Nowadays, particularly is Bulgaria, people are going more and more hungry for money, that is why the word fraud takes portion more frequently in our address. Fraud is portion of condemnable jurisprudence, and it comes when we have personal addition by deceitful manner or damaging another person. The most common intent of frauds are connected with individual or entities seeking to delegate and stole money or valuables. There are plentifulness of theoretical accounts, which are particularly constructed to specify and uncover frauds, most of them will be used in this paper to make up one’s mind whether Asil Nadir should be sentenced or non. More about analysis and comparings with other instances and illustrations of theoretical accounts can be found in appendix 1 and 2.
Proposed Fraud Investigation Plan for Polly Pack ‘s Financial Statement Fraud
Given below is the proposed probe program for Polly Pack ‘s fiscal statement fraud:
1. Develop an apprehension of the activities of Polly Pack
To understand the activities of microfinance establishments, the hearer should pay attending to: the chief concerns of the leaders on the aims and schemes of the establishment, the establishment ‘s organisational construction, operation of its concern, consequences of operations, ability to self-finance, operations and other major economic events may impact its fiscal statements, accounting issues and alterations accounting policies, and support beginnings.
To obtain this information, the hearer should run into with the leaders of the establishment ; visit at least one bureau, and reexamine studies and other paperss.
1.1 Interviews The hearer should run into the chief leaders of Polly Pack, including CEO, the caput of the fiscal service or fiscal manager, recognition responsibly and activities, and the caput of information systems. This is besides the clip for the hearer to discourse the first clip with the staff of the internal audit, the Board of Directors and major stockholders or loaners, if they have topics of concern that should be capable to reexamine missions on the footing of agreed or particular audits processs. During these interviews, the hearer should bear in head the list of points of fiscal statements. After these initial meetings, the hearer should measure any breach of fiscal coverage demands. Analysis of fiscal statement must be carried out prior to this interview since fiscal statements may show many important anomalousnesss.
If the first probes reveal a degree of unacceptable concern pattern or misdirecting presentation of fiscal, the hearer may seek further in-depth probe into a peculiar country.
1.2 Visits The hearer must see several regional offices to get apprehension of the establishment ‘s activities and duties that were decentralized. Hearers should execute some initial visits at the phase of pre-commitment, and more visits during the planning stage.
1.3 Review of fiscal studies and paperss The hearer should besides see the studies and other paperss for a better apprehension of the establishment. Unless they are non available, the followers may be helpful:
antecedently audited fiscal statements,
budgets and strategic programs ;
the monthly activity studies, including tabular arraies of hard currency flows, the recognition statistics and studies on outstanding ;
loan understandings and grants ;
appraisals by givers ;
rating studies and correspondence from the governments re-rules
A thorough contemplation demands to be carried out on the appropriate studies for Polly Peck, harmonizing to its size and age.
1.3 Understand the criterions and accounting methods The accounting regulations and methods of Polly Peck are non conventional, and hence require particular attending from the hearers
2. Measuring Accounting Standards
The external hearer shall find the accounting criterions used by the establishment. Many microfinance establishments do non follow the national criterions or international.
2.2 The accounting policies During the pre-commitment, the external hearer should inquire the direction of the establishment which accounting method it uses. Sometimes the service histories of the establishment are non able to reply this inquiry. Many establishments have adopted accrual accounting, sometimes in a modified signifier. This accounting method is consistent with the criterions imposed by most accounting organic structures. But some establishments continue to utilize hard currency. Hearers should cognize that it can be in the involvements of Polly Peck to register their activities, particularly the merchandise credits, harmonizing to a hard currency footing, taking into history accommodation proposals made at the terminal of the twelvemonth by the hearer. Since operations of Polly Peck were overseas in Turkey, it did non follow a unvarying accounting from one history to another, which farther complicates the work of the hearer.
2.3 The legal construction of Polly Peck in Turkey in the Context of Company Law of the Region The hearer must look at how the establishment considers as a publically owned transnational. This vision frequently has deductions for accounting. In foreign states organisations normally produce fiscal studies that reflect less strictly fiscal public presentation. Some do non even produce fiscal statements Annual. The bulk uses the hard currency and excludes amortisation, accommodations for rising prices, commissariats for hazard alterations, commissariats for societal security, and other similar points to derive from revenue enhancement freedoms. As regulated fiscal establishments, Polly Peck must non merely comply with by and large accepted accounting rules, but besides the specific ordinances regulating Bankss.
2.3 Examine accounting statements for any fiscal abnormalities Auditors must prosecute in the undermentioned activities
The external hearer should look into books of history and internal control of the establishment through:
treatments with directors and staff at assorted degrees ;
reappraisal of paperss such as process manuals, descriptions
places and organisational charts ;
consideration of the studies produced by the accounting section ;
conformity with the establishment ‘s activities, including IT operations and loan processing at central offices and bureaus
3. Reporting Abnormalities in Financial Statements
Accounting operations of Polly Peck were by and large de-centralized because of the operations of the organisation taking topographic point in Turkey. In such companies, the activity of an bureau is frequently recognized at the regional degree, so transmitted sporadically ( normally monthly ) to the caput office. This is normally responsible for the production of amalgamate fiscal statements. In some establishments, all the accounting is performed at central offices.
3.1 Reporting abnormalities of internal control systems Multinational concerns need a strong system of internal control to guarantee the success of its operation. However, Polly Peck was significantly weaknesses at this degree, and the hearer should therefore wage peculiar attending to the rating system organisation of internal control. Since, the board of Polly Peck was mostly inactive, and the administration construction tends to be slack. This is why the system of internal control organisation of the establishment depends mostly on the degree of committedness and competency of its direction.
3.2 Take into history the audit hazard As with any audit, the hearer must explicitly measure the audit hazard, that is to state, the chance to show an sentiment on wrong the truth of the fiscal statements of the establishment, both in footings of fiscal statements at the degree of history balances. Audit hazard has three constituents: built-in hazard, the hazard control, and the hazard of non-detection. At the fiscal statement degree, the chief determine hazards are built-in hazard and control hazard. Regardless of the system of internal control, some hazards come from the nature of the concern activities and its industry.
At Polly Peck a important figure of account staff did non to the full understand the recognition processs as they have been trained to work in the societal field instead than in the field fiscal. Accounting was carried out by staff with small experience of dual entry accounting, international accounting criterions, etc. In add-on, the organisation ‘s activities were decentralized and geographically dispersed frequently in distant countries without equal substructure.
3.3 Identify breaches of hazard control policies faulty processs may do a important hazard control through audits of microfinance establishments. Yet internal controls are important for microfinance establishments. When the internal control has excessively important failings, the audit of the establishment may go impossible. If control hazard is high, the hearer must measure whether we can to utilize extended substantial trials, and if this attack is economically executable for the establishment. In add-on to a thorough rating of internal controls, the external hearer must prove the controls made aˆ‹aˆ‹at the history balances but anterior to these trials, the external hearers should explicate their apprehension and rating systems, utilizing checklists of descriptions and charts.
3.4 Identify hazard of non-detection The hazard of non-detection, that is to state the hazard of stuff misstatement non be detected by the hearer shall be determined for each balance history, this hazard depends on the appraisal of built-in hazard and hazard control.
3.5 Specifying the degree of significance The definition of significance degrees is important in finding the nature, e- tense, and timing of audit processs. A significance degree is limit beyond which the possible mistakes are considered debatable. If the amount of uncorrected misstatements identified during the audit de- passes the threshold of significance, the hearer may non be able to publish an unqualified sentiment. The significance degree is reciprocally related to audit hazard. more the audit hazard, that is to state the combination of built-in hazard, hazard control and the hazard of non-detection is evaluated as of import, the higher the threshold significance is low. In other words, merely a low degree of defects non corrected is acceptable. The significance depends on the determiners identified during the mission planning. An of import determiner of fiscal statements is a factor that users of fiscal statements are most likely to concentrate their attending, given the nature of the establishment. Designation of factors determiners is a affair of professional judgement. Determinants, which can be used to find the significance degree are e.g. net income, entire assets, grosss, and financess ain. Significance degrees may change between 2 and 10 % of factor. In the United States, some use external hearers, as footing of materiality for a commercial bank, 2 % of entire assets. For an establishment whose weak internal controls, the hearer may cut down important at 1 % of entire assets acceptable rate abnormalcies. There is no general regulations to specify the thresholds of significance, therefore the hearer should utilize his/her judgement.
The rating by the hearer of materiality and audit hazard at be aftering the audit, may alter after measuring the consequences of audit processs. This may be due to a alteration in fortunes, or a development of cognition of the hearer, following the audit. For illustration, if the audit is scheduled before the terminal of the twelvemonth, the hearer will expect the consequences of and fiscal place. If existent consequences to differ materially from this estimation, the appraisal of materiality and audit hazard may be changed.
3.6 Evaluation of the internal audit and dealingss with hearers internal The external hearer should see the work of internal hearers during the stage be aftering the audit. Internal hearers evaluate and monitor systems accounting and internal control. Internal audit is an indispensable component to guarantee a sound internal control system, and besides an of import tool decrease, sensing and probe of fraud.
3.7 Obtain an sanctioned position Torahs or ordinances may enforce constitution of an internal audit service. When there is an internal audit map, the hearer must measure its objectiveness, its range, proficient accomplishments and asperity. This appraisal must include a reappraisal of the service organisation, its staff, its intent, its studies and plans. Potential struggles must be evaluated. For illustration, if the audit service Internal studies on its work in the service that he is scrutinizing, the inquiry of the objectiveness of the findings of the internal audit service arises. such state of affairs can significantly cut down the value placed on the work of the internal hearer by the external hearer. Ideally, the internal audit section must account of his work straight to the board or commission audit, if one exists. If the external hearer believes, following a screening appraisal, the internal audit service is dependable, it must prove the work performed by the service to corroborate this appraisal. This is normally done by executing a new trial on a sample of the work performed by the hearer.
The paper laid down a methodical attack to look into fraud in fiscal statements of Polly Peck to place whether the CEO or the top direction of the company was involved in calculated disproof of fiscal statements to raise portion monetary value of the company and to fraud stockholders of the company. The cardinal consideration in this program was triangulation of the elements of the probe to happen out whether all elements of the fiscal coverage lucifer. Triangulation is all the more of import for probe of Polly Peck ‘s fundss since the operations of the company were abroad and centralized coverage was non carried out of company ‘s fundss.
In this Appendix will be reviewed a portion of Polly Peck`s frauds and most of the ill-defined moves and actions of Asil Nadir, besides will be made a consideration and comparing with Enron instance.
Polly Peck was a great company with a brilliant vision on the market and it won`t be a prevarication if it is said that is was a “ stockholder dream ” for every investor in the universe. It has many close points of fraud to Enron instance.
The first deceitful happenstance is that in both instances the most of import documents and paperss disappear. Enron shredded dozenss of paper, while in Polly Peck`s instance they merely disappear and Nadir told that there are no available and bing paperss in their original.
The 2nd concurrence with Enron instance is that Polly Peck built a hotel in Turkey, which costs around 70 million and the debt of the company did non increase. In Enron the debts were “ transferred and funded ” to other little companies. The chief thought here is the caput company to looks attractive, valuable and without debts.
The 3rd happenstances between both companies is that they deal with complementary goods, which can`t be utility. As good Enron, in Polly Peck instance we have immense jobs with accounting. In the first instance we have fault accounting, here besides emerge some misleadings in this sector/department.
In this appendix will take a expression at the significances of the methods and attacks, which are portion of fraud probe and assist us to uncover a fraud. First, it should be known that such probe is rather expensive and it should be started if there are truly serious grounds that fraud occur.
Testimonial grounds: This type of grounds is collected from people, who are interviewed and persuade to make full in candidly trial, to recognize whether we can believe in them. In Polly Peck`s instance should be used this theoretical account, to take an question with the people worked for this company and finally may cognize something of import.
Documentary grounds: This type of grounds is collected from computing machines, paperss, waiters, informations excavation, public records, hunts and so on. In add-on, in such state of affairss the databases are great beginning of information, no affair the information is deleted, it can be restored. This type of grounds can be used every bit good in this instance, because most of the deceitful information is saved on computing machines and if restored can reply us the basic inquiry, is at that place a fraud or non.
Physical grounds: This type of grounds is concerned with taking fingerprints, id Numberss, arms, stolen belongings and so on, which can be linked to a deceitful act.
Personal observation: This type of grounds is besides named “ sense ” grounds, because it is really near to the information, which is “ heard, seen, felt, etc. “ .
A 2nd method of look intoing a strategy is to concentrate on the fraud trigons. It should be investigated all discrepancies, elements of the undermentioned trigons.
Figure1. Fraud Triangles.
Theft act: attempt to prehend the culprit to twist a information or information.
Privacy: In this portion should be taken under consideration and used paperss, computing machine difficult discs, etc.
Conversion: is to specify whether the suspect used money or belongings fraudulently for personal benefit. An great illustration of this type is the instance: [ Brandt v. State, 1944 ]