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2 pages/β‰ˆ550 words
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Other
Subject:
Accounting, Finance, SPSS
Type:
Case Study
Language:
English (U.S.)
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MS Word
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Topic:

Fraud Analysis: Red Flags from the Association of Certified Fraud

Case Study Instructions:

Case Requirements
1. Review the list of common red flags from the most recent Association of Certified Fraud
Examiners (ACFE) Report to the Nations, available at: https://www(dot)acfe(dot)com/report-to-thenations/2020/
(Scroll down to the bottom of the webpage and download the pdf for the report)
a. List and describe (provide evidence from the case) red flags in this case that might indicate fraud.
b. Are there sufficient red flags to warrant Bradley’s concern?
c. What options does Bradley have?
2. Using the financial information provided in the excel file:
a. Calculate the dollar and % change for each line item on both financial statements.
b. Prepare a Common Size Income Statement (all line items as a % of sales) and Balance Sheet (all line items as a % of total assets).
c. Calculate the following ratios:
i. Gross Margin
ii. Net Profit Margin
iii. Asset Turnover
iv. Accounts Receivable Turnover
v. Working Capital
vi. Current Ratio
vii. Debt Ratio
d. Analyze and evaluate the data.
i. What stands out or looks unusual?
ii. Do you think fraud may be present?
iii. Hypothesize about the method of the fraud.

Case Study Sample Content Preview:

Analysis of A Fraud
Author
Affiliation
Course
Instructor
Due Date
Analysis of A Fraud
Midkiff (2018) defines financial statement fraud as the intentional alteration of a company's financial statements to deceive financial information users and create a more accurate picture of the company's financial position, performance, and cash flows. It is commonly defined as the misrepresentation of financial information provided to the investors of publicly traded companies.
According to the Association of Certified Fraud Examiners’ (“ACFE”) 2020 Report to the Nations, the following items can be critical indicators of fraud; (a) bribery, conflict of interest, financial extortion, sales scheme, billing kickbacks, and other forms of corruption (b) Asset misappropriation, which includes the theft of cash on hand, the theft of cash receipts, and the manipulation of sales, accounts receivables and refunds, fraudulent disbursement through invoicing strategies, payroll schemes, expenditure reimbursement, check and reimbursement tampering, and register tampering. (c) financial statement fraud can occur through income understatement or income overstatement. Overstatements can occur due to timing differences, untrue income, hidden expenditure or obligations, incorrect asset valuation, and failure to make full disclosures. On the other hand, understatements can occur due to a difference in timing, underreporting of income, over-reporting of debts and revenue, inappropriate asset valuation, and an absence of appropriate disclosures.
In the case of Boss Corporation, there are many weaknesses in the internal control environment that aided fraud in the company. First, the takeover of Westley as the Chief Executive Officer (CEO) without any financial education background was the start of “cracks” because it provided room for a single person to have overlapping responsibilities. Valerie, knowledgeable in finance and accounting, served as a Finance Vice President (VP) and took up Chief Financial Officer's (CFO) roles as well. Overlapping functions granted some much freedom and close to unlimited access to sensitive financial documents that required an equally informed person to approve (maker checker); in this case, there was none. Westley could not provide any meaningful oversight since he had little knowledge of finance, fur...
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