Recent Books of Reading

The Accounting Research Institute (ARI) congratulates editors of recently published Books of Reading.  The three books are namely "Government Procurement in Malaysia and Selected Case Studies of Local Authorities" edited by Rashidah Abdul Rahman, Normah Omar & Ibrahim Kamal Abdul Rahman; "Empirical Evidence on Corporate Governance Mechanisms in Malaysia"edited by Behnaz Quigley and Rashidah Abdul Rahman and "Dividend Practices in Malaysia" edited by Wee Shu Hui and Norhayati Mohamed".  All three books contain chapters of various research findings contributed by researchers from different research projects.  ARI also congratulates Associate Professor Dr Zuraidah Mohd Sanusi and Ms Yusarina Md Isa for the publication of their chapter titled "Creative Accounting: Auditors' Roles in the Detection of Financial Fraud" in an international book of reading - Effective Auditing for Corporates edited by Joe Oringel.

ICFCTF 2012

For the second year running, the Accounting Research Institute (ARI) is greatly honoured for being invited to jointly organise the International Conference on Financial Crime and Terrorism Financing (ICFCTF 2012).  This year, the main organiser and host of the event is Asian Institute of Finance (AIF).  The event is fully supported by Bank Negara Malaysia.  Themed "Compliance Challenges & Effectiveness: The Next Level", ICFCTF 2012 will be held at the Shangri La Hotel, Kuala Lumpur on 24 - 25 September 2012.  Among the highlights of this year's conference will include the following: (i)  Insights into the challenges in Measuring Effectiveness of an AML/CFT regime, (ii) Exposure to new Terrorism Financing Red Flags and Cyber Crime trends, (iii)  Knowledge on how Corporates are used as a vehicle for money laundering, (iv) Access to AML success stories – detection, investigation and successful conviction and (v) Updates on challenges in implementing the new FATF recommendations

ARI-IBFIM i-CSR Project

Researchers from the Asia-Pacific Centre of Sustainability (APCeS) of the Accounting Research Institute - ARI and the Islamic Banking and Finance Institute Malaysia (IBFIM) met up today to discuss on possible research collaboration to develop an Islamic Corporate Social Responsibility Reporting (i-CSR).  Essentially, i-CSR is part of a comprehensive dimension of the Islamic Corporate Governance & Accountability (i-CGA) Framework for financial institution.  Both i-CSR and i-CGA are ARI-funded research projects which aim to strengthen the Islamic Finance industry in Malaysia and globally.  Both parties have agreed in principle to work together in the development of i-CGA and i-CSR.  They have also agreed to organise a one-day seminar to discuss the research framework and research instrument sometime in October 2012. Participants of the seminar will include practitioners, shariah advisors, regulators and researchers.

Publication Workshops

The university's Institute of Leadership & Quality Management (iLQAM) recently organized two publication workshops in two state campuses - UiTM Perak on 16th July and UiTM Perlis on 19th July 2012.  Professor Dr Normah Omar, Director of the Accounting Research Institute was tasked to conduct the workshops.  As a pre-requisite, participants had to bring at least one draft article which they would have to submit by the end of the workshop. Basically, the workshops were attended mostly by relatively junior researchers.  The two-fold objectives of the publication workshops were firstly to expose or familiarize the researchers to journals that are indexed by ISI Thomson, SCOPUS and Excellence Research of Australia (ERA).  Once the participants were familiar with the journals and their respective requirements, the second objective was to get them to submit their article to their selected journal via the online submission mode.  During the workshops, participants had to identify at least five indexed journals in their respective fields. Then, they had to identify one journal to which they plan to submit their articles. A total of fifty participants attended the workshops at the two state campuses.  At the end of the workshops, several papers were successfully submitted to various indexed journals.

Groom Big Program

The Accounting Research Institute (ARI) were indeed honoured to be chosen by the Malaysia Productivity Corporation (MPC) to train selected companies (and their respective officers) who have been identified as candidates for the Groom Big program.  "Groom Big" Program is a joint-initiative of MITI and MPC.  The program aims to nurture aspiring and potential SME companies towards the export market.  ARI has been entrusted to train eight "Groom Big" companies namely- PSB Decoration, RuffnTuff, PATCO, MITTI Cable, Matrix Cable, Innopeak, Shamawar and Brimal Stampress  in two modules.  Module 1 - Financial Accounting was conducted on 16 & 17 June 2012 and Module 2 - Managerial Accounting on 17 & 18 July.  On the second day of each module, participants made case study presentations of their own companies.

FATF 40 New Recommendations

One of the organizations that have been set up to undertake functions for the development and promotion of national and international policies to combat money laundering and terrorism financing is the Financial Action Task Force.  Effective February 2012, the Financial Action Task Force (FATF) has introduced the "New 40 Recommendations" (incorporating FATF's earlier 40 Recommendations and 9 Special Recommendations) that member countries must comply with.  In essence, the five key changes have included the following:
(i)  The inclusion of tax crimes as predicate offences for money laundering; (ii) The extension of obligations on financial institutions (FIs) to conduct enhanced due deligence on a risk basis to politically exposed persons (PEPs); (iii) The introduction of more rigorous requirements in relation to the information which must accompany wire transfers; (iv) The requirement for countries to establish mechanisms to record basic company information and to enable FIs, competent authorities and others to determine beneficial ownership and conduct appropriate Customer Due Deligence (CDD) and (v) The introduction of a new step-by-step process for the identification of beneficial ownership and control of companies as part of CDD measures. - source FATF

AML/CFT Research Retreat

Researchers from the Anti Money Laundering and Counter Financing of Terrorism (AML/CFT) research cluster recently organized a three-day research retreat in Putrajaya.  Basically the two aims of the retreat were (i) to update the group on research progress & to resolve research issues (ii) to come out with at least two concept papers from their research projects.  Research update have included among others, discussions on Financial Action Task Force (FATF) "40 + 9 Recommendations", "New 40 Recommendations" and "Asia-Pacific Group Mutual Evaluation Report on Malaysia".  Currently, the research cluster reviews ML/CFT initiatives and program in financial institutions, and other reporting institutions such as the Royal Malaysia Custom (RMC), Tabung Haji, the Government's Auditor General Office.  The Accounting Research Institute (ARI) has recently appointed two visiting professors from Australia to facilitate the cluster members with the research projects. The retreat was facilitated by Cluster head, Associate Professor  Dr Pok Wee Ching.

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.

Methadone Maintenance Theraphy (MMT) Project

Researchers comprising Prof Dr Normah Omar from the Accounting Research Institute (ARI)of Universiti Teknologi MARA; Prof Rusli Ismail, Dr Nasir, Dr Wan Nazirah & Ms Ina from the Institute of Molecular Medicine (INFORMM)of Universiti Sains Malaysia met up with two prison officers (Hj Darussalam and Mr Mohd Umbaik) at the Prison Headquarters, in Kajang today.

Basically the main aim of the meeting was to discuss possible research collaboration involving Methadone Maintenance Theraphy (MMT)between the two HICoEs and the Prison Departnment. Currently, an on-going research titled "Cost-Effectiveness of Harm Reduction in HIV/AIDS Using MMT" compares MMT treatment at private hospitals, government hospitals and NGO Clinics at SAHABAT. Hence, MMT at prisons constitutes another useful comparison. Within the prison setting, at least three prisons at Penor, Jelebu and Seremban are currently dedicated for treatment of drug users. The prison department welcomes such university-prison research collaboration. We certainly look forward for such joint works.