Question

Attempt ALL Questions. Most developed countries are characterized by a broad base for direct and indirect taxes with tax lability covering the vast majority of citizens and firms. Developing countries in contrast are confronted with social, political and administrative difficulties in establishing a sound public finance system. As a consequence developing and emerging countries are particularly vulnerable to tax fraud and avoidance activities of individual tax payee and corporations. Discuss. (25 marks) A forensic investigation is a very specialised and detailed type of engagement, which requires highly skilled team members who have experience not only of accounting and auditing techniques but also of the relevant legal framework. There are numerous different types of fraud that a forensic accountant could be asked to investigate. Discuss this statement with relation to the Iceberg theory of Fraud. (25 marks) Q3. Knowledge of the rules of court, the legal system and especially evidence are necessary for effective completion of a fraud investigation by a forensic accountant or fraud auditor. The forensic accountant in particular is normally involved with the final phase of a fraud investigation prosecution. Discuss the judicial system regarding evidence. (25 marks) Q4. Before there were computers, there was no computer crime, but there was crime both the white and blue collar varieties. There were also crimes against people and crimes against property. The computer did not usher in a new wave of crime. It mainly changed the form of older crimes. Discuss. (25 marks)

Answer 1

Since, multiple questions have been posted, I have answered the first one.

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Q1.

Tax fraud and avoidance is prevalent in both developing and developed countries. However, the functioning of public authorities like tax and revenue department may be more systematic in developed countries as compared to developing countries. It is because of availability of appropriate infrastructure, technology and related systems needed to carry out tax collection activities and making tax payers aware of the tax regulations and consequences of non-compliance. Systematic and well defined processes can help in identifying tax avoidance practices and fraudulent conduct of taxpayers.

In developing countries, the level of corruption (in government departments) may be comparatively high, thereby, affecting the efficiency of tax collection processes and practices. Political influence and interference may also affect the functioning of public departments. Additionally, lack of proper systems and infrastructure may affect the administration of these departments. Because of improper supervision and monitoring mechanisms, people (taxpayers) may find it easy to engage in unethical practices (such as tax avoidance). Failure to inform taxpayers on the consequence of non-compliance and penalties applicable in case of default may also result in an increase in the fraudulent activities. Employees working in tax and revenue department may also be more inclined to accept direct benefits from taxpayers rather than enforcing tax regulations and ensuring compliance with various tax guidelines.

Therefore, while developing countries may experience more problems with respect to systems and processes, developed countries cannot be said to be completely immune from fraudulent and tax avoidance practices. Some level of unethical conduct will continue to exist even in developed countries irrespective of how robust the public finance system has been established (in such countries).