Forensic Accounting Paper

Forensic accounting has become a hot topic in Indonesia in recent years. The
beginning was in October 1997, Indonesia has explored the possibility of borrowing
funds from the IMF and World Bank to deal with the increasingly severe financial crisis. As
a prerequisite for providing assistance, the IMF and World Bank require the Agreed Upon
Due Diligence (ADDP) process carried out by foreign accountants assisted by several
Indonesian accountants. The ADDP's findings are very surprising because from the
sample of the Big Banks in Indonesia, our banks carry out overstatement of assets of
28% -75% and understatement of liabilities of 3% -33%. This finding immediately caused
market and government panic which led to the liquidation of 16 private banks.
The liquidation was later remembered as a bad step because it caused a massive
withdrawal of savings (deposits) and deposits in private banks due to the collapse of
public trust in banking books. ADPP is nothing but the application of forensic accounting
or investigative audits.
The term forensic accounting is again sticking out after the success of Pricewaterhouse
Coopers (PwC), a world accounting firm (The Big Four) in dismantling the Bank Bali
case. in 1999. PwC with software in particular was able to show a complex flow of funds
like a sunburst diagram of light. Then PwC summarizes it into the flow of funds
from certain people . 5 The method used in the audit is to follow the money or follow the
flow of money resulting from Bank Bali corruption and in depth interviews which then lead
to officials and entrepreneurs involved in this case.
In 2009, the case of PT Bank Century, Tbk found clarity from the Audit Examination
Report of the Century Bank by the Supreme Audit Agency (BPK ), the results of the
performance of the agency's forensic accountants and investigative audits.

a. Definition of Forensic Accounting

Forensic Accounting is a special practice in the field of accounting that describes

the involvement that results from actual or anticipated disputes or litigation and includes
auditing legal matters for legal settlement both inside and outside the court or personal. Or
it can be said also forensic accounting is a combination of law and accounting which can
be used to solve problems such as the distribution of rights gono gini (inheritance), land
disputes, and can also be used to reveal murder cases.

b. Forensic Accounting according to experts

1. According to D. Larry Crumbley, the editor-in-chief of the Journal of Forensic

Accounting (JFA), said simply, forensic accounting is accurate (suitable)
accounting for legal purposes. That is, accounting can survive in the arena of
feud during the court process, or in the judicial or administrative review process
".

2. According to Merriam Webster's Collegiate Dictionary (10th edition) it can

be interpreted " with regard to preservation" or "with regard to the application of
scientific knowledge to legal matters". Therefore, forensic accounting can be
interpreted as the use of accounting science for legal purposes.

3. Hopwood, Leiner, & Young (2008), states that Forensic Accountants are
Accountants who carry out evaluation and investigation activities, from which
results can be used in a court of law.

c. Task Forensic Accounting

The forensic accountant is in charge of providing legal opinions in
litigation. Besides that, there is also the role of forensic accountants in the field of law
outside the court (non-itigation) for example in helping formulate alternative settlement
cases in disputes, formulation of compensation calculations and efforts to calculate
the impact of termination / breach of contract.

Forensic Accounting is divided into 2 parts, including :

1. Investative services, namely directing fraud examiners or fraud auditors, which

they master the knowledge of accounting to detect, prevent, and control fraud,
and misinterpretation.
 2. Litigation services, which represent the testimony of a fraud examiner and
forensic accounting services offered to solve valuation issues, as experienced
in divorce cases.

d. Skills for Forensic Accountants

1. Auditing skills.

2. Investigative skills.

3. Criminology.

4. Accounting knowledge.

5. Legal knowledge.

6. Information technology (IT) skills.

7. Communication skills.

e. Development of Forensic Accounting in Indonesia

Forensic accounting began to be used in Indonesia after the financial crisis
in 1997, until now the forensic accounting approach is widely used by the Supreme
Audit Agency, the Corruption Eradication Commission, the Financial Transaction
Reports and Analysis Center, the Financial and Development Supervisory Agency,
the World Bank, and the Office Public Accountant office in Indonesia
The development of forensic accounting in Indonesia is quite advanced, but
when compared with several other countries, Indonesia is still lagging
behind. Australia is currently developing a Forensic Accounting Standard, while
Canada and the United States already have standardized standards, while
Indonesia does not yet have adequate standards. So far not many corruption
cases have been revealed thanks to the ability of forensic accountants, but forensic
accounting is a development of accounting disciplines that are still relatively young
and have very good prospects in solving corruption in Indonesia.
In terms of enthusiasts, according to the General Chair of the Ahmadi
Association of Indonesian Accountants (IAI) (in an interview on March 5, 2013 for
 hukumonline.com), it is still rare for Indonesian accountants to study this one
field. Not all public accounting offices are in charge of forensics. Unfortunately, this
accountant professional association has not looked forensic as an important part
of accounting. He has not seen this as an urgent issue to be given special
attention. In fact, Ahmadi himself was not interested in taking this
specialization.The reason is, what if it is not a niche market that is still minimal. I
myself have no ability there. And now I have no desire to study this field. Not many
markets, he said frankly. Ahmadi daily practices at the KPMG Hadibroto Public
Accounting Office.
Actually the fields that are still in low demand among accountants themselves
can issue their own opportunities. At least that is what KAP PricewaterhouseCooper
Indonesia (PwC) is aiming for. We currently have 15 forensic accountants and 50
other accountants that we are currently providing various expertise, including
forensic accounting, said Director of PwC Widiana Winawati. Widiana also admitted
that there were not many accountants who looked at this unique profession. This is
because the specialization of forensic accounting in Indonesia is relatively new,
there are still many accountants who are not yet aware of this profession.

f. Forensic Accounting Expertise

James (2008) using 9 (nine) competency items forensic accounting skills used
in assessing differences in perceptions of accounting academics, accounting
practitioners, and users of forensic accountants, namely:
1. Deductive analysis: the ability to analyze the irregularities occurs in financial
statements, namely events that are not in accordance with reasonable
conditions.
2. Critical thinking : the ability to distinguish between opinions and facts
3. Unstructured problem solving: the ability to approach each situation (especially
an unusual situation) through an unstructured approach.
4. Flexibility of investigation: ability to conduct audits outside of applicable
provisions / procedures.
 5. Analytical skills: the ability to check what should be there is (which should
be available) not what already exists (already available).
6. Oral communication : the ability to communicate effectively verbally through
expert testimony and a general explanation of the basics of opinion.
7. Written communication: the ability to communicate effectively with writing
through reports, charts, pictures and schedules about the basics of opinion.
8. Knowledge of the law: the ability to understand processes h u kum basic and
legal issues, including the provision of evidence (rules of evidence).
9. Composure: the ability to maintain an attitude to remain calm even in situations
of stress.

According to Widiana Winawati, director of PwC, a forensic accountant must

have multitalenta.Seorang examiner fraud (fraud) can be thought of as a
combination of lawyers, accountants, criminologists, and the detective, he said. In
addition, a forensic accountant must have a number of basic traits. Among other
things, be careful, able to keep the secret of his work, creative, abstinence giving
up, having great curiosity, confidence, and the most important thing is being
honest. Compared to other accountants, a forensic accountant has the most
difficult task. Accountant internal are police, auditors are patrol officers, and
forensic accountants are detectives.
The main task of accountants in companies is to record and maintain the smooth
flow of finance his company. While auditors are more like patrol officers who carry
out inspections and checks routine over the area based on their previous
experience. Forensic accountants conduct inspections and more detailed and
thorough checking compared to the patrol officer.

g. The Future of Forensic Accounting

The increasingly complex business world, the increasing tendency to settle
business disputes in the courts, and the decreasing level of community integrity in
developed countries - this is indicated by the disclosure of a number of mega
scandals, such as the Ponzi Scheme case by Bernard Madoff in the United States
which cost customers around US $ 50 billion - making the profession as a forensic
accountant increasingly needed by all parties.
In Indonesia, cases of corruption are increasingly being revealed and
increasingly diverse types and there has not been seen a downward trend also in
fact prove now and in the future more expertise in the field of forensic accounting
is needed.
According to The US News and World Report (2002), forensic accounting
tops the list of careers with the brightest future. US News & World Report
identifies forensic accounting as one of "20 hot job tracks in the future."