MyRA Central Audit 2016

Professor Dr Normah Omar, Director, Accounting Research Institute (ARI) of Universiti Teknologi MARA has been appointed by the Ministry of Higher Education Malaysia as one of the national level assessors for the Malaysia Research Assessment or more commonly known as MyRA. The MyRA instrument is used to gauge the research, development and innovation (R&D&I) activities of Malaysian tertiary institutions (i.e. public universities, private universities,  the branch campuses of foreign universities and university colleges).  chronologically, the MyRA assessment for 2015 went through various phases.

 Phase One (December 2015 - February 2016) was the online submission of MyRA data by the universities.  Universities submitted their data togther with a Masterlist of  nine important sections of the MyRA instrument.  Phase Two (Mid March 2016) was the document audit of all submitted data.  During the document audit, submitted data was gauged against the Masterlist that has been prepared by the institutions.  Any discrepancy or questions related to the data are subsequently noted by the assessors as future references during the site audit.  Phase Three (May - June) is the site audit.  In previous years, site audit meant an actual visits by the MyRA assessors to respective universities.  In 2016 however, actual site audits were only conducted for Research Universities (RU).  For the other universities, a Central Audit was carried out instead.  The processes for the Central site audit are exactly the same as in actual site audit.  Universities need to show evidences of everything that has been included in the Masterlist.

Benford Law to Detect Irregularities

Another useful tool that can be used to detect financial irregularities is the Benford Law technique.  Essentially,  Benford's Law provides a data analysis method that can help alert forensic accountants to possible errors, potential fraud, manipulative biases, costly processing inefficiencies or other irregularities. Premised on its statistical-based principle of number frequency, it has been suggested that the law could be used to detect possible fraud in lists of socio-economic data.  Based on the plausible assumption that people who make up figures tend to distribute their digits fairly uniformly, a simple comparison of first-digit frequency distribution from the data with the expected distribution according to Benford's law ought to show up any anomalous results.  Following this idea, Benford's law could be used in forensic accounting investigation and auditing as an indicator of accounting and expenses fraud. In practice, applications of Benford's law for fraud detection routinely use more than the first digit.  The Law posits that the use of the number "1" as a first digit is about 30%; number "2" about 16%; number "3" about 12%... and number "9" about 5%.  Any abnormality constitutes possible financial shenenigans 

'Beneish Model' to Detect Earnings Manipulation

Very often, one of the most challenging tasks in any financial fraud investigation is to identify the right investigative tool.  One tool that can be used in financial fraud investigation is the Beneish Model. Beneish Model is a mathematical model that uses financial ratios and eight variables to identify whether a company has manipulated its earnings. The variables are constructed from the data in the company's financial statements and, once calculated, create an M-Score to describe the degree to which the earnings have been manipulated. The eight variables are:

1. DSRI - Days' sales in receivable index
2. GMI - Gross margin index
3. AQI - Asset quality index
4. SGI - Sales growth index
5. DEPI - Depreciation index
6. SGAI - Sales and general and administrative expenses index
7. LVGI - Leverage index
8. TATA - Total accruals to total assets

Once calculated, the eight variables are combined together to achieve an M-Score for the company. An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.  As such, an investigation can be proceeded against such company.