Fraud Considerations in the Audit of Financial Statements

The Accounting Research Institute thanks Mr Ken Pushpanathan, President of the Malaysian Institute of Certified Public Accountants (MICPA)who presented a lecture for the students of the Master in Forensic Accounting and financial criminology program.

The lecture topic was related to Fraud Considerations in the Audit of Financial Statements. Essentially, an auditor is responsible for planning and performing the audit to obtain reasonable assurance about whether the financial statements taken as a whole are free of material misstatement, whether caused by error or by fraud. Nevertheless it was further stressed that the fact that an audit is carried out may act as a deterrent, but the auditor is not and cannot be held responsible for the prevention of fraud and error. The International Auditing Standard 240 (IAS 240)specifically stipulates that an auditor in an audit of financial statements must ensure that he or she

(i) gathers information from management and others within the organization to identify and assess risks of fraud, (ii) develops specific audit procedures to address these identified risks and (iii) performs mandatory procedures to address the risk of management override of controls. Mr Ken Puspanathan further shared his experiences as an auditor and elaborated how in reality, financial frauds are committed in various forms. As such, auditors must be creative and proactive in their audit planning so as to maximise the probability of "catching the pepetrators"

Up and Close with Prof Ferid Murad

This has been a very interesting week for Universiti Teknologi MARA as we receive the presence of one notable Nobel Laurette Prize Winner as our guest. The visit is part of the university's initiative under the Vice Chancellor Special Project (VCSP). Professor Ferid Murad, is an Albanian-American physician and phamacologist, a co-winner of the 1998 Nobel Prize in Physiology or medicine for the discoveries concerning nitric oxide as a signaling molecule in the cardiovascular system. According to his available biography, ... Prof Murad's key work was in showing that nitroglycerin and related drugs worked by releasing nitric oxide into the body, with the gas somehow acting as a signaling molecule, making blood vessels dilate. The biography asserts further that the missing steps in the signaling process were filled in by Furchgott and Ignarro, for which the three shared the 1998 Nobel Prize. The past one week has been filled with various activities which included among others a public lecture of "Sharing the Noble Laurette Journey" with university community and the public; meeting various scientific fraternities; television and other media appearance; Intellectual discourse with the medical research community and post graduate students. Today, Prof Murad has been awarded with the Asia Pacific Brand Laurette at a special function organized by the Faculty of Medicine, Selayang Campus. Two researchers from the Accounting Research Institute (ARI)- Prof Dr Normah and Associate Prof Dr Roshayani - have been invited to the meeting. The opportunity to meet up and close with Professor Ferid Murad has been a memorable event for all of us. When asked "how he did it?", one "take home" message from Prof Murad is the need to have a team who can share and effectively work on the project. For him, his teams are his research fellows and co-researchers....

Understanding AMLATFA 2001

Today, post graduate students of AFC 713 (a course on money laundering and financial criminology) who are undertaking the Master in Forensic Accounting and Financial Criminology presented their case studies involving money laundering offences. Selected cases presented by the groups today included those that have been committed in countries such as Canada, United States of America, Australia, Malaysia and Columbia. In Malaysia, the jurisdiction covering money laundering offences is covered by the Anti Money Laundering and Anti Terrorism Financing Act (AMLATFA) 2001. Money Laundering is a process to disguise illegal proceeds from their criminal origin so as to avoid suspicion of law so as to avoid suspicion of law enforcement and to prevent leaving a trail of incriminating evidence. It is a process to make dirty money to appear ´clean´. The three stages of money laundering are namely Placement (i.e. the placement of money into financial institution); Layering (creating complex layers of financial transactions designed to disguise illegal proceeds from their original source) and Integration (turning of illegal proceeds into legitimate economy and to make them appear as ordinary and legitimate earnings). Among the issues highlighted in the presentations included the multi-layering of illegal proceeds that makes the whole process looks very complex and complicated. Further, the involvement of transnational and cross-border crimes also necessitate our anti money laundering investigators to involve their global counterparts into the investigation process.

Meeting with Malaysia Automotive Institute

The Accounting Research Institute (ARI) thanks Mr M. Madani, CEO of the Malaysia Automotive Institute (MAI)and his two officers, Mr Asrulnizam Addrus (Head of Strategic Research Division) and Mr Armey Jefri (Researcher, Supply Chain Division) for recently hosting ARI researchers at MAI office in Cyberjaya. Professor Dr Normah Omar and her PhD student Mr Hussein had an initial discussion with MAI officers for a possible UiTM-MAI research collaboration in the area of Target Costing Implementation Decision and Organizational Capabilities by Malaysian Automotive Manufacturing Companies. From the meeting, it was basically agreed that the proposed research collaboration will embark very soon. MAI was incorporated on 16 April 2010, to function as an independent non-profit organization under the custodian of MITI and was officially launched on 10 June 2010. It acts as a focal point and a coordination centre for the development of the local automotive industry in all matters related to automotive industry including the formulating of the national automotive policy, managing manpower development programme, formulating and coordinating automotive related research and development.

Operation Review Panel Member of MACC from UiTM

The Accounting Research Institute (ARI)congratulates Prof Dr Syed Noh Syed Ahmad, a senior professor from the Faculty of Accountancy, Universiti Teknologi MARA (UiTM)who is lending his expertise in the area of forensic accounting to the Malaysian Anti-Corruption Commission. . Currently Professor Dr yed Noh is a member of MACC Operation Review Panel (ORP). At a recent press conference the MACC Academy in Kuala Lumpur, the committee members of the ORP (Prof Syed Noh from UiTM is seated in the middle)made a recommendation for MACC to initiate investigation on a few high profile corruption cases. Prof Syed Noh's expertise is in analysing financial statement fraud.

Another Rasch Model Workshop with Prof Bond

The Accounting Research Institute (ARI) is greatly honored to host another Rasch Model workshop with Professor Trevor Bond. The one-day workshop was attended mainly by Prof Bond's Rasch Model facebook group in Malaysia. Basically this group comprises researchers who are opting to use rasch model analysis to analyse their data. They probably have posted their questions and queries on the facebook before the workshop. Three researchers from ARI participated in the workshop discussion. Professor Bond will be leaving for Australia early tomorrow morning. Thank you sir.

Rasch Model Workshop With Prof Bond

Day 3 The basic tenet of Rasch model posits that the probability of a specified response (e.g. right/wrong answer) is modeled as a function of person and item parameters. Specifically, in the simple Rasch model, the probability of a correct response is modeled as a logistic function of the difference between the person and item parameter. In the morning, participants were exposed to the concepts of "dochotomous" and "polytomous" measures.

As illustrated by Wikipedia, for dichotomous data such as right/wrong answers, by definition, the location of an item on a scale corresponds with the person location at which there is a 0.5 probability of a correct response to the question. The Polytomous Rasch Model is a measurement model that has potential application in any context in which the objective is to measure a trait or ability through a process in which responses to items are scored with successive integers. For example, the model is applicable to the use of Likert scales, rating scales, and to educational assessment items for which successively higher integer scores are intended to indicate increasing levels of competence or attainment. In the afternoon, participants shared their own research instruments with Prof Bond.

Rasch Model Workshop With Prof Bond

Day Two

On the second day of the workshop, participants were further exposed to the basic framework for measurement: Principles of Fit and Error, Analyzing Dichotomous Data and Polytomous Survey Data.
In the afternoon, participants get to explore "WinSteps 1" program. In essence, the Rasch model provides a mathematical framework against which test developers can compare their data. Rasch models are used for analysing data from assessments to measure variables such as abilities, attitudes, and personality traits. For example, they may be used to estimate a student's reading ability from answers to questions on a reading assessment, or the extremity of a person's attitude to capital punishment from responses on a questionnaire. According to wikipedia, Rasch models are particularly used in psychometrics, the field concerned with the theory and technique of psychological and educational measurement. In addition, they are increasingly being used in other areas, including the health profession and market research because of their general applicability. The mathematical theory underlying Rasch models is in some respects the same as item response theory. However, proponents of Rasch models argue it has a specific property that provides a criterion for successful measurement. Application of the models provides diagnostic information regarding how well the criterion is met. Application of the models can also provide information about how well items or questions on assessments work to measure the ability or trait.

Rasch Model with Professor Bond

Day One In conjuction with the International Conference on Innovation, Management and Technology Research (ICIMTR 2012),

the Accounting Research Institute (ARI)and the Center of Applied Management Studies of Universiti Teknologi MARA (UiTM) organize a three-day workshop on Applying the Rasch Model. Themed "Changing the Face of Innovation, Management and Technology Research: A Role of Rasch Measurement", the workshop is facilitated by Professor Trevor Bond from James Cook University, Australia. Professor Bond is a renown researcher and author. The second edition of his best-selling book which he co-authored with Christine Fox titled "Applying The Rasch Model: Fundamental Measurement in the Human Sciences", reflects his longstanding experience in educational settings as the background for applying fundamental measurement to outcomes in the human sciences. Sixty participants signed up for the course.

This includes forty two researchers and post graduate students from ARI. On the first day of the workshop, participants were introduced to the concepts of measurement; key measurement principles; construct validity & reliability and the Rasch Model Measurement. One of the main contributions of the Rasch Model Measurement is to transform ordinal-scale data set to interval-based scale. Such tranformation is essential to enable researchers to use high level parametric statistics so as to allow research findings to be inferred.

ICIMTR 2012

The International Conference on Innovation, Management and Technology Research (ICIMTR 2012)
was officially launched this morning by YB Datuk Wira Latiff bin Datuk Tamby Chik who represented the Chief Minister of Malacca, Datuk Seri Hj Mohd Ali bin Mohd Rustam. ICIMTR 2012 is an ISI/SCOPUS indexed conference that is jointly organized by Universiti Teknologi MARA and Universiti Malaysia Kelantan. Also presence at the opening ceremony were the Vice Chancellor of Universiti Malaysia Kelantan (UMK); Professor Dr Faridah Hassan, Dean of the Faculty of Business & Management, Universiti Teknologi MARA (UiTM); Professor Trevor Bond & Professor Klaus Georg Oestreicher (both are key note speakers); Professor Dr Normah Omar of the Accounting Research Institute (ARI)and Professor Dr Raja Suzana, the conference chair. ICIMTR 2012 has originally received more than 280 papers but only 75 of them "passed" the blind review process. A total of 50 international participants from more than 25 countries are attending the two-day conference.
Tomorrow, some 60 other participants will be attending a three day Rasch Model workshop which will be facilitated by Professor Trevor Bond of James Cook University, Australia. The Accounting Research Institute is sending a total of thirty eight (38) researchers for the Rasch Model workshop...