Welli Multi Corporation Berhad PREPARE TO: DR. ZALEHA BTE OTHMAN   PREPARE BY: CHUA YI MEI 219663 LIM WAN YI 219871 TAN ZHI JIUN 219893 NUR SAKINAH BINTI MUSTAFA 221288

Principle Activity Formerly known as Fourseason (Malaysia) Berhad Investment holding company engaged in the provision of management services to various subsidiaries 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

The switching of external auditor and the service period Extension for issuing Financial Statements Changes in Boardroom The switching of external auditor and the service period Symptoms of Fraud Unusual Behavior Internal Control Weaknesses Accounting Anomalies 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) Unable to obtain sufficient appropriate evidence Overstated the revenue Abuse of capacity by the top management

Forensic Accountant Should Involved Roles Provide litigation support to courts Provide evidence in forms of written, oral & calculation Good communication & investigation mentality Understand psychology & skepticism Accurately identify, collect and present findings Able to identify substance over form Communicate & present in layman form Familiar with accounting, auditing, IT & legal concepts Unbiased opinion Give trial evidence Accurate evidence Study body language Skeptic against unusual behaviors, anomalies Questioning skills “Think like a crook to catch a crook”

E The Crooked

Who is Brian Cruver ? 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.

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 "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.

Pressure from management SYMPTOMS OF FRAUD Tips/ Complaints Unusual Behavior Accounting Anomalies No whistle blower Fear , threat Pressure from management A culture of gamesmanship Try to show good performance Executives behavior Stock manipulation

accounting firm is both auditing and consulting for a client. OTHER FACTORS No segregation 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

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