed April 17, 2016.

Grant Thornton. 2015. “Fraud in focus: Fraud and corruption in Banking and Financial Services.” Accessed March 20, 2016. http://www.grantthornton.com.au/client-alerts/2015/fraud-and-corruption-in-banking-financial-services/.

ISACA. “COBIT 5: A Business Framework for the Governance and Management of Enterprise IT.” Accessed April 17, 2016. http://www.isaca.org/COBIT/pages/default.aspx.

KPMG. 2015. “Fraud Barometer: The fact of Australian fraud in 2015.” Accessed 20 March, 2016. https://home.kpmg.com/au/en/home/insights/2015/12/fraud-barometer-december-2015.html.

Stewart, Bennett. 2006. “The Real Reasons Enron Failed.” Journal of Applied Corporate Finance 18 (2): 116-119. Accessed March 17, 2016. doi:10.1111/j.1745-6622.2006.00092.x.