Assignment Cover Sheet

Student Name: MAMPHASA JULIA MOETI

Student Number: 171411
Course: FORENSIC ACCOUNTING (LEVEL 7 DIPLOMA)
Assignment No: ASSESSMENT # 4

Marking Criteria:

We expect the learners to write minimum one well expressed point in three lines
against each allocated mark. This means one needs to write 15 lines with 5 well
expressed points to get high grades for a 5 marks question.

For high grades use examples and illustrations where appropriate.

1. SHORT ANSWERS FOR THE FOLLOWING QUESTIONS

i. THE DIFFERENCE BETWEEN PROACTIVE AND REACTIVE

INVESTIGATIONS

Reactive investigation is used when investigators receive information of criminal

activity and there is an urgent need to intervene. In such cases, too great a delay
in response can result in serious consequences for victims. Reactive investigation
is weaker than proactive investigation for several reasons:

Victims may initially provide information but later refuse to cooperate.

Informants may provide information which requires immediate response,
enabling those at higher levels of the criminal organization to evade arrest.
Reactive measures may mean that evidence is lacking or not able to be
collected.

There are three responses which must be applied when the situation of a victim
creates the need for a reactive response:
  Immediate intervention
 To rescue victims
 To prevent the procurement of other victims
 To secure evidence

 Use of information
 To conduct proactive enquiries
 To disrupt trafficking practices
 To develop arrest strategies

 Use of intelligence
 To plan and commence intelligence-gathering operations
 To assess premises to gather information about locations, etc.
 To reduce risks involved in subsequent arrest operations.

Proactive investigation is conducted in response to information on an ongoing

criminal activity obtained through intelligence-gathering or from reports of
witnesses. In these situations, there is no imminent threat to witnesses, meaning
that investigators do not have to respond immediately. Investigators can therefore
plan their activities to collect evidence according to operational plans and
resources.

In proactive responses, investigators:

Can decide where and when to start investigative operations.

Can control the direction of the investigation.
Can remain in control of investigations until the final outcome.

Proactive investigation is more effective because the investigators control the

investigation. If the investigation is conducted successfully, traffickers will not know
when, how or where they are being investigated.

ii. THE DIFFERENCE BETWEEN THE WEIGHTED AND UN-WEIGHTED

SOLVABILITY FACTORS

Solvability factors are information about a crime that can provide a basis for
 determining who committed that crime; a “lead” in the search for the perpetrator
of an offense. The solvability factors selected are those which will assist the
investigating officer or detective in bringing the case to a conclusion; assist the
reviewing Supervisor or Commander in assuring that proper investigative steps
have been taken and in deciding which cases have the potential for a
successful resolution through further investigation.

 WEIGHTED SOLVABILITY FACTORS

Weighted systems separate the more solvable factors from the less solvable
ones. They recognize that not all factors are equally important; for example,
fingerprints found at the crime scene hold more weight than the existence of a
witness. Statistical research and anecdotal experience determine weights in
advance. Stanford Research International’s (SRI) Felony Investigation Decision
Model for Burglary and Robbery is an example of a weighted system.

 UN-WEIGHTED SOLVABILITY FACTORS

These systems do not assign weights to factors; therefore, all factors are equally
important. The presence of factors determines whether the case will be
investigated further or not. Unweighted schemes are usually based on anecdotal
data and are specific to each agency. All cases must be evaluated on their merits
regardless of the system being used. After the case has been evaluated and
investigation has been deemed necessary, it is important for the investigation
process to be smooth, logical and efficient. Every investigation is unique
depending on the specifics of the case, but the success of every investigation
relies on the combination of skill, knowledge, and a sound investigative process.
Without a well-defined, efficient process, even the most knowledgeable and skilful
of investigators will fail to achieve a successful outcome. The consistency and
reliability of the investigative process can be ensured with a sound technique,
awareness of the unique nature of financial crimes, and logic.

Goal-setting is the primary task of the investigator regardless of how the complaint
has been generated. In both proactive and reactive approaches the starting point
is the complaint, and the ultimate goal is to establish a case with a legal basis for
investigation and a successful outcome.

iii. GOAL-SETTING AND PLANNING IS VERY IMPORTANT FOR THE

SOUNDNESS OF AN INVESTIGATIVE PROCESS

The objectives for each investigation will be different. A forensic accountant has to
make sure goal setting or objective setting is one of the first things he does when
he receives a complaint or allegation. Setting objectives at the outset of an
investigation gives a forensic accountant a direction to go in. If he is trying and set
objectives after he has started an investigation, the risk making decisions based
on a single event and not the big picture which could potentially ruin the entire
investigation.

 Goals give the focus

Imagine having to shoot an arrow without being given a target. Where a forensic
accountant would aims? And say he did aim at some random thing (out of sheer
perplexity). Why would he aim there? And what would the purpose be? Get the
idea? This is a literal example of what life is like without a goal or target in mind.
It’s pointless and a waste of energy and effort. He can have all the potential in the
world but without focus his abilities and talent are useless. Just like how sunlight
can’t burn through anything without a magnifying glass focusing it, a forensic
accountant can’t achieve anything unless a goal is focusing your effort. Because at
the end of the day goals are what gives direction in life. By setting goals for
oneself, gives a target to shoot for. This sense of direction is what allows a
forensic accountant’s mind to focus on a target and rather than waste energy
shooting aimlessly, it allows him to hit the target and reach the goal.

 Goals allow a business to measure progress

By setting goals for the business, a forensic accountant will be able to measure
progress because he always have a fixed endpoint or benchmark to compare with.
For example, David makes a goal to write a book with a minimum of 300 pages.
He starts writing every day and works really hard but along the way, he loses track
of how many more pages he has written and how much more he needs to write.
So rather than panicking David simply counts the number of pages he has already
written and he instantly determines his progress and knows how much further he
needs to go.

 Goals keep a business locked in and undistracted

By setting goals a business gives its employees mental boundaries. When a

forensic accountants have a certain endpoint in mind they automatically stay away
from certain distractions and stay focused towards the goal. This process happens
automatically and subtly but according to research does happen. To get a better
idea, imagine this. Josh’s best friend is moving to Switzerland and his flight takes
off at 9:00 PM. He leaves right after work at 8:30 PM to see him off and Josh
knows it’s a 20-minute walk to get to the airport. So he makes it a goal to reach the
airport in 15 minutes by jogging so that he can have more time to say his
goodbyes. Would he gets distracted by “anything” along the way? Would he stops
for a break or a snack? Would he stops by his house before going to the airport? I
bet he answered no for each question and at the end of the day, this is what a goal
gives him. FOCUS. No matter who he meets along the way or what he sees
(assuming nothing is out of the ordinary) his goal allows him to stay locked in. He
subconsciously keep away from distractions and his focus remains only on the
goal. And by the way, if he didn’t know yet this is how he becomes successful, he
sets a goal, he locks it in and then give it 100%.

 Goals help a business to overcome procrastination

When a business sets goals for every employee, it makes everyone accountable
to finish the task. This is in complete contrast with when a business does things
based off a whim and it doesn’t matter whether the employees complete them or
not. Goals tend to stick in mind and if not completed they give a person a “Shoot!”
These reminders in the back of their heads help them to overcome procrastination
and laziness. But keep in mind that long-term goals actually promote
procrastination. Most people aren’t good with deadliness 3 months away. So
whenever a forensic accountant is given a long term goal, break it down into
several short-term goals so he can complete a chunk of the larger long term goal
every week or even every day.

 Goals give employees motivation

The root of all the motivation or inspiration forensic accountants have ever felt in
their entire life are goals. Goal setting provides them the foundation for their drive.
By making a goal forensic accountants give themselves a concrete endpoint to aim
for and get excited about. It gives them something to focus on and put 100% of
their effort into and this focus is what develops motivation. Goals are simply tools
to focus energy in positive directions, these can be changed as business priorities
change, new ones added, and others dropped.

iv. THE MAJOR GOALS OF AN INVESTIGATIVE PLAN

Bowker (1999) notes that investigative plans have four components: a predication,
elements to prove, preliminary steps, and investigative steps. A predication is a
brief statement justifying why the investigation is being commenced. As noted
above, it is very important that the particular justification be spelled out. Generally,
a predication has three features: the basic allegation, the allegation’s source, and
date the allegation was made. Predications for open-source investigations, where
there is no specific allegation, should reflect a purpose, such as community
protection during a specific event, and should also include a fixed duration for the
investigative activity. If a specific wrongdoing allegation is uncovered the plan can
be amended to focus on the statutory elements to establish a violation. A well-
written predication provides the documentation foothold for the investigative steps
that follow. The next critical component is a delineation of the elements needed to
establish a violation occurred. Bowker (1999) notes:

This component must clearly reflect what is needed to establish a criminal

violation, thus focusing the investigation and providing a framework for the steps
that follow. At a minimum, this component should contain all of the statutory
elements and any special jurisdictional issues, such as venue and statutes of
limitations.

The next component is a listing of the preliminary steps an investigator will employ
to obtain basic background information on the victim or complainant and the
suspect(s) if known. A basic Internet search, such as “Googling” for public
information, is one such step. Others include online searches of public records,
such as Whois and Internet registries or incorporation papers and financial reports
filed with government agencies. Other steps may include reviewing agency
records on prior allegations or investigations; conducting an in-depth complainant
interview; and/or conducting a criminal background check of pertinent parties.
Typically, preliminary step completion does not require a great expenditure of time
or resources. The next part of the plan is the more specific or focused investigative
steps needed to resolve and complete the investigation. They lay out the general
parameters needed to establish that an infraction has occurred and each step
should parallel the statutory elements of a violation. Investigative steps include:

 Victims and or witnesses to be interviewed;

 Identifying and securing any legal process or authority needed for evidence
collection;
 Identifying ESI (digital and online) and any other evidential items such as
documents, weapons or contraband to be collected and from where;
 Actual collection and analysis of ESI and other items;
 Suspects to be interviewed.

Following a plan will provide an outline for any final report needed to document the
investigation. Plans can be tailored for civil, criminal, or administrative violations.
Boilerplate plans can be created for investigations which are frequently conducted
with appropriate modifications tailored to meet a current allegation. Investigators
should also realize that plans can be modified as warranted based upon new
uncovered information or new investigative steps needed. For instance, if one is
investigating a cyberstalking case and uncovers information pointing to child
pornography, the plan, and subsequent legal authority, can be modified to
incorporate the elements and steps needed to establish that new allegation
(civilian investigators should STOP and call law enforcement when child
pornography is discovered.

v. THE STAGES INVOLVED IN PLANNING AN INVESTIGATIVE PLAN

Organisations investigate business upsets because they are required to by law or

their own company standards, or the public or shareholders expect it. But,
whatever the motivation, the goal is to identify why the incident happened and to
take action to reduce the risk of future incidents. Investigations often find that
similar scenarios have occurred previously but, for a variety of reasons, did not
result in serious consequences. This is increasingly recognised in high-risk
industries where “near misses” are also investigated as well as incidents which
actually resulted in loss.

A six-step, structured approach to incident investigation (Figure I) helps to ensure

that all the causes are uncovered and addressed by appropriate actions.

FIGURE 1: Six steps of incident investigation (From google)

 STEP 1 – IMMEDIATE ACTION : In the event of an incident, immediate

action to be taken may include making the area safe, preserving the scene
and notifying relevant parties. The investigation begins even at this early
stage, by collecting perishable evidence, such as CCTV tapes or samples.
 STEP 2 – PLAN THE INVESTIGATION: Planning ensures that the
investigation is systematic and complete. What resources will be required?
Who will be involved? How long will the investigation take? For severe or
complex incidents, an investigation team will be more effective than a single
investigator.
 STEP 3 – DATA COLLECTION: Information about the incident is available
from numerous sources, not only people involved or witnesses to the event,
 but also from equipment, documents and the scene of the incident.
 STEP 4 – DATA ANALYSIS: Typically, an incident is not just a single event,
but a chain of events. The sequence of events needs to be understood
before identifying why the incident happened. When asking why, forensic
accountants need to identify the root and underlying causes, as well as the
direct causes. Failures and mistakes don’t just happen by themselves;
organisations allow error-enforcing environments that encourage direct
causes to develop and persist. Such environments, and the basic
management failings behind them, are the root causes, the ultimate source
of the incident.

While human error plays a part in the majority of incidents, people are not
generally stupid, lazy, forgetful or wilfully negligent. Human errors occur because
of influencing factors associated with the work, the environment, an individual’s
mental or physical abilities, the organisation and its management systems. Any
investigation which sets out to find someone to blame is misguided.

 STEP 5 – CORRECTIVE ACTIONS: Many investigations make the mistake

of raising actions which deal only with the direct causes a quick fix, putting
last-lines of defence back in place. By ignoring the root and underlying
causes, not only do they miss an opportunity to reduce the risk of
recurrence of the incident, but they also leave open the possibility that
other, dissimilar incidents may also occur, arising from the same, common
root cause.
 Root causes: failings from which all other causes spring, that is
management, planning or organisational failings.
 Underlying cases: Less obvious system or organisational reasons, that is
unsafe conditions such as inadequate training or poor equipment design.
 Direct causes: Most obvious reasons, which is immediate actions or
inactions of individuals or failed defences.
 STEP 6 – REPORTING: The investigation is concluded when all
outstanding issues have been closed out and the findings have been
communicated so that lessons can be shared. Communication mechanisms
include formal incident investigation reports, alerts, presentations and
meeting topics.
 vi. THREE MAIN AREAS OF INTELLIGENCE GATHERING PROCESS

Intelligence gathering (or intelligence collection) is the process of collecting

information on threats to people, buildings, or even organizations and using that
information to protect them. Intelligence gathering can be dissected into different
modes of which Open Source Intelligence (OSINT), Cyber Intelligence (CYBINT),
and Human Intelligence (HUMINT) are the most viable for targeted attacks.

 OPEN-SOURCE INTELLIGENCE (OSINT) - This is intelligence forensic

accountants can easily get from publicly available sources like websites,
databases, news and social media. OSINT can be very helpful because it
will show them the information on an area that potential threats have access
to.
 HUMAN INTELLIGENCE (HUMINT) - Gathering human intelligence is one
of the easiest ways to find out more about the security environment of a
property forensic accountants are covering. On security contracts they are
bidding on, conducting a property walk and talking to the existing officers
are great ways to collect human intelligence on the property.
 IMAGERY INTELLIGENCE (IMINT) - Imagery intelligence includes things
like maps and GPS images. It is extremely useful for helping to understand
the surrounding environment of the property forensic accountants provide
security for like major roads, public transit routes, parking lots, and public
spaces.

2. SHORT NOTES ON THE FOLLOWINGS

a. Private databases (private records)

Private records are records that contain information about a particular individual.
This information pertains solely to the individual’s affairs. Not all records that are
maintained are available to the public. It all depends on whether they contain
public, non-public, or confidential information. In general, records with public
information are accessible to any person for inspection. Those that are non-public
are not necessarily confidential but can be withheld from the public.

A record with confidential information is never available for public inspection and is
strictly considered private. Private databases, which include online background
checks, update records at their own discretion. Private databases can update in
waves, meaning anywhere between six months to one year, depending on the
company's enforcement of record updates. Some private databases may not ever
be compelled to update their records to reflect the granted order, unless they are
actively enforced to do so. There are services such as the Expedited Record
Clearance Update (ERCU) service which can help to enforce these updates on
certain background check companies.

b. Public databases (public records)

Public records are information or documents created by a government agency or

officer and are required by law to be stored and maintained. They also include
records filed with a government agency. As such, public records can largely be
divided into two main categories: information about people (individuals), and
information about the any government and its policies. Public databases such as
the Department of Justice (DOJ), Department of Public Safety (DPS), courthouses,
and police stations require a granted court order for the sealing or expungement of
the criminal case to remove the record and are updated automatically upon
receiving the court order. After a person’s petition for criminal record clearing is
granted, the court clerk will send him or his legal representation the signed court
order. The court will update their records of his granted order within 48 hours. The
DOJ and DPS must then update their records within 30 days of receiving the
order. Most background check companies get their information from these public
databases. Some of these types of records can be difficult and timely to track
down, which is why many people turn to the best background check (opens in new
tab)and people search sites(opens in new tab) to assist with the research.
Typically, forensic accountants would have to search multiple databases to get the
level of information provided in just one of these succinct reports. There are many
types of public records that are available for free at federal, state, county, and city
level. Examples include census data, tax liens and judgments, criminal records,
court records, property information, and bankruptcy rulings.

3. “FINANCIAL CRIME INVESTIGATIONS GENERALLY RESULT IN

HIGHER VOLUMES OF EVIDENCE AND MORE COMPLICATED
 THEORIES OF EVIDENCE THAN NON-FINANCIAL CRIME.’

Financial crime investigations locate assets owned or used by the defendant or

organised crime group members as well as the ownership and use of properties
which can then be restrained. Criminal investigations can be either reactive,
where the police respond to a crime that has already occurred, or proactive, where
the investigation may go on before and during the commission of the offense.

Examination of financial records inevitably reveals additional offences such as

money laundering which can then be included in the private prosecution of these
defendants. Financial crime investigations can reveal complex corporate structures
identifying additional offences and offenders. Financial trails can track the
movements of individuals and place people at particular places at particular times,
thereby providing evidence linking them to criminality or particular criminal groups.
The evidence uncovered through financial crime investigations of the lifestyle led
by a defendant can assist in the procurement of a confiscation order following a
successful private prosecution. A confiscation order can target assets of the
defendant including hidden assets. This financial evidence can also aid in the
enforcement of confiscation orders especially where hidden assets are involved.

One of the biggest challenges in an asset recovery case is producing the evidence
that links the assets to criminal activities (property-based confiscation) or
establishes the amount of the benefit derived from an offense (value-based
confiscation). To establish this link, practitioners must identify and trace assets or
“follow the money” until the link with the offense or the location of the assets can
be determined.

Often, the assets have been moved around the world using schemes that involve
offshore centres, corporate vehicles, nominees, intermediaries, “straw men”, and a
variety of financial transactions to launder the funds and obfuscate this link. This
therefore requires the use of a variety of investigative techniques to trace assets
and analyse financial data, especially in order to secure reliable and admissible
evidence to prove the elements of the offenses that are under investigation.
Various investigative techniques followed around the world assist practitioners in
these efforts, although jurisdictions may limit or prevent the use of some of these
techniques. It is imperative that practitioners determine which techniques are
authorized by law and ensure that all legal requirements, policies, and procedures
are followed.

CASE STUDY

i. An accounting system is how a business plans its operating budget and

tracks its expenditures and receivables, or income. An accounting
system also may handle payroll, taxes and other business accounts,
including workers' compensation, health-care coverage and other
benefits. Functions of accounting can be handled in house or contracted
out to a certified public accountant. Failure to properly manage an
accounting system can result in financial disaster for any business.
 Lack of security

A lack of security is another common disadvantage to manual accounting.

Companies may be unable to prevent employees from reviewing sensitive data
in paper ledgers and journals. Files copied and stored on a computer may also
be less secure. This may allow employees to abuse financial information
through fraud or embezzlement. Disgruntled employees may also irreparably
damage the information and destroy important financial records.

ii. SOME POSSIBLE CAUSES OF SHORTFALL OTHER THAN THEFT

BY BYRON
 Subject to errors: Errors can be quite frequent in manual accounting
processes. Common errors are entering information into incorrect accounts,
transposing figures or recording information backwards. While these errors
are also in modern accounting systems, manual systems have no internal
checks and balances. Accountants researching errors will often spend
several hours to locate and correct entries. Multiple accountants working in
several manual accounting ledgers can exacerbate these problems.
 Few copies available: Large organizations with different departments such
as Byron’s often find manual accounting difficult due to the lack of multiple
ledgers and journals. Most businesses will have one journal for accounts
payable, accounts receivable, payroll, and fixed assets and so on. This
 means only one accountant can work on a journal at any given time.
Separating out these ledgers into sub ledgers can result in less security and
the potential for duplicating information in the accounting.

 Time consuming: Accounting processes that use paper journal and ledgers
or similar tools requires copious time to complete tasks. Accountants will
need to locate accounts and journals in the system prior to recording
entries. Checking account balances and reviewing information is also
difficult. Accountants may also need to rifle through multiple documents to
locate information requested by executives. Copying this information can
also be difficult.
 Poor budget planning: Even small businesses must plan their budgets to
ensure the operation stays on track. The budget process involves assessing
all of the financial needs of a business and creating a financial road map to
make sure bills are paid, employees get pay checks and the business stays
on course with its earning and income projections. Businesses that fail to
institute a proper accounting system run the risk of underestimating
earnings, which can ultimately lead to business failure.
 Accounts payable: Accounts payable are the bills a business pays to cover
its assorted operating costs. Without a proper accounting system in place,
accounts may be paid late or not paid at all, which can result in a variety of
problems. A business can see product delivery stop, utilities turned off,
insurance coverage dropped or other catastrophic outcomes. Any one of
these problems has the potential to severely impact a business’s
productivity and viability.
 Accounts receivable: Just as important as understanding where the
business money is going is understanding where the money is coming from
is very crucial. A proper accounting system tracks sales and income and
ensures that clients and customers are paying as expected. A company that
allows unpaid accounts to go uncollected and provides services or delivers
products without compensation puts itself at financial risk. For a small
business with thin profit margins, losing money in this manner can present a
significant financial deficit that could potentially bankrupt the operation.
 Tax preparation: A small business in-house accounting professional can
 handle tax preparation for the company, or she can work in conjunction with
an outside tax preparer. Regardless of how it's handled, proper accounting
measures used throughout the year can help ensure all tax obligations are
being fulfilled. This is accomplished through detailed financial record
keeping. A company that fails to properly handle tax payments runs the risk
of tax penalties and fines that can become significant and damaging to a
business’s operation.
 Embezzling: If a business has a self-devised accounting system, it means it
doesn’t have a proper accounting system in place, Byron will have a hard
time learning if the company is being financially defrauded in any way. An
unscrupulous employee could take advantage of lax accounting procedures
to slowly siphon money from the business, and the result could be financial
insolvency and business failure. Understanding how to develop and read
balance sheets, cash flow charts and other financial documents will both
organize and protect the business.

Student Statement:

By submitting this assignment, I confirm that this is my own work.

Student Signature: MJMoeti Date: 15th August

2022

For Tutor / Assessor Use Only

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