THE ROLES OF FORENSIC ACCOUNTANTS IN PREVENTION AND DETECTION OF MONEY LAUNDERING IN PHOENIX ACTIVITIES

Samuel Anindyo Widhoyoko; Deoga Payudha; Jeannada Natasha; Jerremy Immanuel

doi:10.36766/ijag.v1i1.5

THE ROLES OF FORENSIC ACCOUNTANTS IN PREVENTION AND DETECTION OF MONEY LAUNDERING IN PHOENIX ACTIVITIES

Samuel Anindyo Widhoyoko, Deoga Payudha, Jeannada Natasha, Jerremy Immanuel

Abstract

The process of company liquidation is always full of money laundering allegations and vulnerable to fraud. This fraudulent scheme is referred to as phoenix activity. The main purpose of phoenix activity is to avoid liability and expenses, which detriments the stakeholders. This research explains the importance of the role of forensic accountants prior, during, and after bankruptcy. The methodology used in this research is literature review examining the problems through various researches and frameworks. The literature review discusses three aspects related to fraudulent bankruptcy scheme i.e. motivation, the scheme processes and litigation processes. The research concludes that the presence of forensic accountants is important in the insolvency prevention and detection, in their roles as(1) independent and hired experts; (2) professional legal assistance providers of Anti-Money Laundering (AML) and asset manager; (3) business valuation experts; (4) private investigators; and (5) surveillance body for anti-money laundering purposes.

Keywords

Phoenix Activity, Insolvency, Bankruptcy, Money Laundering, Asset Recovery Forensic Accounting

Full Text:

PDF

References

Agha, S. Al. (2007). Money laundering from Islamic perspective. Journal of Money Laundering Control, 10(4), 406–411. https://doi.org/10.1108/13685200710830899

Albrecht, W. S., Albrecht, C. O., Albrecht, C. C., & Mark F. Zimbelman. (2012). Fraud Examination. Mason, OH. USA

Alldridge, P. (2008). Money laundering and globalization. Journal of Law and Society, 35(4), 437–463. https://doi.org/10.1111/j.1467-6478.2008.00446.x

American Institute of Certified Public Accountants. Consideration of Fraud in a Financial Statement Audit SAS 99, AU Section Statement on Auditing Standards (SAS) No. 99 § (2002). https://doi.org/http://pcaobus.org/Standards/Auditing/Pages/AU316.aspx#au_316.14

Accounting Professional & Ethical Standards Board (APESB). Code of Ethics of Professional Accountants. APES 110 (2010). http://www.apesb.org.au/uploads/standards/apesb_standards/standard1.pdf

Accounting Professional & Ethical Standards Board (APESB). Valuation Services. APES 225 (2012).http://www.apesb.org.au/uploads/standards/apesb_standards/13092014105315p2.pdf

Accounting Professional & Ethical Standards Board (APESB). Forensic Accounting Service APES 215 (2013). http://www.apesb.org.au/uploads/standards/apesb_standards/13092014103232p1.pdf

Accounting Professional & Ethical Standards Board (APESB). APES 330 (2014). http://www.apesb.org.au/uploads/standards/six_month_review_reports/13092014060735APES330.pdf

Accounting Professional & Ethical Standards Board (APESB). APES 220 (2015). http://www.apesb.org.au/uploads/standards/superseded_pronouncements/29092014102934_220heading.pdf

Association of Certified Faud Examiners. (2014). Report to the Nations on Occupational Fraud and Abuse, Global Fraud Study, 15(2), 1–80. https://doi.org/http://dx.doi.org/10.2139/ssrn.2222608

Bastin, G., & Townsend, P. (1996). Whistleblowers — A Legitimate Role in Corporate Life? Journal of Financial Crime, 4(2), 179–182.https://doi.org/10.1108/eb025774

BBC. (2014). Kilas balik kasus Bank Century. 2014. Retrieved from http://www.bbc.com/indonesia/berita_indonesia/2014/07/140716_bankcentury_101

Beasley, M. S., Carcello, J. V, & Hermanson, D. R. (1999). Fraudulent Financial Reporting: 1987-1997 An Analysis of U.S. Public Companies Research. Dana, 1–67.

Black, B. S. (2001). The Core Fiduciary Duties of Outside Directors. Asia Business Law Review,16(219),3–16 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=270749%5Cnhttp://papers.ssrn.com/ sol3/papers.cfm?abstract_id=1295427

Brennan, N. M., & Mcgrath, M. (2007). Financial Statement Fraud: Some Lessons from US and European Case Studies. Australian Accounting Review, 17(July), 49–61.

Brennan, N. M., & Solomon, J. (2008). Corporate Governance, Accountability and Mechanisms of Accountability. Accounting, Auditing and Accountability Journal, 21(2008), 885–906.

Brun, J.-P., Gray, L., Scott, C., & Stephenson, K. M. (2011). Asset Recovery Handbook. The World Bank. https://doi.org/10.1596/978-0-8213-8634-7

Bryan, D., Janes, T., & Tiras, S. L. (2014). The Role that Fraud has on Bankruptcy and Bankruptcy Emergence. Journal of Forensic & Investigative Accounting, 6(2), 126–156.

Chong, A., & Lopez-De-Silanes, F. (2015). Money laundering and its regulation. Economics and Politics, 27(1), 78–123. https://doi.org/10.1111/ecpo.12051

Coffee, J. C. (2001). The Acquiescent Gatekeeper: Reputational Intermediaries, Auditor Independence the Governance of Accounting. The Center for Law and Economic Studies, (191).

Cooper, H. (1999). Synthesizing research: a guide for literature reviews. Applied social research methods series (Vol. 3rd).

Dechow, P. M., Hall, M., Larson, C. R., & Sloan, R. G. (2009). Predicting Material Accounting Misstatements. Contemporary Accounting Research, 1–72.

DeFond, M., & Zhang, J. (2014). A review of archival auditing research. Journal of Accounting and Economics, 58(2–3), 275–326.https://doi.org/10.1016/j.jacceco.2014.09.002

Donaldson, L., & Davis, J. H. (1991). Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns. Australian Journal of Management, 16(1), 49–64. https://doi.org/10.1177/031289629101600103

Đorđević, M., & Tadija, Đ. (2015). Contribution of Internal Audit in the Fight Against Fraud. Economics and Organization, 12, 297–309.

Dowling, G. (2006). How good corporate reputations create corporate value. Corporate Reputation Review, 9(2), 134–143.https://doi.org/10.1057/palgrave.crr.1550017

Fafatas, S. A. (2010). Auditor conservatism following audit failures. Managerial Auditing Journal, 25(7), 639–658. https://doi.org/10.1108/02686901011061333

FATF. (2012). The FATF Recommendations. www.fatf- gafi.org/recommendations.html

Fauziah, W., Yusoff, W., & Alhaji, I. A. (2012). Insight of Corporate Governance Theories. Journal of Business & Management, 1(1), 52–63.

Financial Accounting Standard Boards. ASC 340 Other Assets and Deferred Costs (Topic 606) (2012).

Girodo, M. (2008). Specialized Corruption Investigations. Soft Law Controls. Siak Journal, (2008), 13–19. https://doi.org/10.7396/2008

Glinkowska, B., & Kaczmarek, B. (2015). Classical and modern concepts of corporate governance (Stewardship Theory and Agency Theory). Management, 19(2), 84–92. https://doi.org/10.1515/manment-2015-0015

Godfrey, J., Hodgson, A., Tarca, A., Hamilton, J., & Holmes, S. (2010). Accounting Theory. John Wiley & Sons, Inc.

Groenendijk, N. (1997). A principal-agent model of corruption. Crime, Law and Social Change, 27, 207–229. https://doi.org/Doi 10.1023/A:1008267601329

He, P. (2010). A typological study on money laundering. Journal of Money Laundering Control, 13(1),15–32. https://doi.org/http://dx.doi.org/10.1108/13685201011010182

Houck, M. M., Kranacher, M.-J., Morris, B., Riley Jr, R. a, Robertson, J., & Wells, J. T. (2006). Forensic Accounting as an Investigative Tool. CPA Journal, 76(8), 68–70. Retrieved from http://ezproxy.library.capella.edu/login?url=http://search.ebscohost.com/login.aspx?dire ct=true&db=bth&AN=22080055&site=ehost-live&scope=site

Jain, Pankaj & Rezaee, Z. (2006). The Sarbanes-Oxley Act of 2002 and Security Market Behavior: Early Evidence. Contemporary Accounting Research, 23.

Kassem, R., & Higson, A. (2012). The New Fraud Triangle Model. Journal of Emerging Trends in Economics and Management Science, 3(3), 191–195.

Kiel, G. C. (2005). Evaluating Boards and Directors. Corporate Governance: An International Review, 13, 613–631.

Kranacher, M.-J. (2006). Financial Statement Complexity: A Breeding Ground for Fraud. The CPA Journal, 76(9),80. http://search.proquest.com.ezaccess.library.uitm.edu.my/docview/212324644?accountid=42518

Louwers, T. J., Henry, E., Reed, B. J., & Gordon, E. a. (2008). Deficiencies in Auditing Related-Party Transactions: Insights from AAERs. Current Issues in Auditing, 2(2), A10– A16. https://doi.org/10.2308/ciia.2008.2.2.A10

Mietzner, M. (2007). Party Financing in Post-Soeharto Indonesia: Between State Subsidies and Political Corruption. Contemporary Southeast Asia, 29(2), 238–263. https://doi.org/10.1355/CS29-2B

Murphy, P. R., & Dacin, M. T. (2011). Psychological Pathways to Fraud: Understanding and Preventing Fraud in Organizations. Journal of Business Ethics, 101(4), 601–618.https://doi.org/10.1007/s10551-011-0741-0

Nkama, N., & Onoh, J. O. (2016). Forensic Accounting and Board Performance in the Nigerian. Journal of Accounting and Financial Management, 2(2), 29-43

Onofe, A. O., Izevbigie, I. D., & Usifo, E. J. (2015). Impact of Confidential Priviledge on Forensic. West African Journal of Business and Management Sciences, Nigerian Edition, 4(August), 118–126.

Pande, S., & Ansari, V. A. (2014). A Theoretical Framework for Corporate Governance. Indian Journal of Corporate Governance, 7(1), 56–72. https://doi.org/10.2139/ssrn.1949615 Pedneault, S., Silverstone, H., Rudewicz, F., & Sheetz, M. (2012). Forensic Accounting and nancial Management, 2(2), 29–43.

Peterson, K. O. (2016). Fraud Detection, Conservatism and Political Economy of Whistle Blowing. Academic Journal of Interdisciplinary Studies, 5, 17–24. https://doi.org/10.5901/ajis.2016.v5n3p17

Plessis, J. J. du, Hargovan, A., & Bagaric, M. (2012). Principles of Contemporary Corporate Governance. Cambridge University Press.

Popoola, O. M. J., Ahmad, A. C., & Samsudin, R. S. (2014). Forensic accounting auditors and fraud: Capability and competence requirements in Malaysia. Journal of Modern Accounting and Auditing, 10(8), 1–401. https://doi.org/10.5281/zenodo.30981

Sahiti, C. A., & Bektashi, M. (2015). Detection Techniques of Fraud in Accounting. European Journal of Economics and Business Studies, 9571(August), 96–101.

Sankaran, S. (2004). Audit Watchdog or Bloodhound.pdf. ICFAI Reader, 51–58. Sarbanes Oaxley 2002, 251 § (2003). https://doi.org/10.1136/bmj.2.1489.110

Schneider, F., & Windischbauer, U. (2008). Money laundering: Some facts. European Journal of Law and Economics. https://doi.org/10.1007/s10657-008-9070-x

Simser, J. (2010). Asset recovery and kleptocracy. Journal of Financial Crime, 17(3), 321– 332. https://doi.org/10.1108/13590791011056282

Simunic, D. A. (1984). Auditing, Consulting, and Auditor Independence. Journal of Accounting Research, 22(2), 679–702. https://doi.org/10.2307/2490671

U.S. District Court for the Southern District of New York. Phyllis Rosen v Livent Inc. (1998). Vanasco, R. R. (1998). Fraud auditing. Managerial Auditing Journal, 13(1), 4–71. https://doi.org/10.1108/02686909810198724

Veng Mei Leong, A., & Leong, A. V. M. (2007). Chasing dirty money: domestic and international measures against money laundering. Journal of Money Laundering Control, 10(2),140–156. https://doi.org/10.1108/13685200710746857

Weibing, P. (2011). Research on money laundering crime under electronic payment background. Journal of Computers, 6(1), 147–154. https://doi.org/10.4304/jcp.6.1.147- 154

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2012). Accounting Principles (9th ed.). John Wiley & Sons, Inc.

Wright, D. (2001). Mareva Orders as Part of the New, Emerging Law of Remedies. University of Tasmania Law Review, 4(2). Retrieved from www.austlii.edu.au/au/journals/UTasLawRw/2001/4.pdf

Yang, C., & Tan, B. L. (2012). Corporate governance and income smoothing in China. Journal of Financial Reporting an Accounting,10(2), 120–139. https://doi.org/10.1108/1985251121127368

DOI: https://doi.org/10.36766/ijag.v1i1.5