A meta-theoretical analysis of commercial crime prevention strategies in the BRICS countries Ruan Hieronymus Koch 21095728 Dissertation submitted in fulfilment of the requirements for the degree Magister Commercii in Forensic Accountancy at the Potchefstroom Campus of the North-West University Supervisor: Mr D Aslett Assistant Supervisor: Mr A van Zyl November 2013 CERTIFICATE D N R LEVEY (PROF.) FREELANCE LANGUAGE EDITOR AND CONSULTANT t/a Expert English Editors CC 2007/147556/23 [email protected] P O Box 14686, Hatfield, 0028, South Africa Tel. +27 (0)12-333-5053. Cell +27 (0)83-384-1324. Fax 086-511-6439 [South Africa only] _______________________________________________________________________________________ Member of South African Translators Institute. For bouquets or brickbats regarding quality of service please contact SATI at P O Box 1710, Rivonia, 2128. Tel. +27 (0)11 803-2681, [email protected], TO WHOM IT MAY CONCERN This is to certify that I have edited the following document for English style, language usage, logic and consistency; it is the responsibility of the author to accept or reject the suggested changes. Author: Mr Ruan Koch Item: MCom (NWU) Dissertation A meta-theoretical analysis of commercial crime prevention strategies in the BRICS countries Sincerely DAVID LEVEY 2013-11-15 SUMMARY Title: A meta-theoretical analysis of commercial crime preventions strategies in the BRICS countries. Keywords: BRICS; commercial crime; corporate governance; corruption; ethics; forensic accounting; fraud; fraud prevention. Prior research on combating commercial crime has focused predominantly on the responsibilities of auditors and ex post facto forensic investigations. This dissertation aims rather to delve into the meta-theoretical philosophy of commercial crime prevention and the role that forensic accountants can play in this regard, postulating that proactive prevention of commercial crimes is a more effective approach. The BRICS countries (Brazil, Russia, India, South Africa and China) were chosen for deeper level analysis, based on their strong growth potential coupled with high levels of commercial crime. While the majority of the research centred around commercial crime prevention strategies for the BRICS countries, a secondary objective was to expand the research field associated with forensic accounting, so as to encourage research into incorporating more preventative strategies. Subsequently, from the literature review and philosophical analysis performed, this dissertation establishes that developing prevention strategies for commercial crime is a philosophical and also a feasible possibility in the BRICS countries. LIST OF ABBREVIATIONS ACFE Association for Certified Fraud Examiners AFU Asset Forfeiture Unit AICPA American Institute of Certified Public Accountants AML Anti-Money Laundering ASBE Accounting Standards for Business Enterprises BRICS Brazil, Russia, India, China and South Africa FATF Financial Action Task Force FCPA Foreign Corrupt Practices Act IAASB International Auditing and Assurance Standards Board ICAI Institute of Chartered Accountants of India IFRS International Financial Reporting Standards IRBA Independent Regulatory Board for Auditors ISA International Standards of Auditing OECD Organisation for Economic Co-operation and Development SABRIC South African Banking Risk Intelligence Centre UNTOC United Nations Convention against Transnational Organized Crime WEF World Economic Forum TABLE OF CONTENTS 1. A META-THEORETICAL ANALYSIS OF COMMERCIAL CRIME PREVENTION STRATEGIES IN THE BRICS COUNTRIES ............................................................................... 1 1.1. Introduction ......................................................................................................................... 1 1.1.1. Background ................................................................................................................. 1 1.2. Motivation ............................................................................................................................. 8 1.3. Problem Statement .......................................................................................................... 10 1.4. Research Objectives ....................................................................................................... 10 1.5.1 Investigating the levels of commercial crimes in BRICS countries ........... 10 1.5.2 Critical analysis of current commercial crime prevention methods .......... 10 1.5.3 Commercial crime prevention as the new norm in BRICS countries ......... 10 1.5.4 Conclusion and recommendations. .................................................................... 11 1.5. Research Methodology ................................................................................................... 11 1.6. Chapter Division ............................................................................................................... 11 2. RESEARCH METHODOLOGY ............................................................................................... 13 2.1. Introduction ....................................................................................................................... 13 2.2. Current Accounting Framework ................................................................................... 14 2.3. Paradigm and Lexicon .................................................................................................... 15 2.4. The Three Worlds ............................................................................................................. 16 2.5. Meta-science ..................................................................................................................... 17 2.6. Transcendentalism .......................................................................................................... 17 2.7. Literature study ................................................................................................................ 19 2.8. Conclusion ......................................................................................................................... 20 3. COMMERCIAL CRIME IN BRICS COUNTRIES .................................................................. 22 3.1. Introduction ....................................................................................................................... 22 3.2. Brazil .................................................................................................................................... 24 3.2.1. Corruption .................................................................................................................. 25 3.2.2. Organised crime ....................................................................................................... 26 3.2.3. Fraud ........................................................................................................................... 27 3.2.4. Audit and reporting standards ............................................................................. 27 3.2.5. Governance ............................................................................................................... 28 3.3. Russia ................................................................................................................................. 28 3.3.1. Corruption .................................................................................................................. 29 3.3.2. Organized crime ....................................................................................................... 30 3.3.3. Fraud ........................................................................................................................... 31 3.3.4. Audit and reporting standards ............................................................................. 32 3.3.5. Governance ............................................................................................................... 32 3.4. India ..................................................................................................................................... 33 3.4.1. Corruption .................................................................................................................. 33 3.4.2. Organised crime ....................................................................................................... 34 3.4.3. Fraud ........................................................................................................................... 35 3.4.4. Audit and reporting standards ............................................................................. 35 3.4.5. Governance ............................................................................................................... 36 3.5. China ................................................................................................................................... 37 3.5.1. Corruption .................................................................................................................. 37 3.5.2. Organised crime ....................................................................................................... 38 3.5.3. Fraud ........................................................................................................................... 39 3.5.4. Audit and reporting standards ............................................................................. 40 3.5.5. Governance ..............................................................................................................