I. New Case Study Provides Valuable Tool in Fight Against Financial Fraud
The Anti-Fraud Collaboration, a group of organizations that includes the Center for Audit Quality (CAQ), continues to build awareness of financial fraud detection and deterrence with the release this month of a new case study for members of the financial reporting supply chain.
The Carolina Wilderness Outfitters Case Study explores potential material fraud at a fictitious public company. The hypothetical examination is designed to facilitate a discussion of how and when to conduct an internal investigation when fraud is suspected in an organization. The case study also aims to raise awareness of the environments in which financial reporting fraud might flourish and to engage audit committees, financial executives, and internal and external auditors in a discussion concerning mitigating risks.
Carolina Wilderness Outfitters is the second in this series of case studies. The first, Hollate Manufacturing, focused on understanding the conditions that can generate and perpetuate fraud and misrepresentation in financial reporting.
The Anti-Fraud Collaboration comprises the CAQ, Financial Executives International, The Institute of Internal Auditors, and the National Association of Corporate Directors. It was formed in 2010 to develop thought leadership, awareness programs, educational opportunities, and related resources to promote the deterrence and detection of financial reporting fraud.
“We are pleased to build on the success of last year’s Hollate Manufacturing Case Study,” said CAQ Executive Director Cindy Fornelli in a statement. “Hollate Manufacturing has been well-received in classrooms and training rooms across the country. In fact, 96 percent of instructors responding to a CAQ survey said Hollate Manufacturing helped them achieve their classroom goals, demonstrating that these case studies are a valuable tool in the fight against financial reporting fraud at public companies.”
To help teach the Carolina Wilderness Outfitters Case Study, the Anti-Fraud Collaboration has published a discussion guide that provides the framework for leading a robust dialogue addressing key learning objectives of the case. It also includes a list of resources on how to properly conduct an internal investigation. The case study and other materials are available at the CAQ website.
II. Fornelli: “Blue Chips Leading on a Red Hot Issue”
There's plenty of room for improvement in the area of audit committee communication, writes CAQ Executive Director Cindy Fornelli in a February LinkedIn Influencer post. “Regulators worldwide are keenly interested in such improvement,” she says “as are companies, their auditors, and their investors.”
The audit committee plays a key role in financial reporting, as it has primary reporting lines from management and the external auditor. It also has a critical relationship with internal auditors. In Fornelli’s view, the large majority of audit committees in the U.S. are performing their duties well, but the public, especially investors, doesn't get enough information demonstrating this important work. Moreover, she notes that “we can do better” when it comes to audit committee disclosure.
“Fortunately for us, there are plenty of examples of audit committees that are doing better,” writes Fornelli, pointing to top companies like Coca-Cola, General Electric, Pfizer, and McDonald's. These companies and others were highlighted in a report, Enhancing the Audit Committee Report: A Call to Action, published last fall by the Audit Committee Collaboration.
III. Reminder: CAQ and AAA Auditing Section Seek Proposals for Access to Audit Personnel Program
Don’t forget: The CAQ and the Auditing Section of the American Accounting Association (AAA) have issued a request for proposals for their joint program to facilitate accounting and auditing academics’ ability to obtain access to audit firm personnel. The CAQ and the AAA Auditing Section established the program in 2013 to generate research on issues that are relevant to audit practice, while providing doctoral students and those professors seeking tenure with access to audit firm personnel to complete the research study protocols. The deadline for submissions is April 21, 2014.