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Forensic Accounting




Question;Main Task: Create a Literature ReviewWrite a brief literature review using all 40 sources from the annotated bibliography, to be attached, and the analysis of the issue, to identify the skills needed for a professional forensic accountant and determine if the accounting curriculum of higher education offers sufficient forensic instructions to prepare accounting students for operating as a professional post SOX.This is not an annotated bibliography.Your Concept Paper literature review is a synthesis and integration of fundamental and recent research and theory on your dissertation topic. Its main purpose is to show that you are familiar with key literature relevant to your research topic and to demonstrate that there is a gap in existing literature and research findings that your study will address.Your review should be a coherent, organized, and logical narrative that uses sources to argue that there is a meaningful gap in the current theory and research in your topic area that your study will address. Your review should be in the form of a conceptual arrow that points to the need for new research exactly the research that you propose!Avoid simply describing one study per paragraph: Your goal is an integrated synthesis of concepts, ideas, and findings. The last few paragraphs of the review should summarize the trends in the literature that you have observed and build a bridge to the need for additional research within the area.APA style. Fully cited. Proper english.***************************************************************Annotated;Bibliography;Adu-Boateng, D.;(2012). The role of audit firm tenure;in a firm's propensity to disclose material weaknesses in internal controls;after SOX.(Order No. 3494474, Nova Southeastern University). ProQuest Dissertations and Theses. Retrieved;from;(921503579).;The Sarbanes-Oxley Act of 2002 (SOX);requires auditors to maintain objectivity. The author performed quantitative;analyses on data of 5 years after SOX to assess the positive and negative;effects of tenure of the auditor to disclosing material weaknesses. Audit firm;tenure did not appear in prior research.Ge and McVay (2005) included audit firm;size in their work, and Raghunandan and Dasaratha (2006) analyzed the;relationship between disclosure and audit fees. The author carefully selected firms;from Security and Exchange Commission filings and performed a Pearson;Correlation with logistic regression. The study found that non-disclosure of material;internal control weaknesses is more likely when the auditor has stayed with the;client for a long tenure.;Ahadiat, N.;Hefzi, H. (2012). An investigation of earnings management practices: Examining;generally accepted accounting principles. International Journal of Business;and Social Science, 3(14) Retrieved from;Earnings management is the act of intentional manipulation of the;corporate financial data with the intent to achieve a specific objective. Ahadiat;has published 14 other articles. The author developed a questionnaire to;identify management's decisions that were within generally acceptable;accounting principles (GAAP) yet unacceptable to the public or other;professionals. The study was limited to actual cases identified by members of;the Institute of Management Accountants. Previous studies were hypothetical;cases. Results identified management's actions as unacceptable. The conclusion;was that more emphasis needs to be placed on ethical practices.;Akpan, M. D.;(2013). The role of management in;preventing banking fraud in Nigeria.(Order No. 3588609, Walden;University). ProQuest Dissertations;and Theses. Retrieved from;(1428361629).;Electronic;banking is a target for fraud. Whereas SOX had issued regulations for U.S.;banks, the Nigerian banking system had no controls. Akpan identified the lack;of fraud policies, procedures, and processes in Nigerian banks. The qualitative;study explored management's role in fraud prevention through interviews of 40;bank officers. The audience includes bank officers, investors, stakeholders;auditors, and governing officials. The descriptive study followed the;sequencing design of Miles and Huberman (1994). The resulting corrections could;be applied to banking systems worldwide to improve fraud prevention.;Baker, M. W. (2013). A multiple case study of the dark side of;leadership: An exploration of executives who led their companies to disastrous results;versus exemplary CEOs who did not.(Order No. 3570902, Regent;University). ProQuest Dissertations;and Theses. Retrieved from;(1420266661).;The purpose of the study was to examine leaders who make destructive;decisions compared to those who make better decisions. Ten leaders from both;groups and 10 additional CFOs were chosen for the study. Rather than the;opinion survey of prior studies, Baker developed a multi-case study of three;chosen, extreme quintains. Data about situational and personal characteristics;strategic choices, and organizational outcomes was collected from books;journals, press releases, annual reports, testimonies, and videos.Baker provides insights into;executives who have committed fraud as;well as other unethical or;illegal decisions that threatened the viability of their;companies. It is a starting;point from which top management?s tone can be assessed.;Human resources and review;boards would find the trait analysis most beneficial when faced with choosing;executives. Auditors could also apply the trait analysis when evaluating the;tone at the top.;The study was unique. Baker;relates to Lawrence (2010) and Boddy?s (2011a, 2011c) that leaders without;conscience (a.k.a., corporate psychopaths) are at the root of financial crises.;Baker had some interesting points, and was thorough in;his testing.;The results show a decline in business, whether due to fraud or;other circumstance, with a destructive leader, and the characteristics that;contributed to the actions of the leader.;Beasley, M. S., Carcello, J. V., Hermanson, D. R., & Neal, T. L. (2010).;Fraudulent financial reporting: 1998-2007.;Durham, NC: The Committe of Sponsoring Organizations of the Treadway Commission;(COSO).;Analyzing fraudulent financial reports can help better understand fraud.;The authors supported this assertion through critical insight from past;fraudulent cases. They explored the effects that fraud had on the capital;markets. Their purpose was to include various types of fraud in the hopes of;discovering ways to prevent future cases. Their intended audience included;CPAs, investors, regulators, stock exchanges, boards of directors, and external;auditors. They published their report through COSO, whose goal was to improve;the quality of financial reporting.;The focus was on the implications as;well as the array of fraudulent financial reports. Stating, "most frauds were;committed at or directed from the companies' headquarters locations,;showed that those higher up in power are more likely to "cook the;books." Pressures from various expectations such as investment and;compensation plans increased upper managements' probability to commit fraud. This;article relates to the claims made in The;CPA Journal article "CEOs, CFOs, and Accounting Fraud," but;looked into other factors that may implicate fraud, while that article just;focused on upper level management taking advantage of power.;Beke, J. (2012;September). Effects of the application of accounting standards on company;performance: A review. International;Journal of Management, 29(3), 110-124.;The International Financial;Reporting Standards (IFRS) apply to financial reporting by publically traded;companies worldwide. Beke proposes that harmony in the underlying methodology;of financial reports is more beneficial that standardization. Companies that;adopted IFRS were analyzed in other research resulting in increased;transparency. In his qualitative study of businesses listed on the Budapest;Stock Exchange, management performance indexes deteriorated for solvency and;prosperity using IFRS. Note, this study, was done using financial information;before 2008, and before the finalization of IFRS in 2013. The study showed that;the application of a standard reporting system, applied to international;companies, produced a leveling effect. Unfortunately, the leveling effect was;detrimental to standard financial reports meaning that companies might be;reluctant to follow IFRS practices. Beke has done numerous studies on IFRS;reporting to emphasize the overall benefits of worldwide reporting standards.;Blaskovich, J.;Davis, C. J., & Taylor, E. Z. (2012). Enterprise risks, rewards, and;regulation. Journal of Applied Business Research, 28(4), 563-579. Retrieved;from;Financial reports provide;information about the company to the users of financial data. The authors;presented that risk management reports were vital because of the opportunities;for innovation and growth. The authors looked at information systems and technology;specifically, identifying that area as most critical for risk. Their findings;showed a lack of risk management even when the companies reported adoption of;the SEC's Regulation S-K. Firms met the technical requirements of the;regulation but not the process applications. The article relates to Beasley et;al. in that companies were not modifying procedures for risk management. The;authors are educators and have worked in business accounting as auditor;process management, and ethics, respectively.;Boyle, D. M., Carpenter, B. W., & Hermanson;D. R. (2012, January). CEOs, CFOs, and accounting fraud. The CPA Journal;62-65.;CEOs;and CFOs played a key role in the presence of accounting fraud. The authors explored;statistics and studied upper management manipulation. Their purpose was to;broaden the insight about the variations of coercion, narcissism and power that;management facilitated to undergo fraud. Their intended audience includes CPAs;CFOs, CEOs, as well as CFFs and the authors targeted this audience by;publishing their findings in The CPA;Journal.;The authors focused on detection and;preventing accounting fraud, especially among the contribution of upper;management. Studies within the article revealed "that financial statement;fraud cases often involve the top executives, with the CEO or CFO implicated in;89% of the cases," meaning that while personnel may carry out the;mechanics, it's clear that management had the most influence. This article;relates to the claims made by Beasley, Carcello and Hermanson, but they focused;more on the pressures made by the nature of the controlled environment, while;Boyle, Carpenter and Hermanson looked into the psychological aspects.;Brewington, G. F.;(2013). Impact of accounting;standards, laws, and best practices on fraud in local governments.(Order;No. 3599368, Walden University). ProQuest;Dissertations and Theses. Retrieved from; (1462053435).;Accounting standards, laws, and practices;affect governments as a business. The author explored fraud prevention through;internal controls in local government units examined for preventative measures;acode of ethics, a;training program, an employee assistance program, a tip line, internal audit;function, and external financial audits. An online survey method was;implemented which was not a limiting factor in this study but could be in other;unincorporated government areas.;The;results of the study indicated that the establishment of a code and specific;ethics trainings were the greatest determent;to fraud. This related to Yallapragada et al., in that education is vitally important in fraud prevention. A benefit of;the study was more awareness of;fraud issues that reduce future occurrences of fraud. The study was also a baseline for each government unit for;future examinations.;Brown, M. S. (2012). Does the application of Benford's Law;reliably identify fraud on election day?(Order No. 1508809;Georgetown University). ProQuest;Dissertations and Theses. Retrieved from;;(1011593771).;Benford's Law is a phenomenological rule of logarithmic probability;distribution of a significant digit. It can be used to indicate the presence of;fraud. The author applied Benford's Law as a forensic tool to election results;vote count. Benford's Law had been used in other elections as a determinant of;fraud. Variables were generated from the International Society for Fair;Elections. Applied to the 2008 Republic of Georgia's parliamentary elections;where numerous votes were considered void, Benford's Law was not suitable for;determining the presence of fraud. The author indicated that Benford's Law in;this application produced specifically false results. The author relates to;Deckert,Myagkov;and Ordeshook (2011) that this test produces false results in elections.;Results indicated that whereas a tool can be great in one application, caution;had to be used, and careful examination made when selecting the evaluation tool;in investigations.;Caplan, D. H., Dutta, S. K., & Marcinko, D.;J. (2012). Lehman on the brink of bankruptcy: A case about aggressive;application of accounting standards. Issues in Accounting Education, 27(2);441-459. doi:10.2308/iace-50126;The authors presented information on the Lehman Brothers Company as;both a victim and cause of the 2008 recession. Presented for students, facts;surrounding the case showed how aggressive interpretation of accounting rules;and modified terms led to one of the largest bankruptcies in history. Results;indicated that auditors need to consider substance over form. Though GAAP;provides the framework, auditors providejudgment on, (1) the accounting;principles selected and applied, (2) the appropriate accounting principles for;the circumstances, and (3) uniform financial statements, and related notes, that;may affect their use, understanding, and interpretation (AICPA 2009). The article related to Kranacher in that both emphasize basic;concepts for educational purposes.;Castro, G. S. (2013). Internal auditors;skepticism in detecting fraud: A quantitative study (Doctoral dissertation). Retrieved;from;The research was to contribute to the theory that the lack of;professional skepticism was the contributing factor to malpractice litigation;against the auditors, and that years of experience contribute to skepticism. The;author used statistical testing. The amount of litigation was not discussed. The;findings were that high levels of skepticism did not influence the auditor's;judgment, and years of experience as internal auditors do not achieve a high;level of professional skepticism. TheStatement on Auditing Standards No.99 required an increased level of;professional skepticism and the need to maintain it during the gathering of;evidence. Arguments from previous studies stated that auditors with skeptical;attitudes sometimes fail to detect fraud. In which case, the lack of high;skeptic behavior could not be blamed for the failure to detect fraud, but;instead, the lack of in-depth knowledge on fraud could be the cause;The research was by online participation. Previous research by;Fullerton and Durtschi (2004), Quadackers, et al. (2011), andCarpenter;and Reimers (2011)all;contradicted these findings.;Deckert;J. (2013). Patterns of fraud: Tools;for election forensics.(Order No. 3589499, University of;Oregon). ProQuest Dissertations and;Theses. Retrieved from;(1430505418).;The purpose of the dissertation was;to improve upon the tools used to uncover fraud. The author did an analysis of;three case studies. Uncovering irregularities is similar in elections and;businesses. The author analyzed data including Benford's Law for the;distribution of digits. After identifying the irregularities, then fraud;identification began. Understanding the irregularities was only the first step;in identifying fraud. The author expanded on previous studies. His tools were;affected by variables that had to be recognized. The tools were not a;preventative measure. No further studies were promoted.;Devine, C. T. (1960).;Research methodology and accounting theory formation. The Accounting Review;387-399.;Auditors;have control. This assertion is supported by exploring the logical processes;that an auditor completes and behavioral relations that accompany them. The;author's purpose was to look into the psychological aspects of an auditor and;discover a behavioral theory. His intended audience includes researchers;scholars, students, and CPAs and he targeted this audience by publishing his;findings in The Accounting Review.;Devine;focused on the behavioral attributes of auditors as it correlated to their;actions. Stating, "accountants seem to have waded through relationships to;the intricate psychological network with a heavy- handed crudity," meaning;that auditors were influenced by the thread of control. Devine argued that it;was essential that this assertion be researched further to grasp a better;understanding of this position. This article relates to Ramaoorti's "to;mind the store" principal, that focused on the aspect of control as an;implication to fraud.;DiGabriele, J. A. (2012). A case study on the;determination of lost profits for the forensic accountant. Issues in;Accounting Education, 27(3), 751-759.doi:10.2308/iace-50161;The purpose of this article was a student case study for the preparation of the;calculation for the value of lost profits during a short-term loss period. The;author reasoned that forensic accountants should be proficient in litigation;support services such as the valuation of lost profits. The author has;accomplished two PhDs and professional designations, with years of teaching. He;has represented in multiple depositions, court testimonies, and arbitrations. Education;is an important fraud preventative which relates toDorminey.;Dorminey, J., Fleming, A. S., Kranacher, M.;Riley Jr., R. (2012, May). The evolution of fraud theory. Issues in Accounting Education, 27(2), 555-579.;doi:10.2308/iace-50131;The purpose of the article was enhancing the understanding of the;motivations of fraud. With better understanding, fraud can be prevented. The;authors are recognized in the field of business fraud and published on his and;her own.;The document is a resource for educators and researchers studying;fraud. The flow of the article was very easy to follow. The statements were;backed with references and included a power-point summary.;The authors;discussed the Fraud Triangle, the Fraud Scale, M.I.C.E., the Fraud Diamond, and;the Fraud Predator using examples of known fraud scandals. They presented an;overview of fraud, the foundation of fraud theory, and expanding, used a;meta-model to illustrate links in characteristics. The discussion on prevention;reviewed internal controls and culture, deterrence, detection, assessment, and;collusion, and management overrides. The authors closed with a discussion about;future research and current gaps. This article is similar to Hermanson and;Wolfe in that they explored the usages of models and educational insight into;the behavioral mindset of a fraudster. It is also related to Kranacher, but he;focused more on criminological relations, while this article focused more;broadly on behavior.;Geesey;J., & Rocha, C. (2012). Self control theory: Recognizing your company's;vulnerability to employee theft. Journal of American Academy of Business;Cambridge, 17(2), 198-203. Retrieved from;;Many aspects of fraud have to be;addressed. Human capital contributes to business failure due to the amount of;internal theft. Because there has been limited research into the relationship;of self-control and employee theft, the authors introduced a theory of;self-control that goes beyond the theory of employee satisfaction by Kulas;McInnerney, DeMuth, and Jadwinski (2007). The authors adopted the Gottfredson;and Hirschi theory of self-control that applies to all ethnicities, gender;ages, places, and times, so the Self-control theory can be used to identify;potential problems, diminish internal theft, and save U.S. companies up to $40;billion each year.;Ghosh;A., & Chakraborti, C. (2014). Beyond corporate social responsibility;Ethics in action. Global Virtue Ethics Review, 6(4), 60-99. Retrieved;from;Corporate social responsibility(CSR);identifies economic and socially accepted expectations of a business. The;authors propose that ethical actions were both a fraud preventative and the;precursor for sustainable CSR actions. The authors progressed through the;development of CSR to their theory that a sustainable development was a more;appropriate choice to meet ethical responsibilities. Ghosh is a professor with;areas of research in ethics and CSR, and Chakraborti, also a professor, has;published 3 books and 70 articles also related to ethics.;Hamilton;E. L. (2013). Evaluating the;intentionality of identified misstatements: How perspective can help auditors;in distinguishing errors from fraud. (Order No. 3561791, University of;South Carolina). ProQuest;Dissertations and Theses. Retrieved from;;(1369906809).;The study was to investigate whether auditors who use the psychology;theory of perspective takingrecognize when the circumstances surrounding an identified misstatement;was intentional. The author performed an;experiment using a scenario with established variables. The auditors had to think;as the perpetrator. Findings were that when the circumstances surrounding a misstatement;were indicative of high fraud risk, auditors who engaged in perspective taking;assessed misstatement intentionality higher than those who did not use;perspective taking. The weakness in this study was that roll-playing did not;match actual conditions.;The audience is auditors;specifically, but the information is also useful for management, CPAs, and educators.;Similar to Beasley et al., auditors need to use every available tool in their;fraud detection.;Hansen;J., & Klamm, B. K. (2012). A study of accounting students' ability to;recognize and evaluate fraud risk. The Journal of Theoretical Accounting;Research, 8(1), 1-23. Retrieved from;;The authors presented this study as;a learning tool for accounting students to better understand fraud risk factors;and the concepts of the fraud triangle. The study used five stories;implementing a mix of business situations and fraud risk factors. The results;showed that the students were unable to identify and classify risk factors. In;an audit situation, risk factors would not be identified. This study relates to;the study at the West Virginia University in that Hansen and Klamm identified;the need for educations and the WVU addressed the curriculum.;Harris, M. B., Sr. (2013). Government regulation and corporate best;business practices: Mitigating public procurement fraud.(Order;No. 3588325, Walden University). ProQuest;Dissertations and Theses. Retrieved from;;(1427924688).;The purpose of this study was to;investigate the extent of federal regulations and corporate best business;practices on reductions in fraud. In this quantitative study, the author;examined two independent variables, government regulations and corporate best;business practices, with the dependent variable of public procurement fraud.;Participants were 114 procurement and acquisitions professionals who completed;an internet survey. The data were analyzed by a statistical ANOVA and;correlation test. The results showed that regulations, either federal;regulations or corporate best business practices.;The study is important for;businesses to be aware of the need for developing regulations and being;proactive in fraud prevention.;Herron, E. T. (2012). Characteristics of creativity in relation to auditors' recognition of;fraud cues and response to perceived fraud risk.(Order No.;3525618, Oklahoma State University). ProQuest;Dissertations and Theses. Retrieved from;;(1039142897).;The study showed a positive relationship between;creativity and the ability to recognize fraud clues. Auditors and fraudsters;both learned audit procedures. Fraudsters use the system to their advantage.;The author proposed that the auditor include strategic reasoning and brainstorming to widen the;scope of their experience in response to fraud.;This study relates to Beke in that both identify the need;for thinking beyond rules and regulations, and Kranacher for the connection of;auditor to fraudster.;Jones;M. (Ed). (2011, January). Creative;Accounting, Fraud and International Accounting;Scandals. Chichester, England: Wiley & Sons;The scandals of the 1990s and 2000s, especially Enron and WorlCom;were explored. The author examined the particulars of the business setting, the;environments, motivations, accounting methods and evidence used in fraud;management, and a timeline of fraud. Other authors analyzed accounting scandals;in various countries. The author looked back at themes and the effect on the future.;Kept in mind was a list of national laws and regulations enacted after major;scandals.;Jones has taught accounting for 33 years, published over 240;articles in professional and academic journals, and authored three texts. He;supports his findings with references.;The book is easy to read for those who have substantial technical;knowledge of accounting practices. The author stated that the book is suitable;for undergraduate students interested in fraud. The author had a consistent;tone. The author maintained the theme of creative accounting in management and;financial statements with technical analysis.;Kranacher, M., Morris, B.;Pearson, T. A., & Riley, R. A. (2008). A model curriculum for education in fraud;and forensic accounting. Issues In Accounting Education, 23(4), 505-519.;doi: 10.2308/iace.2008.23.4.505;It;is essential to provide a curriculum of fraud education in the classroom. The;authors supported this assertion by presenting data and materials easy to;understand for the educational mindset. Their purpose was to educate others on;fraud and financial accounting. The intended audience includes educators and;students and they targeted this audience by publishing their findings in the Issues of Accounting Education.;The;authors are all associated with universities and have all been published. Riley;has been published at least 10 other times.;The;educational aspects pertained to fraud and forensic accounting. It focused on;fraud prevention, deterrence, detection, investigation and remediation;generating courses, and guide material." They went into depth on the;interrelationship between auditors and fraudsters to develop a foundation to;the course of this criminal behavior. This source relates to "The;Evolution of Fraud," which focused on theory, while Kranacher focused on;basic concepts for educational purposes.;Krishna Moorthy, L. K. (2012). Changes in corporate governance following;allegations of fraud against shareholders versus fraud against the government.;(Order No. 3519174, University of Minnesota). ProQuest Dissertations and Theses. Retrieved;from;(1034562867).;The author investigated any differences in the changes of corporate;behavior versus changes in government behavior following the allegations of;fraud. Prior studies found significant reactions against executives following;financial restatements, and SEC enforcement actions that led to bankruptcy;with little stakeholder reactions to executives under the suspicion of fraud;either in corporations or governments. The author estimated a logistic;regression for litigation in corporate and government samples.The results showed higher executive;turnover after the settlement of fraud allegations in both corporate and;government lawsuits, concluding that shareholders penalized managerial;misconduct harshly and instituted changes to prevent such occurrences in the future.;CEO;turnover was significantly;greater for corporate boards relative to the government. The author noted that;there were more turnovers in the years following the establishment of SOX;concluding the effectiveness of regulations.;Miller, T. C., Cipriano, M., & Ramsay, R. J.;(2012). Do auditors assess inherent risk as if there are no controls? Managerial;Auditing Journal, 27(5), 448-461.;doi:;The purpose of this paper was to;examine whether auditors interpret the risk of material;misstatement (RMM) in accordance;with current standards? definition of inherent risk (IR). Controls should not;be expected when assessing inherent risk and that inherent risk should be considered;separate from and prior to control risk. Because auditing standards explicitly;require auditors to assess IR without consideration of internal controls (i.e.;control risk (CR)), RMM should not be adjusted upward for control deficiencies.;The authors surveyed and interviewed auditors about current risk assessment;practice. They then evaluated whether their understanding of risk assessment was;in line with current standards. Auditors presumed some control effectiveness;when assessing IR and they may have increased RMM in response to internal;control deficiencies. This was inconsistent;with the definition of inherent risk from the Auditing Standards Board (SAS No.;107), Public Company Accounting Oversight Board (AS 8), and International;Auditing and Assurance Standards Board (ISA 200). The misinterpretation might;have been the result of guidance provided by standard setters in the form of SAS;No. 109 from the ASB, AS 12 from the PCAOB and ISA 315 from the IAASB, which;suggest combining IR and CR into RMM. The research was limited by sample size;and the small number of risk factors investigated. If a level of control was;presumed, auditors reduced audit effectiveness by estimating a lower RMM than was;appropriate. This study presented an environments where inherent risk was not maximum.;Mocha, S. C. (2012). Are fraud experts relevant? A study of the retail investors;perceptions of audit committee characteristics and corporate governance. (Order;No. 3547149, Capella University). ProQuest;Dissertations and Theses. Retrieved from;(1272157219).;The studyexamined the extent retail;investors perceived the level of effectiveness of;audit committees (ACs) and corporate;governance in relation to perceived satisfaction in;the firms? quality of financial reporting.;The study also investigated whether retail investors perceived fraud experts?;skills relevant to enhancing the quality of financial;reporting. This descriptive quantitative;study was conducted with a survey instrument developed and validated through a;field test and a pilot study. The survey was conducted online with a sample of;retail investors (n= 291) in the United States of;America. The survey instrument was in a five-point Likert scale. The data that;were collected were analyzed with the use of thet-test, and Pearson?s correlation;as well as the analysis of variance (ANOVA) statistical techniques. The results;from the study indicated that the level of effectiveness of audit committees;and corporate governance were relatively effective and adequate in relation to;retail investors? perceived extent of satisfaction with the quality of;financial reports. The existing requirement that allows at least one financial;expert as a member of the AC was perceived by participants to be fairly effective;and adequate in relation to retail investors? perceived level of satisfaction;with the quality of financial reports. The results also indicated that retail;investors considered types of skills of ACs and boards of directors as one of;the cr


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