Forensic Accounting: Wolf Transport - Essay Example

Forensic Accounting - Investigation Analysis: Wolf Transport 0 Administrator and Liquidator – Forensic Accountant Forensic Accounting also known as investigative accounting is integrated with principles and concepts of accounting and techniques to legal problems. Administrator and Liquidator are two different professionals dealing with insolvent companies. However there are differences between these persons appointed in the company which is mentioned below. An administrator is a person appointed by the court stating the company is under administration. An administrator is either a registered liquidator or an official liquidator whereas an official liquidator only may be appointed as the liquidator through proper order from board of directors, bank or court. The purpose of administrator is to advise the creditors on viable solutions like ending the administration and returning the companies control to board of directors, converting the administration into a creditors voluntary liquidation or have the company enter into Deed of Company Arrangement (“DOCA”) under Sec. 439C whereas the purpose of appointing the liquidator is wind up the affairs of the company by gathering its assets and distributing it to creditors and others whom the companies owe in any form resulting in deregistration of the company. (Marshall, 2006)1 Administrator is conferred with powers to exercise which were earlier exercised by the previous officers of the corporation whereas the liquidator is appointed through court with legal powers to officially or voluntarily winding up the company. (Tomasic,2 et.al. 2002,pp 743 & Marshal,3 2006) In regard to relation with forensic accountant, the administrator will be the in charge of the company and will required the forensic accountant to provide his expert opinion by determining the economic damages incurred till now whereas the liquidator will be performing the obligation of liquidation on the report of forensic accountant. Thus liquidator and administrator are concerned with operation, administration of the company and in the end to successfully liquidate the assets of the company to pay off the debts. 2.0 Investigation Plan Forensic accounting investigators is determined by the scope of work while find answers to the involvement, coconspirators, impact on financial statement, cause for deed, and ways to overcome the situation. The investigators should bear in mind that they are only to detect the fraud and put the facts on paper and submit the same to the in-charge officer. (Golden et.al. 2006, pp. 524)4 In order the investigate the company details regarding whether any fraudulent activity is performed and resulted in bankruptcy, a detailed and scientific plan is prepared for the purpose of investigation. Wolf Transport has history of around 26 years and therefore it is necessary to record each and every statement of the founders first and then the next generations thereon. It is understood that Reg Wolf is the CEO of WolfTrans with Reg and Meg operating the Sydney business while their two sons Les Wolf and Peter Wolf operate Canberra and Melbourne depots. As every depot is equipped with operation manuals for the staff as well as the managing personnel, it is unrealistic that there would be any misappropriation in regard to functioning of jobs by the staff and executives. But however, it is revealed during the initiate phase that Peter and Marjory who operate the Melbourne Depot manage and operate the business in their own fashion and according to their convenience. Based on this hypothesis, it has become necessary to investigate the facts of the case from the scratch then narrow it down to the Melbourne Depot for critical examination of the business operations. Thus an investigation plan is prepared to collect, collate and for further critical assessments which is presented below. Gathering the information on contact details of personnel (Wolf Family) engaged in operating the business at different depots like local office contacts, email address, phone number, cell number, etc. Obtaining a basic overview of the person’s duties and responsibilities, from how long they have been associated with WolfTrans, their changing positions from time to time. Checking and verifying the methods of recording and processing of financial information of the WolfTrans including Canberra and Melbourne, in the past and present. 2.1 Sydney Depot Checking the depots operation manual which covers the duties of all staff and the procedures of their duties. Inspect the lease papers of the depot which has been given to transport business on commercial rental, and to check its financial statements. Enquiring Reg and Meg for not using the vacant land for the purpose of business as 25% of 10 acre land is used for business and the remaining is wasted. Collecting the documents related assets like underground diesel and petrol tank, diesel pumps with card readers, office buildings, loading dock, vehicles, etc. Gather information on the number of employees working for Sydney Depot and is there any operations manual which lays certain responsibilities for the staff. And finally inspecting the past records and transactions pertaining to contracts, payment, receipts, sales and purchases along with bank statements, reconciliations, debtors and credit payment history. 2.2 Canberra Depot Critical investigation and examining the papers of sale deed, agreement, etc. for the depot as it was readymade depot which was built by another transport operator. Evaluate and assess the information regarding the fuel consumptions by the depot vehicles and by the staff vehicles. Collecting the documents related assets like underground diesel and petrol tank, diesel pumps with card readers, office buildings, loading dock, vehicles, etc. Collecting relevant information regarding trucks operated by the depot and how many vehicles are leased to other operators. Gather information on the number of employees working for Canberra Depot and is there any operations manual which lays certain responsibilities for the staff. And finally inspecting the past records and transactions pertaining to contracts, payment, receipts, sales and purchases along with bank statements, reconciliations, debtors and credit payment history. 2.3 Melbourne Depot Gathering information on acquisition of the depot space, inspected the related papers, agreements, and payments. Does the petrol pump facilitate commercial petrol retailing? Collecting the documents related assets like underground diesel and petrol tank, diesel pumps with card readers, office buildings, loading dock, vehicles, etc. Gather information on the number of employees working for Canberra Depot and is there any operations manual which lays certain responsibilities for the staff. And finally inspecting the past records and transactions pertaining to contracts, payment, receipts, sales and purchases along with bank statements, reconciliations, debtors and credit payment history. In what way the financial transactions take place. Do they take permission from the Sydney Depot, do they submit their annual financial accounting report to the Sydney depot. Have they taken any loan from the banks or in any other form? Is the depot in any type of debt, mortgage or does it owes to anyone? 3.0 Admission Plan – Seeking an Interview The most difficult phase of investigation is conducting interview as it requires the interviewer to sort out too much in little time. During real time interviews, it is necessary to retrieve real information which could be done only by uncovering relevant facts. (Wells, 2003)5 Before seeking an admission to interview, the forensic accountant should have relevant information about the interviewee, little bit of his background, experience, and other facts and details regarding which the interview will be conducted. Ten rules of good interviews are prepare, think as you go, to observe nonverbal behavior, create proper impression by gaining persons cooperation, don’t break in between the interview, listen more talk less, straight forward approach, don’t speed up to complete the interview, double check the facts by reconfirming, and get the facts recorded signed by the interviewee.6 The following is the admission plan seeking interview of the persons related to WolfTrans Trust. All the persons related with the WolfTrans will be interviewed one at a time. Interviews will conducted under the conditions of privacy The purpose of interview is basically to know the reason for insolvency as informed by the WolfTrans bank. Some of the questions will be as follows Information Questions; Reg Wolf – What do you think about the operations of other two depots? Are they successfully operated? Meg Wolf – What about the financial transactions of other two depots? Debbie Madison – What do you think about Reg Wolf’s management and how do you relate the same with Les and Peter’s management? Les – How is your business running? How many trucks do you operate? Peter – What about your operations? Is it fine? Having any financial difficulties? Marjory – How do you manage both business and financial transactions? How do you deal with payments and purchases? To start with informational questions, other types of questions will be followed like open, closed which requires precise answer, leading questions to confirm the information already retrieved, double negative questions, and complex questions which requires more than one answer. After all the details are recorded, the report will be signed by the interviewee to ascertain its legality whenever necessary. (Wells, 2003)7 4.0 Investigation Report - WolfTrans 4.1 Synopsis – WolfTrans with operations at Sydney, Canberra and Melbourne is family run business involving sons of Reg and Meg Wolf, namely Les and Peter. The excerpts of the interview recorded, invoice search, data mining of the invoices and other relevant facts don’t show any fault with Sydney and Canberra operations. During the interview, most of the interviewee except Reg Wolf, assumed that Peter and Marjory may be at fault and cause for the insolvency which is supported by the invoices as well. 4.2 Index Interview Memoranda, Final Report, Exhibits, Visual aids 4.3 Memorandum of Interviews Wolf Family and their staff were interviewed at their office at Sydney, Canberra and Melbourne. After being advised of the identity and the purpose of the interview, the interviewee voluntarily provided the records pertaining to the investigation and their statements were recorded. The original records are initialed and dated for possible evidence. 4.4 Final Report WolfTrans is a family business run by Wolf Family. Reg and Meg Wolf have ran the business for over 25 years and expressed shock over the appointment of administrator by the bank and he is unaware of banks proceedings. Reg states that he doesn’t find any fault with his two sons, Les and Peter. And especially, Peter because according to Reg, he has managed the Melbourne depot extraordinarily and has developed himself in the local community. But Reg also makes a point that Peter however doesn’t like paper works. Meg Wolf, wife of Reg, during her interview, mentioned that both of them, Reg and Meg, were out of their depth in order to bid for steel contract eventually resulting in opening of two other depots managed by their two sons, Les and Peter. She accepts that she is unable to understand UNIX interpretation and cannot perform her financial obligations. Further, Meg states that she was little bit loose on Melbourne operations and even adds that Peter is largely influenced by big opportunities well supported by Marjory, whom she doesn’t like. Some shocking information were revealed during the interview of Debbie Maddison, working with Reg and Meg for past 10 years. She revealed certain documents, emails, and claims suspicion against the Melbourne depot. She revealed that fact once Marjory had asked her help to sort out some issues pertaining to reconciliation of bank statements but admits that most of the WolfTrans reconciliations are done in Sydney only. She smells fishy in regard to Melbourne depot and argues that how is it possible to send their children to expensive schools, learn keyboard and other instruments which are not cheaper either. Petra, administrator at the Canberra depot, during her interview session stated that Les is not good in business and rather would be an artist rather than in this business. She also states that he regularly quarrels with his brothers and sister but thinks Les is an honest guy and innocent too, as he misguided at times. She doesn’t make any choices as who may be reason for present situation. Brian Dickman, journey man, answered honestly but in short, providing nothing more than what is required, keeping himself on the safer side. But during the interview, he gave an impression that there are some people who he doesn’t like, coming in and out of the Melbourne Depot. Dianne Wolf, daughter of Reg and Meg Wolf, expresses her dissatisfaction over the business operations and doesn’t get on with any of the family members except meeting them on Christmas. However, even she doesn’t trust Peter Bruce Wolf, son of Reg and Meg Wolf, is little surprised by the fact that the liquidator is being appointed because he had told his dad, Reg Wolf, earlier to get a better accountant. He expresses dissatisfaction over the state of affairs of the business and blames his brother Peter and Marjory, for the situation. Exhibits Debbie Madison, during her interview had given information about Marjory Wolf emails which include letters from Marjory asking to release payments for the purchase of computers. Further critical examination revealed that such bills would be created every month under heads of computers, stationery, office costs, etc. There were additional invoices raised in favor of cleaning yard companies, some of which were innappropriate. During the course of interview and examinations of documents related to fuel consumption at each depot, it was further revealed that Melbourne Depot has the largest consumption of fuel. The reason for the excessive fuel consumption was assumed to be Peters association with football club. The association with local football club cost him dearly in terms of huge sponsorship payments, free fuel filling to the players of the club which is clearly evident from the letters by the President of Football Club addressed to Peter for the favor. Financial reports for the last three years from 2005 to 2008, present sorry state of affairs for the Melbourne depot. It was from the financial accounts that the cause of insolvency was retrieved. Financial reports reveal that Melbourne incurred losses under non contract category and its trading profit was lesser as compared to Sydney and Canberra huge amount was being spent on maintenance. A glance at the expenses column revealed the truth as there were huge expenses due to which Melbourne Depot suffered losses which is clearly depicted in the financial statement. All the records substantiating the above report along with emails, letters from Football Club President, invoices, fuel consumption report do not favor Peter Wolf and may be the cause for companys present situation. References 1. Golden W.T, Skalak. L.S and Clayton, M.M. 2006 A guide to forensic accounting investigation, John Wiley and Sons 2. Marshall R. 2006 Liquidation, Administration and Receivership – Legal Issues, Wentworthchambers, Available at http://wentworthchambers.com.au. [accessed 10 Oct, 2009) 3. Marshall, R 2006 Liquidation, Administration and Receivership – Legal Issues, Wentworthchambers, http://wentworthchambers.com.au 4. Ten Steps to a Top Notch Interview (2002) Joseph T. Wells (2003) There Is Art to Conducting Admission-Seeking Interviews, Journal of Accountancy. Vol. 196 Available at http://www.journalofaccountancy.com. [Accessed on 12 Oct 2009] 5. Tomasic R,  Bottomley S, and McQueen R, 2002, Corporations law in Australia, (2nd Ed), Federation Press, Australia, 6. Wells, T.J. (2003) Chapter 1: "Conducting Interviews. "Fraud Examination: Investigation Methods, Association of Fraud Examiners, Austin, Texas, Available at http://fvs.aicpa.org [Accessed on 12 Oct 2009] 7. Wells, T.J. (2003) There Is Art to Conducting Admission-Seeking Interviews, Journal of Accountancy. Vol. 196 Available at Questia Library, http://www.questia.com/ [Accessed on 11 Oct 2009] Read More