Welli Multi Corporation Berhad

PREPARE TO:DR. ZALEHA BTE OTHMAN

 PREPARE BY:CHUA YI MEI 219663LIM WAN YI 219871TAN ZHI JIUN 219893NUR SAKINAH BINTI MUSTAFA 221288

Principle Activity

Formerly known as Fourseason (Malaysia) BerhadInvestment holding company engaged in the

provision of management services to varioussubsidiaries involved in the production and distribution of a wide range of products.

The Fraud Perpetrators

Managing Director Executive Director

Deemed to have committed the offences under Section 122B (a) (bb) read together with Section 122(1) of the Securities Industry Act 1983

Symptoms of

Fraud

Unusual Behavior

Internal Control

Weaknesses

Accounting

Anomalies

Extension for issuing Financial StatementsChanges in Boardroom The switching of external auditor and the service period

Unable to obtain sufficient appropriate evidenceOverstated the revenue Abuse of capacity by

the top management

Changes in the Board including: CEO Audit committee Company secretary Sudden resignation of the CEO Mr. Tan Chin Han Dr. Abdul Rashid Tang Abdullah Account receivable: RM4, 973,707

Inventory: RM19, 940,243(no physical observation)

Forensic Accountant Should Involved

• Give trial evidence

• Accurate evidence

• Familiar with accounting, auditing, IT & legal concepts

• Unbiased opinion

• Study body language

• Skeptic against unusual behaviors, anomalies

• Questioning skills

• “Think like a crook to catch a crook”

• Able to identify substance over form

• Communicate & present in layman form

Roles

Provide litigation support to courts

Provide evidence in

forms of written, oral

& calculation

Good communicati

on & investigation

mentality

Understand psychology

& skepticism

Accurately identify,

collect and present findings

The Crooked E

An ex-employee at Enron, he was been hired

by Enron 9 months before it was collapsed. Author of the book “Anatomy Of Greed :

Unshredded Truth from an Enron Insider” The story shows us how a typical Enron

employee viewed the company’s dramatic collapse.

Who is Brian Cruver ?

Red Flags / Symptoms of Fraud

Tips and Complaint

• Bickers , analyst in New York Wall Street• Tried to get Brian to pay attention to Enron’s

Financial situation since Brian worked in Enron, especially on the limited partnership and related party transaction

• But Brian ignored his advices.

• Sharon Watkins, Enron vice president of corporate development.

• Alerted Enron CEO Kenneth Lay of irregularities of accounting practices such as booking income based on own developed stock, related parties transactions and others

• However, she was not reporting the fraud to related authorities.

Extravagant lifestyle

• Cruver, bought new car, expensive wedding plan, branded watch and television

• Changed in personalities, he become obsessed. • Aggressive compensation driven culture, contributed to dysfunctional

corporate culture, obsessed with short-term earning to maximize bonus.

Analytical anomalies

• Risk and Assessment Control(RAC) responsible for approving deals and managing Enron’s overall risk

• RAC’s independence assessment of deal’s value not match with the real value of the deal.

• Business unit not come up with real value, they inflated real deal value to meet their target bonus.

• The manager in bankruptcy department changed Cruver valuation on deal, no action taken against him.

• Peer Review Committee (PRC) created unethical culture in Enron.

Accounting anomalies

• Highly profitable company, report increased in revenue every quarter. • Stock price keep rising• How can Enron keep increasing in their profit if compared to other

companies in same industries.• Using aggressive accounting practice?

• Former CEO Jeffrey Skilling refuse to explain unusual accounting practice in Enron

• Unable to produce the balance sheet with the earning statement

• Something hidden behind it?

Unusual Behavior

• Sudden resignation of CEO Jeffrey Skilling with inappropriate reason

• Holding CEO position for 6 months, worked in Enron since year 1990

• Unable to believe that someone who was working so long to head up this company left after so short a tenure.

• Mr.Blue, worked in Enron since 80s, being transferred to another project on the other side of the world.

• Broke Enron culture, no bad news . • He involved in a report to the management

showing the pipeline problem a year before the explosion.

The roles of Arthur Anderson • Use as a symbol to show Enron follow the

code of ethic, even they owned huge amount of virtual assets

• Using the name of Arthur Anderson , to prove their integrity

• There are confusing their employee and also the public.

• In reality, there are reckless and negligence• Being place in special room, playing golf,

games, reading newspaper, they do nothing.• After announcement of resignation of Jeffrey

Skilling , Arthur Anderson audit team still sitting and playing games, no investigation carry out, they seems to be very relaxed.

• Integrity? Independence?

"Bigger Than Enron" examines three specific cases in

which Andersen auditors allowed misleading or fraudulent accounting practices to cause enormous investor losses at Sunbeam, Waste Management, and finally Enron.

Specifically, what failure was bigger than Enron? Answer????

Their auditors. !!!!!Soon after the fall of Enron was the collapse of accounting firm Arthur Andersen. The 89-year-old accounting firm was once known as the gold standard of integrity in auditing.

BIGGER THAN ENRON

SYMPTOMS OF

FRAUD

Tips/Complai

nts

Unusual Behavio

r

Accounting

Anomalies

No whistle blowerFear , threat Pressure from

management

Executives behavior Stock manipulation

A culture of gamesmanship

Try to show good performance

OTHER FACTORS

No segregati

on of duty

Revolving Door

Congressional

Intervention That

Blocked Efforts At Protecting Investors

accounting firm is both auditing and consulting for a client.

tendency for auditors take jobs with companies they audit

Congress weakened the protections and tied the hands of regulators, making it easier for aggressive companies like Enron to push the envelope

Thank You