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1

FINANCIAL RATIOS FOR DETECTION OF COMPANY’S INSOLVENCY AND BANKRUPTCY FRAUD: SIMILARITIES AND DIFFERENCES

100%

Liodorova J. , Voronova I.

Sociālo Zinātņu Vēstnesis

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2020

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nr 1

7-29

EN

This research is aimed to identify the similarities and differences of financial ratios used in the international methods for detecting insolvency (bankruptcy) and bankruptcy fraud. This is the first step in the process of developing a Latvia model of bankruptcy fraud detection. The methods of research: literature review, analysis and synthesis, comparative and correlation analysis. The selection of the analysed financial ratios is based on data from 28 bankruptcy forecasting models tested in Latvia and Lithuania, developed on the basis of multiple discriminant and regression analysis. In addition, the ratios of 3 analogical models for detecting fraud are also analysed. 58 indicators for bankruptcy forecasting were included in the study, selecting 19 indicators, which are also used to reveal fraud in financial statements (FFS) and to detect bankruptcy fraud in experts’ and auditors’ practice. The forensic methods to detect bankruptcy fraud, the international guidelines to reveal FFS, legislative acts and scientific research in this area are reviewed with the purpose to identify and analyse the similarities and differences in detecting insolvency (bankruptcy) and bankruptcy fraud. This type of complex analysis has not been presented in the Baltic countries yet. The article presents the testing results of fraud’s revealing score models (M-score, F-score) using a sample of data obtained manually from financial statements of 114 small and medium companies in Latvia. It has been concluded that it is necessary to implement the system of financial ratios and assess the possibility to use fraud’s revealing models in accounting examination. The authors stated the impossibility of using the M-score and F-score models without calibration for Latvia companies. The logistic regression model for revealing fraud (Lithuania) one year before the fact of bankruptcy forecasts the possibility of the bankruptcy fraud with an accuracy of 61.5%. The results of the study can be used both to create a model for detecting bankruptcy fraud and to develop an accounting expertise procedure to reveal fraud.

2

INTEGRAL SYSTEM OF FRAUDULENT BANKRUPTCY EVALUATION

100%

Liodorova J. , Voronova I.

Sociālo Zinātņu Vēstnesis

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2018

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nr 2

42-60

EN

The research aims at clarifying the opinion of experts to identify factors indicating possible intentional nature of bankruptcy and its assessment. In the article, the authors analysed such concepts as fraudulent bankruptcy, criminal bankruptcy, etc., distinguish division of bankruptcy and defined its distinctive characteristics. On the basis of literature review and expert estimation, the authors searched indicators of fraudulent bankruptcy. The study is based on opinions of the experts related to fraudulent bankruptcy (insolvency administrators, investigators, academics of accountancy and forensic accountants), using the analytic hierarchy process (AHP method). Experts identified the 10 most popular indicators related to fraud bankruptcy cases and evaluated them. The authors tested the possibility of the appearance of these indicators in non-criminal insolvency cases in various conditions of three internal characteristics of the company (quality of management, organisation of accounting and internal control of the company) using the simulation approach. The results of the empirical research can be applied to the construction of models for fraudulent bankruptcy evaluation. The authors summarized also the terminology of fraudulent bankruptcy in different countries’ law and identified a common concept – deliberate illegal activity or fraud. At least three forms of fraudulent bankruptcy were identified: fictitious, intentional and hidden. The authors proposed also their own definition – fraudulent bankruptcy is a white-collar crime, which contains any type of offences and detrimental transactions, which result in company’s bankruptcy.

3

MONEY LAUNDERING INVESTIGATION: THE CASE OF LATVIA

80%

Gise-Sproģe I. , Liodorova J. , Murniece K. , Voronova I.

Sociālo Zinātņu Vēstnesis

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2020

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nr 2

137-155

EN

The problem of money laundering has received increased attention in recent years. Currently, other standards, which have been developed in accordance with the latest technologies, are applied in the investigation of money laundering cases. The leading countries studying money laundering are the United States, Switzerland, Australia, China, the United Kingdom, and the Netherlands. The topicality of the research is based on the lack of scientific theoretical foundations in the field of anti-money laundering and the application of methods and techniques for investigating money laundering in practice. The article provides the definition and stages of money laundering and explains the stand-alone (autonomous) money laundering. Particular attention is paid to the money laundering typologies for the investigation of stand alone money laundering, including the methodological recommendations developed by the Financial Intelligence Unit of Latvia in 2020 which are adapted to national circumstances. The authors describe a number of important events in Latvia in the fight against money laundering in the country that influenced further developments in this area: changes in legislation and in the investigative approach, and professional and scientific interest in this topic. The article examines the economic and social aspects of money laundering, which have so far not received sufficient attention in informing the public about the negative impact of money laundering. The novelty of the research is presented as an extension of the scientific theoretical basis for more effective money laundering investigation and examining a new approach to money laundering investigation based on typologies. The authors, using the results of an empirical study of typologies developed by the Financial Intelligence Unit, present the results of their application based on six criminal proceedings on money laundering. The results of the pilot project show that the set of features of the developed typologies mainly corresponds to the specific typology identified by the investigators themselves. The study shows the possibility of applying typologies in practice, which is especially valuable in cases of autonomous money laundering, where there is no direct evidence of a predicate offense. The research methods include bibliometric research, historical analogy method, conceptual analysis, comparative analysis and synthesis method, and graphical method.