134 Imoniana, J. O., Antunes, M. T. P., Formigoni, H.
h) Monitoring frauds and enhancing financial performance According to EFG, what we do is use that information derived from historical performance doing the trimming of time - as companies change over time. Thus, we use the past two or three years of information, understanding the normal pattern of this company and detect exceptions. At the moment, one detects an exception and proceeds to a closer investigation, which is barely an audit. It is therefore important to map frequency, values, and probabilities and understand the internal controls that are in practice within the company. Wise characteristics, the skills needed are such as those shown in the Graph 1, ranging from analytic to fraud detection and asset tracing skills. Graph 1- Enhanced Skills for Forensic Accounting
Adapted from Davis;
Ogilby, and Farrell (2010)
i) Identifying Red Flags - investigative mentality (event code) The use of interpretation of red flags arising from accounting information is hammered in the discourse. “Something smells like fish” […] these are some adaptations of some controls developed in banks, particularly to track some problems related to money laundering (Gomide, 2008, pp. 8). What can one consider as an example of red flags - unusual revenues, earnings or earnings management for instance? This applies to companies negotiated in stock markets whose book values are manipulated so that investors are unable to follow the twists and turns of events. According to EFG, “I have an example of a client in Rio, who nearly zeros his inventory as he pushes sales to the wholesaler at the close of quarterly reporting. A month later, he receives a bunch of returns, but the headquarters had recognized all the revenues. Three years late, this modus operandi was changed after hiding bad results for so long a time”. Controlling problem manifests itself through a variety of easily identified symptoms – red flags that usually reflect poorly designed processes or questionable ethics (Bickley, 2004). These symptoms could be as in Table 4.
JISTEM, Brazil Vol. 10, No.1,Jan/Apr 2013 pp.119-144
www.jistem.fea.usp.br