Question XXXXXXXXXXwords)Read below for question 1:Read the following Chapters in Wells, Corporate...

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Question XXXXXXXXXXwords)Read below for question 1:Read the following Chapters in Wells, Corporate Fraud Handbook, 4th Edition:Chapter 11   Conflicts of InterestChapter 12   Accounting Principles and FraudChapter 13   Financial Statement Fraud SchemesExplain how the course resources for the week related to your assignments. Your answer should include the name of a specific resource and a specific assignment.Question 2:  For question 2, relate to:  Ex-roadrunner CFO Peter ArmusteI have attached the case presentationInvestigative Project Design: (For the investigative project design its 1.5 pages)Deteence Measure Design:  (one page)This aspect of the three-part assignment will relate to the case you described. Assume you are a fraud examiner available for hire. Provide a discussion of the approach you, as an investigator, would use to look into a lead received about the possible fraud. The discussion should include several steps and indicate what documents you anticipate will be available and important during your investigation, whether interviews of individuals will be involved, who those individuals might be, and how you might analyze the collected information.Assume you have received a general lead, but not all of the facts you laid out in your case presentation. Think through what type of actions may have occued or might be taking place during your investigation. What records might be a good source to investigate the situation? Oral evidence through interview of individuals can be helpful, but documents are necessary to confirm oral evidence. How can you relate oral evidence to documents you expect to find?This investigative design can be provided in prose or naative writing, or as a clearly defined numbered list. For those with audit background, this list would be much like an audit program--a sequential list showing a supervisor the expected path you anticipate the investigation to take. This might be one-half to one page of naative. Although not limited, a step-by-step list would probably include no more than ten steps for most cases. When the submitted Investigative Design documents are reviewed, if posted with the case design, only the section about the investigation will be reviewed and graded.A word of caution here! If a list of steps is provided, there needs to be enough wording that a reader can understand what actions you plan to take during the investigation. This is about explaining to a supervisor how you plan to pursue this fraud. A supervisor, if approving your plan, would be committing your organization to spend the funds to support your efforts and the related expenses. Professionalism in this submission is important.References and in-text citations are appropriate for this part of the three-part assignment. These sources fortify the merit of your approach to the case and often provide insights about the suitability of your approach to a specific case.Deteence Measure Design:  (one page)Considering the case you presented, and the investigative design you offered, what deteence measures would you suggest to the enterprise you described in your case presentation? Your suggestions will be considered in the context of being both realistic and responsive to the specific presentation you provided. This review of deteence measures should be written in naative form. For most cases, the deteence measures will probably require no more than one full page of text. Post a document with your Case Presentation, Investigative Project Design, and Deteence Measure Design, to the Assignments folder identified for the Deteence Measure Design.You will be able to see the sequence in a single document as you developed and offered a description of a fraud based on your readings and understanding of that type of case. You will see your own plan how to approach the fraud you outlined, including what complexities might be involved. Then, you will have offered suggestions for how the described fraud could be deteed with systematic changes in policies and procedures within the organization you described. Review of the deteence measure design aspect of the assignment and grading will be limited to that aspect of the posted document.References and in-text citations are appropriate for this part of the three-part assignment. These sources fortify the merit of your suggestions and often provide insights about the right revisions to address the issues relevant to a specific case.Power Point Presentation  (6 power point slides)Develop a slide show providing general information to your colleagues about the component of internal control from the COSO framework you wrote about in your final project report. Identify the component you selected, how you related that component to an effective system of controls. Your colleagues will be interested in why you selected the component you did. Indicate why you think this component is of particular value to an overall system? Are there any particular concerns you have for individuals in applying this component? Please prepare 6 power point slides. The ability to develop a slide show is often very important in one’s career. This assignment provides an opportunity for students new to this activity a chance to practice. There is a balance between providing a full explanation in a report or naative writing and using a slide show to highlight key issues. As we all have encountered in some venue, often items referenced in a slide show are discussed by an oral presenter in front of a group. Most successful slide shows include bullet lists with the key points that would be discussed if you presented your case before the class or a live audience.  Slide shows are not a place for a copy and paste of the words from your naative submissions. Also, most of us have been to a presentation and heard the presenter refer to one of the slides as “sort of like an eye chart,” because the text is too small to see and read. Summarize on your slides, rather than including long text. A very good slide show should be suitable for you to stand up and present to an audience. If some content in the slides is based on a published source, a citation and reference list using APA formatting would be appropriate. That includes a reference list at the end of the slideshow and small citations by the content supported by a reference. For example, you might refer to the Fraud Triangle or an aspect of the COSO Framework in supporting your points. A reference to those would be appropriate. Fraud Project Report (2 single space pages report)Our classroom includes access information to the recent publications of the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The COSO Framework for Internal Control is the most recent guidance helpful to organizational leaders seeking to develop and implement good systems of internal control.For this assignment, select one Component of Internal Control discussed in the framework: · Control Environment· Risk Assessment· Control Activities· Information and Communication· Monitoring ActivitiesDiscuss the implications of the selected component or control area. How does this relate to the types of fraud you have studied during the course, like larceny? How do the controls you selected build a better culture in an organization? You might refer to a case you presented during the class and how the issues from that case might have been avoided, if this component of internal control had been applied effectively.a)     When you select one of the components from the internal control framework, you are not necessarily stating your view that one is best compared to the others, since each has a unique role in the whole.)     Toward the end of your discussion of the component you considered, comment on how that component interacts with or supports other components in making up the whole. That is the point of this ending.This Report unites the various sources and information you have collected during the course. The Report, including a reference list, is to generally comply with the American Psychological Association (APA) style rules. Times New Roman font is standard for APA formatting. As noted elsewhere, the Report should be single-spaced with a blank line between paragraphs. A successful Report should not require more than two pages in most instances. This should be an opportunity to look back on the course and see how organizational risk, risk management, and systems of internal control come together to deter fraud.Question 3: (400 words)Read below to answer question 3Governance, Risk and Compliance (GRC) arises again as you read Chapter 10 “Creating a High-Performance Board” at http:2012books.lardbucket.orgooks/governing-corporations/s12-creating-a-high-performance-bo.html Read the “Appendix  B: Red Flags in Management” as a component of the monitoring process, and the intersection of accounting and information systems:  http:2012books.lardbucket.orgooks/governing-corporations/s15-appendix-b-red-flags-in-manage.htmlAuditors are sometimes called the "Guardians of the Capital Markets." What does this mean to you? Do you agree with this description? Support your discussion with examples from the course readings to date.Weekly Graded Discussion ThreadsPlease make a serious effort to do diligent preparation so that your comments are based on well-grounded facts and not speculation. You are encouraged to offer your own ideas, opinions, and personal accounts of real-life situations and experiences. This is potentially the most valuable component of our course and the more substantive and well-thought-out your contributions are, the more we will learn from each other. Question 4  (one page)Read below to answer question 4Corporate Governance, Risk, and Compliance (GRC)--Read the following chapters:Governance, Risk and Compliance (GRC) arises again as you read Chapter 10 “Creating a High-Performance Board” at http:2012books.lardbucket.orgooks/governing-corporations/s12-creating-a-high-performance-bo.html At this point remember documentation and written plans are important so assessments can be made on whether we do what we say as well as to determine intentions and evidence of good management policies.The role of technology is important as well.  To whom in the organization will the Chief Information Officer (CIO) report? Is this function, the CIO, included on the organizational chart?  Perhaps the CIO is the Chief Innovation Officer.  Examine organizational charts as you read the article “CFO: IT's New Boss?” as an example of a long running debate on the relationships between the CEO, CFO and CIO   http:www.cio.com/article/2416207/it-organization/cfo--it-s-new-boss-.htmlRead the “Appendix  B: Red Flags in Management” as a component of the monitoring process, and the intersection of accounting and information systems:  http:2012books.lardbucket.orgooks/governing-corporations/s15-appendix-b-red-flags-in-manage.htmlEnterprise Risk Management (ERM) as a key tool for all organizations, is an emerging issue. COSO will be moving forward with an ERM Framework in the near future. Read the “Appendix C: Enterprise Risk Management: Ask the Board”    to learn more about ERM http:2012books.lardbucket.orgooks/governing-corporations/s16-appendix-c-enterprise-risk-man.htmlInstructionsPrepare a report with comments on your experience completing the readings and other learning activities for the week. This document should be at least two paragraphs (a paragraph should be comprised of at least 5 sentences) as you summarize your work, ask questions, and consider key topics.  The report should be no more than 1 pages in length.  The report should be in business report format:  single spaced, 12 pt. font, one-inch margins, and in your own words, i.e. formal business writing with proper grammar and punctuation. Note that for business report format, paragraphs should not be indented and there should only be double spaces between paragraphs. This is a

Sandeep · Accepted Answer

Ans 1 In the book Corporate Fraud Handbook, 4th Edition chapter 11 is referred to situation where person’s individual interest (CEO, CFO, BOD, Manager, Investor, Banks, and FII etc.) always clashes or intersects with the professional business interest vested in the company or the employer. The conflict of interest concept was borne out of stakeholder corruption concept. Same way BOD have fiduciary duty to corporation they oversee. Every stakeholder must in written disclose their substantial financial and economic interest in any activity which negatively impact or harms the interest of the entity linked to that activity then stakeholder must withdraw himself from such activity. In the corporate world entities must disclose the details of shareholders holding more than 5% of share capital .Similarly related parties concept and ALM concept are arose out of need of conflict of interest principle. One this is sure that the stakeholder interest in the transaction is “undisclosed”. 
From this assignment there are various resources which can be related to concept of “Conflict of Interest”. In the passage “Ex-roadrunner CFO Peter Armbruster” CFO didn’t disclose his financial interest by overbilling or fudged billing thereby causing loss to company stock price and investors not mention company’s reputation. It can also be related to financial auditor’s interest in the company they audit because their fees is dependent on audit client satisfaction certificate. Here auditors interest clashes with business and investors welfare. The conflict of interest can take form of “Corruption”, “Bribery”, “Kickback” .This may take shape of any following:
Purchasing scheme – Refers to Overbilling/False billing of company in collusion with 3rd party cause financial loss or harm to company.
i. Under billings
ii. Writing off sales
iii. Resource diversion
iv. Financial disclosure
Coming to next chapter of Accounting Principles and Fraud –Financial frauds have been rampant in most of economies for many decades. The most recent ones are Enron, Tyco and WorldCom’s saga and associated Financial Auditors in cahoots. No matter how many rules, and GAAP standards are devised accounting will continue being subjective and arbitrary process subject to manipulation and judgement. There is huge pressure on top management to keep reporting higher earning quarter after quarter and their compensation quadrupling. These high profile managers play with the accounting system and use them as tool to further their sinister motives and harm everyone including the hands that feed them. 
FS fraud is a conscious miss-statements or oversights of material amounts or disclosures of financial statements with the aim of tricking users of financial statement and other stakeholders (i.e. investors, Banks, FII and creditor).Some of the unknown devastating impact of such corporate frauds on various stakeholders in country are:
i. Devalues the reliability, quality of financial reporting, opacity and integrity 
ii. Malign the reputation and objectivity of noble profession of Auditing 
iii. Wreck the confidence of common man in public institution and authenticity of FS produced
iv. Renders Capital market less efficient
v. Impacts nations by limiting their prosperity and growth
vi. Can cause bankruptcy and other economic losses of company involved
vii. Plants serious doubts about efficacy of financial audit firms and their work
viii. East into public confidence and trust in such noble profession.
There are many methods of perpetuating the FS fraud like
i. Creating fictitious revenues – Simply implies fabricated, artificial, fake or non-existential sale with imaginative or phantom customers. This also means trying to adjust the opening and closing stock to justify the transaction. Revenue recognition is one of most risk perceived areas in the auditing domain .A most favourite mechanism is to create shell companies and routing through long trail of complex transaction to confuse the authorities. Perhaps the most common example being Satyam fiasco 
ii. Timing differences – Revenue vs cost matching principle in business is not upheld. It is common notion that cost incurred to bring revenue should be recognised in the same period as revenue is booked. Not doing so can show month-on-month variation with viz.-a-viz the budgets and forecasts .This may be due to early revenue recognition before the title of goods or services passes to the buyer and there is serious doubt about the collectability of the proceeds. Normally there will be no evidence to back this data.
iii. Concealment of liabilities and expenses critical to business -Understating both is resorted to by most to escape the tight loan covenants condition or to boost the revenues. One of the example of this case is Adelphia communication which intentional shifted the bank debt with $ 2.3bn from their Consolidate FS to unconsolidated affiliates with aim of concealing it .Further it produced sham documents and transaction receipt to confirm that it had already paid off the debts 
iv. Inadequate disclosures –Management has an obligation to the stakeholders who use these company FS to arrive at conclusion to invest their saving or not to make disclosure in the management analysis and discussion. Not doing so will amount to misleading. Some of the details omitted deliberately are :
a) Omission of liabilities
b) Events occurring after reporting date
c) Related Party transaction
d) Accounting changes	
v. Inappropriate assets valuation- 
Ans 2 Deterrence Measure Design:  
	Fraud is defined as intentional false representation or concealment of a significant material information with the aim of inducing counterparty to act upon it thereby causing immeasurable loss or harm.
 Accounting frauds, or corporate accounting frauds, are often committed with the connivance and due to misdeeds of trusted executives of publically traded firms. Well few would expect these big multinational public traded firm like Enron, Tyco and WorldCom to committing such misdeeds involving complex methods for misappropriating or misdirecting funds, inflating revenues, underreporting expenses, in cahoots with officials in other corporations or affiliates. Accounting involves subjective preparation of books, arbitrary process and subject to professional judgement so there is scope for manipulation and window dressing. Analyst believe that these fraud happen with the involvement of 
It’s said that to catch a criminal one should think like criminal .In other words to prevent these and detect such frauds we need to understand the motivation or triggers that pressure these senior managers or CEOs to do unthinkable. Some of deterrence measure underlined under Sarbanes-Oxley Act 2002 include:
Underline highest standard of corporate governance model and responsibility .CEO and CFO mandatorily personally certify annual and quarterly SEC filing free from any errors and misadventures to avoid absolving themselves of blame later. Focus should be on Improving quality and transparency of financial reporting .Enshrine severe civil and criminal penalties for such crimes .Provide protection and reward to corporate whistle-blowers. Strict standard for conduct of audit by Audit forms .Constitute Audit commit with independent power and report to BOD. Disclosure in Management discussion and analysis report about off balance sheet arrangement and such contractual obligations. Strict code of ethics and conduct for senior staff and audit committee .Appointment of at least 2/3 independent director on board with financial literacy and expert knowledge. Mandatory registration of Public accounting firms (PCAOB board). Laying strictest auditing, quality control, ethics, and other standard for audit. Enforce SOX and PCAOB rules in letter and spirit. Peter Armbruster is the suppressor and instigator in chief. Self-serving Greed led to the loot.
Investigative project design: Several instances where fake revenue entries made weeks after the Quarter closing to show high revenue growth. Showing Transfer of goods vide DCs as legible sales transaction to inflate income. During the investigation it also came to light that several directors and other staff were handsomely rewarded through stock compensation in spite of violating SEC guidelines and underperforming. While some handwritten notes claiming showing difference between the gaps between actual revenue achieved and targeted revenue could have found. Hence identifying entries to fill this gap to close it. Company inflated its reported income by issuing false/dummy Invoices to Group companies. Associates, branches etc. Upon realising risk of being caught immediately restated its financial statements for various quarters CFO intention was to drag this scandal as long as could be by underreporting critical expense and deferring them against GAAP rules. Its early to rule out BOD did play some role instigating misdeeds of Peter Armbruster by controlling the Board’s agenda, motive, discussion and decisions. Peter just got his way with Boards and other senior personnel who either trusted him or too ignorant. Several department were spectators and lost control, pressure to meet results and Top down authority structure of taking commands/instruction downwards suppressed voices.
Peter has substantial external business interest of some of their supplier’s entities and load had been extended not on ALM basis blatantly flouting   related party Transaction policies. Audit committee also failed to discharge it obligation but giving clean chits to Peter and his team. They relied heavily on management statements and not conducting reasonability audit tests tom corroborate the information. Some operating expense instead of being recognised same year were capitalized in breach of company’s policy and set standards. So these were shifted to future years and Balance sheet instead of P&L account. Adopting dubious Accounting practices and overlooking GAAP standard of reporting. Creating Special purpose entities to transfer the losses and showing only income and gains in the main businesses by window dressing. Creation of SPE vehicle for unloading part of company’s debt and NPAs to it with aim to show primary business reporting good earnings. Internal auditor and Financial Audit team were taken into confidence and business sensitive information concealed in the name of being confidential or competitor threat. Peter inflated the company’s reported income to meet analyst’s expectations and keep stock prices jumping QoQ. Company’s cash and Bank balance fudged and inflated by not furnishing Bank statement to Auditors for review and reconciliation like in case of Satyam scam. Deferring the expenses over several financial quarters so that it doesn’t attract the investor’s, auditors and other stakeholder’s attention was game plan.
Fraud Project report:
Under the COSO framework or Enterprise risk management there are basically five wheels of maintaining internal control in the enterprise. These are Control Environment, Risk Assessment, Control activities, Information and Communication and monitoring activities. All of these lay stress on detecting or identifying the early warning signals for detecting the frauds or criminal activity. Since a stitch in time can save nine is apt here. It aims to achieve its objective through the early identification of the problem areas and critical business point earmarking for special focus. Then measurement and assessment of the estimates of the potential risk involved. This is followed by devising of mitigating risk strategies to reduce the impact of unforeseen events or even eliminate it completely. Next in Enterprise risk management theory is documenting the risk events through effective reporting and monitoring techniques.

Question XXXXXXXXXXwords) Read below for question 1: Read the following Chapters in Wells, Corporate Fraud Handbook, 4th Edition: Chapter 11 Conflicts of Interest Chapter 12 Accounting Principles and...

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