Part A: Forensic Accounting:
1. Describe what is meant by the term forensic accounting, including the possible work that might be undertaken by forensic accountants (Note: you should discuss examples of the work undertaken by forensic accountants, possibly from media reports etc.)
Forensic accounting is also known as financial forensics which describes involvements of accountants in matters subsequent to forecasted financial disagreements and/or legal issues. It is called forensic due to its results and processes in the courts being recognized as legally valid. Forensic accountants are also generally known as forensic auditors who mostly provide financial legal proofs of some event in a court trial. The main examples of work undertaken by forensic accountants are claims on insurances, financial frauds, civil works finances and audits on royalties. Furthermore they are also engaged in calculations for financial damages, financial disputes resolutions, warranties’ breaches, liquidation, securities related frauds etc. They may also get involved in financial deductions, money laundering and financial recovery claims. They mostly provide support in financial negligence recoveries. They practice and develop an perception of financial concepts, business related information, economical reporting, audit of processes & standards, management of information and gathering the evidences through their built in interrogative techniques (Larry, Heitger, Smith, 2005).
They get highly involved in the litigation procedures to execute their taks. Financial forensics experts are fulfilling their highly demanding objectives to reduce the risks in businesses and are continuing to execute extended tasks which are parts of audits and frauds. They usually try to get the answers to the famous 4 Ws which are what, where, who and why. These accountant have been playing their role in revolutionize their core objectives to assist the business world by providing their services with full legal support. One important thing to mention here is that the forensic accountants are not the ones who are responsible to determine the fraud but it is up to the court to determine and declare a fraud. A big example of forensic accountants work is when in 1996 a manager in Orinda-Moraga Company, California was allegedly supposed of being fraud so the city manager asked Dan Ray (a forensic accountant) to look into the matter. He took the job very seriously and uncovered the fraud through carefully going through the company’s records and highlighted it to the management. Ultimately, the company’s owners were found guilty.
2. Whilst we know that a wide range of experience in work environment/s is essential for forensic accountants, there are several elements in AIS studies that provide the foundations of the skills necessary for forensic accountants. Briefly discuss the links you see between AIS and forensic accounting.
Accounting information systems (AIS) are very complex systems and due to this complexity the accountant usually don’t let these systems run on automatic mode through computer programs only but they are run side by side with expert accountants of the field. This is done to ensure that no mistake gets carried away and furthermore if any fraud occurs then the responsible accountant will be blamed for that so he will be ensuring that AIS must work smoothly (Romney, Marshall, Paul, 2009). The forensic accountant usually take help of AIS through the main database managed at both low and high levels and he also gets acquaint with the system in order to develop the understandings to such a level that he gets to know about the fraud or any other abnormality in the AIS to detect and present it in the trials.
Individual business procedures are not restricted to one department and hence it creates a complex picture of the AIS in any organization and especially in the bigger ones. There are mainly three ways of involvement of forensic accountants in the AIS of an organization which are as AIS users, as AIS designers and as auditors of AIS. These roles are very important in the detection of frauds as well as smooth operation of an organization. Forensic accountant are present in almost every major organization and especially in the government departments. The most common examples of such are in FBI and CIA offices in most of the local authority’s level. These departments use these accountants in detecting the terrorist’s activities as well through recognizing abrupt cash flows etc.
Part B: XBRL
What is XBRL and what is its significance to members of the accounting and finance professions? In your discussion, also comment on the current status of XBRL in the
country in which you are undertaking (i.e. what is the current status of XBRL in Australia?)
eXtensible Business Reporting Language or simply XBRL is a open source, freeware and globaly standardized for exchange of business related data. It includes the meaning of data in terms of semantics which is usually the requirement of reporting in all businesses. XBRL is used to formulate and communicate the financial data for the financial experts and advisors. The XBRL detailed specs are formulated by XBRL International, Inc. It is a standardized way of communication among business experts and systems. It takes the input of individual concepts of reporting and also the relevancy between the concepts the meanings. XBRL assurance is the auditor's opinion on whether a financial statement or other business report published in XBRL, is relevant, accurate, complete, and fairly presented.
An XBRL report is an electronic file and called instance in XBRL terminology. IFAC has discussed with many accounting organizations on the subject in order to take the decision on a general approach and standards in auditing related to XBRL. The accounting and finance professionals may give re-assurance to financial statement of XBRL, furthermore, a business report in XBRL and continuous reporting in XBRL. The financial statement of XBRL is of critical importance and the regulatory reports are considered to have been playing a vital role in the same context in shorter terms (Curry, Harth, O'Riain, 2009). While on the other hand the forecasts are to rely on more and more on the real time reporting systems. Australia has been actively implementing the XBRL system since 2003 when the Dutch started a new relevant XBRL project named Netherland Taxonomy Project or simply NTP which launched Standard Business Reporting (SBR) in order to develop a clustered environment for countries to communicate and keep themselves updated through it. Australia was one of the earliest countries who developed the XBRL through this project and is still successfully running it.
As of now the Australian government has a regulatory authority known as the Australian Prudential Regulation Authority (APRA) which performs using their Direct 2 APRA (D2A) software. The first stage execution of XBRL in Australia's regulatory authority is considered as a format of submission. It has provided some challenges in the formulation of the relevant Taxonomies due to their requirement of catering for the complexities in the existing forms which are about 350 forms. This is due to the complex validation infrastructure which compares newly submitted data against values submitted in other forms and reporting periods. XBRL instances can be submitted to APRA using the D2A XBRL import facility. Furthermore, an online version of XBRL Australia can be found on internet with latest updates on the subject. On this official website of XBRL for Australia latest news are published in regard to the subject and taxonomy and projects are also available for the visitors to look into. There are some useful links available at the website for briefing the visitor on XBRL. These are some of the efforts made by Australian government to motivate and encourage the implementation of XBRL in Australia.
References
Crumbley, D. Larry; Lester E. Heitger, G. Stevenson Smith. (2005). Forensic and Investigative Accounting. CCH Group.
Romney, Marshall B., and Paul John. Steinbart.(2009). Accounting Information Systems. Upper Saddle River, NJ: Pearson Prentice Hall.
E. Curry, A. Harth, and S. O'Riain. (2009). "Challenges Ahead for Converging Financial Data," in Proceedings of the XBRL/W3C Workshop on Improving Access to Financial Data retrieved from http://sw.deri.org/2009/09/financial-data/.
