Integration Forensic Accounting &

Governance Risk and Control for

a sustainable competitive advantage

Maliki Heru Santosa Kuliah Tamu pada FEB Universitas October 18, 2022
Trunojoyo

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 INTEGRATION F A & G R C FOR
A SUSTAINABLE COMPETITIVE ADVANTAGE

National
Paradigm A sustainable
Designing competitive
Objective Regulation strategy
Best practices, advantage
Stholder Exp.

Forensic
Governance Accounting Integration Better Gov, Risk
problems Current FA & GRC and Compliance
condition

Strategic environmental disruption: ie IR:0, Fraud,

Cybersecurity, Millenials, pandemic, ESG
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 Agenda

Introduction 1
2 Fraud and Governance
problems
The Role of 3
Forensic Accounting 4 Challenges

Strategy 5
6 Conclusion

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 Intro

Fundamental of Business Objectives

1 Service Values

2 Productivity

3 Sustainability

©mahesa Risk Culture and ledership, CRGP, LSPMR, 2022

 Governance

Any successful organization must establish a

basic framework through which both long-
term and day-to-day decisions will be made
All organization must establish an overall
g ove r n a n c e s t r u c t u r e t o e n s u r e k e y
stakeholder needs are met.
This governance structures provide direction
to those executing the day-to-day activities
(internal control) of managing the risks
inherent in an organization’s business model.

Anderson et al, Internal Auditing, 4 th, IIA, 2017 Governance surrounds all activities in an organization
The Board provides direction to senior management (SM) to
guide them in carrying out the RM activities. SM provides
direction to lower levels of managements who are responsible 5
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for the speci c controls
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 Governance
Overview of Governance

Governance “umbrella”
Governance is the combination of processes and
BOARDS OF DIRECTORS
structures implemented by the board to inform, direct,
manage, and monitor the activities of the organization
toward the achievement of its objectives (IIA)

Corporate Governance (CG) involves a set of relationships

between company’s management, its board, its Strategic direction Governance oversight
shareholders and other stakeholders. CG also provides
structure through which the objectives of the company are
set, and the means of attaining those objectives and Risk Mgmnt Assurance
monitoring performances are determined. (OECD)

Anderson et al, Internal Auditing, 4 th, IIA, 2017

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 T Transparency
A Accountability

Governance R Responsibility
I Independency
F Fairness

GCG adalah kumpulan hukum, peraturan, dan kaidah-kaidah yg wajib dipenuhi agar
dapat mendorong kinerja sumber-sumber perusahaan untuk berfungsi secara e sien
guna menghasilkan nilai ekonomi jangka panjang yang berkesinambungan bagin para
pemegang saham maupun masyarakat sekitar secara keseluruhan (World Bank)
Luki karunia et al, 2021, p 13

Prinsip-prinsip yang mendasari suatu proses dan mekanisme pengelolaan perusahaan

dengan berlandaskan peraturan perundang-undangan dan etika berusaha
(PerMenBUMN : PER-01/MBU/2011 Penerapan Tata Kelola Perusahaan yang baik (GCG)
Luki karunia et al, 2021, p 13

Tata Kelola Perusahaan Yang Baik Bagi Perusahaan Perasuransian, yang selanjutnya
disebut Tata Kelola Perusahaan Yang Baik, adalah struktur dan proses yang digunakan
dan diterapkan organ Perusahaan Perasuransian untuk meningkatkan pencapaian
sasaran hasil usaha dan mengoptimalkan nilai perusahaan bagi seluruh pemangku
kepentingan khususnya pemegang polis, tertanggung, peserta, dan/atau pihak yang
berhak memperoleh manfaat, secara akuntabel dan berlandaskan peraturan perundang-
undangan serta nilai-nilai etika. PERATURAN OTORITAS JASA KEUANGAN No 2/POJK.05/2014
TENTANG TATA KELOLA PERUSAHAAN YANG BAIK BAGI PERUSAHAAN PERASURANSIAN

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 GOVERNANCE PROBLEMS

Poor Corporate Governance and problems within reporting systems

Weaknesses:
1. Lack of a well-developed and implemented policy of corp. Governance
2. Lack of honesty and trasparency in reporting
3. An inef cient and Ineffective Systems of Internal Control
(Madan Lal Bhasin, 2017)
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 Intro
INTRO FRAUD FA & CHALLENGES STRATEGY CONCLUSION

Republika.co.id, 24 Juli 2021

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 Intro

10
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 Intro
INTRO FRAUD F A & CHALLENGES STRATEGY CONCLUSION

MORE THAN Reputation, nancial position

Stock market capitalisation
FINANCIAL LOSS Damage investor con dence
Litigation
Bankruptcy — unemployment
Other stakeholders

Costly
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 12
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 Fraud Fraud Global 2022

INTRODUCTION FRAUD FA & CHALLENGES STRATEGY CONCLUSION

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Fraud Global 2022
INTRODUCTION FRAUD FRAUDELENT ST STRATEGY CONCLUSION

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Fraud Global 2022
INTRODUCTION FRAUD FRAUDELENT ST STRATEGY CONCLUSION

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Fraud Global 2022
INTRODUCTION FRAUD FRAUDELENT ST STRATEGY CONCLUSION

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Fraud Global 2022
INTRODUCTION FRAUD FA & CHALLENGES STRATEGY CONCLUSION

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Fraud Global 2022
INTRODUCTION FRAUD FRAUDELENT STRATEGY CONCLUSION

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Fraud Indonesia
INTRODUCTION FRAUD FA &CHALLENGES STRATEGY CONCLUSION

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 Global Fraud

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 Cooking the books

What is 'Cook the Books'?

Cook the books is a slang term for using

accounting tricks to make a company's nancial
results look better than they really are.

Typically, cooking the books involves manipulating

nancial data to in ate the company's earnings and

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de ate its expenses in order to pump up its bottom
line. (Investopedia)

Window dressing
Lipstic accounting,
Income smoothing,
Creative accounting,

high temperature

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 Company Year How US $
(player)
Keep huge debt off
Enron (CEO) 2001 the Balance Sheets 74 bn
Lehman Brothers Loans disguised of
(executives) 2008 sales 50 bn

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Worldcom (CEO) 2002 In

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 Fraud is the knowing misrepresentation of the
truth or concealment of a material fact to induce
another to act to his or her detriment (Black Law
Dictionary)

Occupational Fraud and abuse : the use of

one’s occupation for personal enrichment
through the deliberate misuse or misapplication
of the employing organization’s resources or
assets [ACFE]

Fraud is all about stealing, cheating, lying, and

lack of integrity (Martin T Biegelman and Joel T
FRAUD Bartow, 2006)

nancial condition of an enterprise accomplished through

the intentional misstatement or omission of amounts or
disclosures in the nancial statements to deceive nancial
statement users [ACFE]
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 Fraud
Corruption

Asset Misapropriation: Cash,

Inventory and others Fraudelent
statements
Assets
missappropriation
ti o n : C o n fl ic t o f in t., Bribery,
Corrup
tu it ie s , E c o n o m ic Extortion
Illegal Gra

Fraudulent Statements : Financial

(asset and revenue) and non
financial (employee credentials)

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 Fraud

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 Why do people commit
Fraud ?
29

Fraud Triangle Theory

Ra
nit
justi cation
Weak Internal Control

tio
rtu

na
po

liz
Op

a
tio
n
Motivation

Greed or need

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 Why do people commit
Fraud ?
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Co
Ra nce mp
g a ete
e

tio
ro
iv

na
A r nc
nt

e
ce

liz
In

a
tio

o n
Crowe’s Fraud
n

ity
za t i
Pentagon

tun
li
Op

a
y

por
lit

n
po

bi

io
pa

Op
r

t
tu

a
Ca
ni

R
ty

Pressure

Diamond and Pentagon

Diamond Theory Theory

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 Why do people commit
Fraud ?
Never underestimate the impact of
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a single rotten apple

“The rotten apple spoils his

Low-hanging fruit companion.”
Potato Chip
Tip of Iceberg Benjamin Franklin

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 Why do people commit
Fraud ? Power tends to corrupt,
and absolute power
corrupts absolutly
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(Lord Acton)

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 Forensic
Accounting

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What, Why and the Role

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 De nisi (1-2)
Forensic accounting [FA] is the action of
identifying, recording, settling, extracting,
sorting, reporting, and verifying past nancial
data or other accounting activities for settling
current or prospective legal disputes or using
such past nancial data for projecting future
nancial data to settle legal disputes.
(Crumbley et al, 2015)

FA is the use of professional accounting skills

in matters involving potential or accrual civil
or criminal litigation. (ACFE, 3.1104)
FA is actually litigation support involving
accounting
Fraud Examinations can be considered
forensic accounting, but not all FA is fraud
examination

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 De nisi (2-2)

Akuntansi Forensik pada dasarnya adalah Akuntansi Forensik adalah penerapan

perpaduan antara bidang akuntansi dan
hukum (BPKP)
disiplin akuntansi dalam arti luas
termasuk auditing pada masalah hukum
untuk penyelesaian hukum di dalam atau
di luar pengadilan (Tuanakota, p. 4,
2018)

Akuntansi

Hukum Auditing

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 Role (1-2)

36

FORENSIC ACCOUNTING
ROLE

LITIGATION NON LITIGATION

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 Role (2-2)

Investigasi, analisis, penghitungan dan mediasi

Investigasi kriminal, kecurangan bisnis, Analisis penyelesaian
perselisihan: pem. Saham dan management, sengketa atas aset
perush, contract disputes etc, Insurance claim, Mediasi dan
arbitrase
Dhar & Shakar, 2010

Pemberian Keterangan Ahli

Keterangan ahli merupakan salah satu alat bukti yg sah (KUHAP,
184 (1)

Audit Investigatif
Suatu upaya pembuktian atas suatu kesalahan sesuai
dg hukum yang berlaku
Diarahkan pada ada tidaknya fraud atau perbuatan
melawan hukum.
Setiap audit investigasi dimulai dg maksud dan tujuan
bahwa kasus ini berakhir dengan litigasi BPKP

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 Forensic
Accounting

38

Broad areas of useful expertise Contribution :

Knowledge of Financial Statements Fraud investigation

Understanding Fraud Schemes Preventing Fraud

Comprehend Internal Control Systems Vigilant oversight

IT Knowledge Creating positive work environment

Psychology Establishing effective lines of

communication
Interpersonal & communication skills Corporate governance
Governance policies, laws, legal
system, and court procedures

Bahsin 2017

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 FA in the News

Kuliah Tamu
Kuliah Tamu

Tanggal
Tanggal 18
18Okt
Okt2022
2022
Waktu 09:00 -12:00
Waktu 09:00 -12:00

Fakultas
fakultasEkonomi dan
Ekonomi
Bisnis
dan Bisnis
Universitas Trunojoyo
Univ Trunojoyo

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 Internal Control of
Financial Reporting

E ective ICFR provides reasonable (not absolute) assurance that

corporate records are not intentionally or unintentionally misstated.

ICOFR ICFR is one element of the broader concept of internal control de ned
by COSO: control environment, risk assessment, control activities,
information and communication, monitoring activities

The companys culture re ects the importance of integrity and ethical

values and a commitment to reliable nancial reporting.

management should consider any relevant controls at a service

organization that may impact company's ICFR.

Control activities are the speci c actions established through policies

and procedures designed to mitigate nancial reporting risk.

Adequate internal controls are the rst line of defense in detecting and preventing material errors or fraud in nancial reporting.
When internal control de ciencies are left unaddressed, nancial reporting quality can suffer. (SEC Chief Accountant Wesley Bricker)
Understanding ICOFR - June 2019 - www.bdo.com

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 IC limitation

Cannot change poor manager into a good one

Poorly designed

Fail to operate as intended

Human Factors: laws in design, errors of judgement or

interpretation, misunderstanding, carelessness, fatigue,
distraction

Cost vs bene its

Resource constraints Holistic

Discipline
Management override
Monitor
Soft control
Collusion

INTOSAI: Guidelines for IC Standards for the Public Sector & other sources

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 Points of failure of IC

It’s only auditor’s Job

4
Failure to link risks and controls
Inadequate monitoring of controls
Ignoring reality - risk management
override is always present

NC State University, 2007

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 Governance Risk &

Compliance
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GRC adalah pendekatan terpadu dan

holistik terhadap organisasi untuk
memastikan suatu organisasi bertindak
secara etis dan sesuai dengan selera
risiko, keb akan internal, dan peraturan
eksternal melalui penyelerasan strategi,
proses, teknologi dan manusia, sehingga
meningkatkan e siensi dan efektivitas

Komponen dasar : (1) strategi, (2) proses,

(3) teknologi dan (4) manusia

©mahesa Panduan mencapai model keunggulan GRC, OJK, 2020

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 Governance Risk &
Compliance

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Governance Achieve objective

GRC Risk Address uncertainty

Compliance Act with integrity

is the integrated collection

G of capabilities that enable
an organisation to reliably
R achieve objectives,
C address uncertainty,
and

Act with integrity

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 Model Keunggulan GRC

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SUSTAINABLE EFFICIENCY AND Goals

COMP. ADVANTAGE AGILITY EFFECTIVENESS

Innovation Resources

Decision making

Panduan mencapai model keunggulan GRC, OJK, 2020

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 Strategy Principles of effective internal control

1) Demonstrates commitment to integrity and ethical

values

Control environment 2) Exercises oversight responsibility

3) Establishes structure, authority and responsibility

4) Demonstrates commitment to competence

5) Enforces accountability

6) Speci es suitable objectives

Risk Assessment 7) Identify analyzes risk

8) Assesses Fraud risk

9) Identy and analyzes signi cant change

Control Activities 10) Selects and develops control activities

11) Selects and develops general controls over technology

12) Deploys through policies and procedures

13) Uses relevant information

Information &
14)Communicates internally

Communication 15) Communicates externally

Monitoring Activities 16) Conducts ongoing and/or separate evaluation

17) Evaluates and communicates de ciences

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 COSO Framework components and Principles & Fraud
Strategy Risk Management Principles

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COSO
FRAMEWORK 2013

FIVE FRAUD
RISK
MANAGEME
NT

17 IC PRINCIPLES

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 COSO Framework components and Principles & Fraud
Strategy Risk Management Principles

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LES
CIP
RIN
CP
17 I
FR
AM C
E OS
W
O O
R
K
FR NAG
MA

20
T

AU EM

3 1
D R EN
FIVSK
I
E

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 Three Lines of Defense

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Anderson et al, Internal Auditing, 4 th, IIA, 2017
 Governance , Risk and
Forensic Accounting
Control

Objective FA and its impact on Corporate Governance

Corporate Governance and

Management Accountability
statury audit function

Financial reporting systems Detecting nancial fraud

Strengthening auditor Additional assurance for

independence audit commitee

Greater responsibility for ext. Better tool for audit commitee

Auditor esp for detecting re v i e w i n g t h e q u a l i t y o f
fraud external auditor

Eyisi et al, 2014

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 Governance , Risk and
Forensic Accounting
Control

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๏ Direct impact on over sustainable corporate governance (SCG)

๏ FA can become the part of governance management toward the elimination of
fraud and achievement of SCG
๏ FA can be regarded as the cornerstone of SCG
(Rehman, Ali et al, 2020)

๏ Forensic Accountants can contribute with the development of an adequate

regulatory framework that would be applicable in nancial reporting, which
would affect the objective an fair presentation of accounting information and
play important role in attracting capital, which would contribute to the more
ef cient functioning of the entire systems states.
(Perduv, Vedrana Vukovic et al, 2018)

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 Strategy

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S trategic Solution
4. 0

CONNECTIVITY
COORDINATION

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COLLABORATION
GOVERNANCE : DIGITAL SENSE
Bridging the Silos BALANCE
SYNERGi

©mahesa Maliki, IPSC, 2019

 Conclusion
INTRODUCTION FRAUD FRAUDELENT ST STRATEGY CONCLUSION

BEYOND THE COMPLIANCE

Financial scandal due to Internal control fail to work

Zero tolerance to fraud

Holistic & integrated approach

Bridging the Silos - GRC

FA special skill and knowledge to enhance GRC through

detecting and preventing fraudulent activities

Integrated FA and GRC

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 IF U DONT
Conclusion
ATTACK THE
RISK, THE RISK
WILL ATACK U Sustainable
competitive.
Advantage

Emerging and Service quality Pre/

cultural Productivity Pandemic/
Risks Sustainability Post & Crisis

Leadership, Strategic & Trusted

★ Governance, Risk,
Compliance ★ Forensic acounting

Corporate culture
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 With a single or minor

Inconsitency
A Forensic
Accountant
Can solve
a Fraudelent Mistery
(Larry Crumbley)

Terimakasih
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