There are many resources available for those seeking to deter and detect financial fraud. Research in recent years has yielded valuable information about the conditions that make an organization more susceptible to fraud, as well as techniques and tools that support both deterrence and detection. This knowledge is of particular value to all participants in the financial reporting process, including management, boards of directors, audit committees, and internal and external auditors.

ANTI-FRAUD COLLABORATION RESOURCES

Washington, DC – The Anti-Fraud Collaboration continues to promote diligence in financial fraud deterrence and detection with the latest installment of its series of case studies. The new case study features fictional company LDC Cloud Systems, a rapidly growing global technology company whose board must contend with a bribery allegation and accounting abnormalities.

“The Anti-Fraud Collaboration is pleased to present the latest case study in our series designed to raise awareness of financial reporting fraud,” said Center for Audit Quality Executive Director Cindy Fornelli, on behalf of the Collaboration. “These case studies have proven to be valuable educational tools for all members of the financial reporting supply chain, as well as students.”

With a plot centered on a bribery allegation and questionable accounting oversight within the company, this hypothetical scenario is designed to provide the reader a better appreciation of how fraud situations can unfold and be addressed, including the importance of strong board oversight. The LDC Cloud Systems case study explores actions of management and the board in-depth, providing a timeline of decisions after they uncover potential problems within the company. The case study also illustrates how complex accounting practices common in today’s fast-changing business environment can make a company susceptible to fraud.

For classroom use, the Anti-Fraud Collaboration created a video series to bring scenes from the case study to life. The videos are available at the Anti-Fraud Collaboration website.

“New technologies can make for a disruptive business environment, and can create new challenges on existing business practices,” said Andrej Suskavcevic, President and CEO of FEI. “Resources like this case study provide a practical tool to help financial executives explore issues that can help to deter financial reporting fraud.”

“For internal audit, this case study provides powerful insight into the challenges even highly competent functions face when confronting complex risks that are compounded by deceptive actions within a company,” said IIA President and CEO Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA. “It also shows the importance of being adequately resourced to address such risks.”

“Audit committees serve a critical role in ensuring the long-term value of their companies. This case study serves as a valuable resource to help audit committees think through their roles in providing oversight of their companies’ financial controls and communications,” said Peter Gleason, president and CEO of NACD.

Anti-Fraud Collaboration case studies take participants through a hypothetical scenario about a fictional company dealing with fraud. Guided by an instructor, the participants then discuss what could have been done to address or help avoid the situation. Each case study offers a companion discussion guide for instructors, available on request.

LDC Cloud Systems is the Collaboration’s fourth case study. Others include the following:

  • Hollate Manufacturing focuses on understanding the conditions that can generate and perpetuate fraud and misrepresentation in financial reporting.
  • Carolina Wilderness Outfitters is intended to facilitate a discussion about how to conduct an internal investigation when fraud is suspected in an organization.
  • Kendallville Bank focuses on the importance of exercising skepticism as a participant in the financial reporting process.

The Anti-Fraud Collaboration has developed six short video vignettes for use with the LDC Cloud Systems Case Study. In each vignette, actors reenact several interactions selected from the case study. The videos do not provide information beyond that found in the case. Rather, they aim to enable discussion participants to see certain material in a new light and allow the discussion leader to emphasize certain aspects of the case in the classroom.

The LDC Cloud Systems Case Study is another installment in the Anti-Fraud Collaboration’s successful series of case studies. Participants in case study teachings start with a hypothetical scenario about a fictional company dealing with a fraud. Guided by an instructor, they then discuss what could have been done to address the situation.

Effective accounting policies and internal controls are key for stemming fraud and reducing the number of financial restatements. So how can companies improve in these two areas? Hosted by the Anti-Fraud Collaboration, this July 2017 webcast highlights leading-practice recommendations from top company executives, corporate directors, and auditors. The webcast also outlines the importance of creating accounting policies and controls, crafted through risk-based evaluations, that can be easily understood by non-accountants. Expanding on insights contained in a 2017 Anti-Fraud Collaboration report—Addressing Challenges for Highly Subjective and Complex Accounting Areas—the webcast’s panelists include experts from across the financial reporting supply chain. They discuss how successful companies utilize strong accounting policies to deter and detect fraud while providing actionable recommendations that each supply chain member can bring to their organizations.

MODERATOR

  • Cindy Fornelli, Executive Director, Center for Audit Quality

PANELISTS

  • Brian T. Croteau, Partner, PricewaterhouseCoopers LLP
  • Karl Erhardt, Executive Vice President and the Chief Auditor, MetLife
  • Suzanne Hopgood, President and CEO, The Hopgood Group
  • Linda Zukauckas, EVP and Corporate Controller, American Express