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Anti-Fraud Collaboration Offers New Fraud Case Study

Tammy Whitehouse | February 18, 2014

Sue Ramos is an internal auditor with a problem on her hands. Keep digging into a curious finding from an investigation of a whistleblower tip a week before the third-quarter filing date? Or proceed through the mountain of other work that must be completed and put the investigative revelation on the to-do list for the next routine compliance review?

The Anti-Fraud Collaboration outlines the fictitious scenario in a case study meant for training and classroom purposes to facilitate discussion of when and how to pursue internal investigations if a faint whiff of fraud is detected. The “Carolina Wilderness Outfitters Case Study” is the second case study published by the Anti-Fraud Collaboration after the Hollate Manufacturing case study got positive reviews for helping facilitate training on understanding the conditions that can lead to fraud and misrepresentation in financial reporting.

In fact, a recent CAQ survey found 96 percent of instructors said the Hollate case was helpful in the classroom, said Cindy Fornelli, executive director of the Center for Audit Quality, one of the Anti-Fraud Collaboration participants. The feedback demonstrates “that these case studies are a valuable tool in the fight against financial reporting fraud at public companies,” she said in a statement.

The latest case study explores the early discovery of a possible material fraud event at a fictitious public company. The study walks through a hypothetical examination meant to facilitate a discussion of how and when to conduct an internal investigation when fraud is suspected. The study also seeks to raise awareness of the types of environments that breed financial reporting, producing a way for audit committees, financial executives, and internal and external auditors to engage in hypothetical discussion concerning mitigating risks. An accompanying discussion guide provides a framework for leading a dialogue and a list of resources on how to properly conduct an internal investigation.

The Anti-Fraud Collaboration is made up of the Center for Audit Quality, Financial Executives International, Institute of Internal Auditors, and National Association of Corporate Directors. The collaboration formed in 2010 to develop thought leadership, awareness programs, educational opportunities, and related resources to promote deterrence and detection of financial reporting fraud.