Forensic Accounting and Fraud Examination | My Assignment Tutor

BA303 – Forensic Accounting and Fraud Examination Assessment Details and Submission Guidelines Final Assessment in Replacement of Final ExaminationSchoolSchool of BusinessCourse NameBachelor of BusinessUnit CodeBA303Unit TitleForensic Accounting and Fraud ExaminationTrimesterTrimester 1, 2021Assessment AuthorAssessment TypeIndividualAssessment TitleEnd-of Trimester Major Case Study Assessment in replacement of Final ExaminationUnit Learning Outcomes Addressed:Describe and explain the process of forensic accounting. Investigate issues and cases in forensic accounting. Identify the risks of fraud and plan accounting systems to minimize fraud. Understand the links between corporate governance and risk management. Conduct analysis to detect financial statement fraud.Weight50%Total Marks50 MarksWord limitNo limitRelease DateOn Final Examination DateDue DateOn Final Examination DateSubmission GuidelinesAll work must be submitted on Moodle. The assessment must be in MS Word format, 1.5 spacing, 11-pt Calibri (Body) font and 2 cm margins on all four sides of the page with appropriate section headings. Reference correctly, if applicable, using IEEE for SITE or APA for School of Business.DeferralAccording to the MIT Assessment Policy and Procedure Section 5.3.5, a student may apply to a Head of School to defer an examination or an equivalent assessment in exceptional circumstances. An Application for Special Consideration and supporting documentation must be submitted directly to the School’s Administration Officer via your MIT AMS login: You must submit this application no later than three working days after the due date of the specific piece of assessment or the examination for which you are seeking Special Consideration.Academic MisconductAcademic Misconduct is a serious offence. Depending on the seriousness of the case, penalties can vary from a written warning or zero marks to exclusion from the course or rescinding the degree. Students should make themselves familiar with the full policy and procedure available at: For further information, please refer to the Academic Integrity Section in the Unit Description. ASSESSMENT INSTRUCTIONS INSTRUCTIONS TO CANDIDATES: The Final Assessment is scheduled for the Final Examination period.The questions will be released on the unit Moodle page.You are not permitted to use mobile phones or other tools to chat with anyone during the assessment.You must upload your completed work to the Submission Link on the unit Moodle page. This automatically submits the work through Turnitin. Completed work must be uploaded before the end of the assessment duration.This is an individual assessment task. You must complete it on your own.  You are not to discuss it with any other students during the timeframe set to complete the Final Assessment. Academic integrity rules and penalties apply.You MUST write in your own words.  Do not copy and paste from the internet as you will not receive marks for this and you will be penalised for plagiarism.The Final Assessment consists of FIVE (5) Sections, withSection A (Case Study A, 11 Marks)Section B (Case Study B, 10 Marks)Section C (Case Study C, 8 Marks)Section D (Case Study D, 10 Marks)Section E (Case Study E, 11 Marks)Answer all questions from a BA303 Forensic Accounting and Fraud Examination perspective.Apply the terms, concepts and ideas that have been introduced and discussed in the unit to demonstrate your learning.Type your answers in the Question and Answer Paper (MS word document).Proofread and edit your work before submitting.  SECTION A: Case Study A (Total: 11 Marks) Background and Content: The following financial data was collected during a fraud investigation: Year 1 Year 2 Year 3 Assets Properties $990,000 $990,000 $990,000 Motor vehicles 20,000 165,000 305,000 Shares 5,000 15,000 55,000 Cash 8,000 22,000 73,000 Boat 78,000 Liabilities: Mortgage 600,000 180,000 20,000 Personal loans 24,000 22,000 12,000 Income: Salary 100,000 110,000 120,000 Investment 2,000 25,000 55,000 Expenses: Living expenses 60,000 100,000 110,000 Mortgage expense 40,000 20,000 10,000 Auto expense 5,000 9,000 11,000 Assessment Tasks: Answer both questions below. 1. Calculate the amount of “unknown income” using the numbers given above. (8 Marks) 2. Explain whether it appears that a possible fraud exists. In your answer, explain other possible explanations for the unknown income. (3 Marks) SECTION B: Case Study B (Total: 10 Marks) Background and Content: Sandeep Marlin has been asked to conduct a fraud examination. He has been informed that a serious fraud may be occurring at a number of schools involving their large cleaning contracts, including for COVID-19 cleaning. These very lucrative cleaning contracts are managed and administered by staff in the government’s education department. He was also informed that this possible fraud was exposed by a “whistle-blower” who had reported his fraud suspicions to the person in charge of the government’s education department. The whistle-blower’s allegations pointed out that the fraud was quite extensive and could possibly adversely affect the health and well-being of both teaching staff and students across the affected schools, as well as the broader community. Sandeep’s preliminary investigation revealed that despite the impact of COVID-19, the education department’s staff responsible for finding and approving the cleaning contracts have been demanding that an unusually high number of contracts be processed. They also have been demanding that these contracts be processed much faster than the time normally allowed, including ignoring key controls such as police checks of the cleaners. Further investigation revealed that when some staff quit working because of this increased pressure, the other staff responsible for finding and approving the cleaning contracts made sure that this did not get the attention of the education department’s directors and senior management and, consequently, the government. In addition, some of these responsible staff have very close relationships with a number of the cleaning contractors. However, as far as Sandeep could determine, they have always kept totally independent from these contractors. Sandeep has decided to further investigate this possible fraud through an undercover operation, using a covert cleaning contracting business that includes himself as one of its cleaners. Assessment Tasks: Answer all three questions below. 1. Discuss up to four (4) red flags or symptoms that indicate that fraud may be occurring? (4 x 1 Mark = 4 Marks) 2. To help Sandeep focus his investigation of this fraud, identify three (3) questions that he would ask himself about fraud symptoms. For each question, present the answer. (3 x 1 Mark = 3 Marks) 3. Having decided to implement an undercover operation, explain how this method would be an effective approach to investigate the fraud. (3 Marks) SECTION C: Case Study C (Total: 8 Marks) Background and Content: Proactive Physio Pty Ltd is healthcare provider business. The company’s key directors are Karem, its recently appointed chief executive officer (CEO), and Antoinette, its newly promoted chief financial officer (CFO). Antoinette has been at this company since it commenced operations and is considered a most trustworthy worker. Amongst her team of accountants, she is very popular, highly respected and also trusted. Antoinette’s recent promotion was based on her in-depth knowledge and understanding of the company, its services, the industry, and its clients. Over the last five years, in addition to providing physiotherapy services to a number of hospitals, the company has been providing “in-home” physiotherapy services, 24 hours per day/356 days per year. This business model has resulted in significant increases in sales and earnings, particularly, during the last 15 months, after the company implemented an aggressive “COVID-19 safe” related marketing campaign for its “in-home” physiotherapy services. The company also introduced large incentives and bonuses to reward its physiotherapists, who have helped achieve such high performance. Within the next 12 months or so, the company is planning to list on the Australian Stock Exchange (ASX). Earlier this year (in January), Karem asked Antoinette to meet with him to discuss the company’s recent significant increases in sales and earnings, and to point out the need for the company to continue such high performance over the next few months. During the meeting, Antoinette looked very worried and tense about the company’s ability to continually keep increasing sales and earnings, as per the company’s expectations. This is because the company had recently failed to secure the renewal of large contract with a major public hospital. This contract would have provided the company future sales worth at least 5 million dollars over the next three years. A few weeks ago, Karem noticed that some of Antoinette’s key staff had resigned with very short notice given, and that she and her team of accountants had started to regularly work late into the nights. Further, he noticed that Antoinette, and her team, appeared even more anxious and stressed than when he first met her a few weeks earlier. Last week, the company’s president, Sanjeev, announced and celebrated that it had met the its high sales and earnings expectations, and now was 100 percent committed to listing on the ASX, within the next six months. Karem also was happy, but at the same time appeared somewhat anxious about these great results; he had become concerned that something “fraudulent” had occurred. Assessment Tasks: Answer the question below. There are six categories of “fraud symptoms”, e.g., “Accounting Anomalies”. Identify and discuss any four (4) “fraud symptoms” present at this company. (8 Marks) SECTION D: Case Study D (Total: 10 Marks) The Cummings and Baptiste Fraud Case Background and Content: By the time the New York identity theft fraud case was solved, over 30,000 people had suffered a total combined loss of over $2.7 million. This money had been stolen by a gang of New York residents who had accessed the victims’ credit information and exploited that information to steal the victims’ identity. The fraud began when Linus Baptiste approached Philip Cummings about a plan to steal and sell people’s personal information. Philip Cummings had begun to work at Teledata Communications, Inc., a third-party credit reporting agency that facilitates the retrieval of credit history data. Teledata had outstanding contracts with over 25,000 companies, allowing these companies to check on the creditworthiness of potential customers, thus creating a direct line past the three main credit bureaus. As a customer service representative, Cummings had obtained access to many confidential access codes. These access codes were used by the clients of Teledata to gain approval on credit requests. With access to these codes, Cummings had the opportunity to commit fraud. In early 2013, Cummings and Baptiste began to steal credit reports. The two fraudsters sold this information to a group of Nigerian nationalists. The Nigerian nationalists would pay up to $60 for one person’s information. After some time, the Nigerian nationalists began to provide the two fraudsters with names and Social Security numbers to help facilitate the process even further. To convert the information into money, the Nigerian nationalists would use the information to gain access to the victim’s bank accounts and other financial information. The group of Nigerian nationalists would then take the following steps: • Deplete the bank accounts of the victims through wire transfers. • Change the addresses of the accounts so the current information was not sent to the victim. • Order new checks to be written off of the victim’s bank accounts. • Order new ATM cards so the money could be taken out in cash. • Order new credit cards under the victim’s name. Establish new lines of credit under the victim’s name. By using these techniques, the fraud gang was able to steal over $2.7 million from consumers. This money was stolen over a period of about three years. The most intriguing aspect of the fraud was that’ Cummings quit working at Teledata half way through the fraud period, but was able to continue to steal the information for an additional two years. Cummings claimed that most of the access codes he had stolen while working at Teledata remained unchanged for the full two years after he left the company. After three years, Cummings began to get greedy, and his greed led to the detection of fraud. Perceiving that he needed to make more money, Cummings stole around 15,000 credit reports from Teledata by using the access codes of Ford Motor Company. Then for the next four months, Cummings again stole a large number of names. This time, Cummings used the access codes of Washington. Mutual Bank to steal 6,000 credit reports. Finally, three months later, Cummings made what would be his last big credit report theft. Using the access codes of Central Texas Energy Supply, Cummings was able to steal 4,500 credit reports. After the theft using Ford’s access codes, Equifax, one of the three large credit bureaus in the United States, began to see the request spikes in Ford’s accounts. After the next two large batches of requests, Equifax decided to investigate further. Equifax found that almost all of the credit report requests came from one phone number and that the requests were done in large batches of about 100. The location of the phone number was found, and a search by federal authorities turned up a computer and other equipment that were used in the fraud. Cummings was prosecuted, sent to prison, and had to pay large fines. The victims faced the dreadful task of restoring their credit, a process that, in some cases, took a long time to complete. Assessment Tasks: Answer this question below. Create a Vulnerability Chart to coordinate the investigation of the various elements of the possible fraud.(10 Marks) SECTION E: Case Study E (Total: 11 Marks) Background and Content: An Australian Stock Exchange (ASX) listed entertainment and casino operator company had been reporting significant losses over the last few years. In addition to this history of poor financial performance, its recent cash flow position also were very weak. However, its balance sheets showed very strong financial positions. A few months ago, the company announced to the world that “it was on the verge of being granted gambling licenses for four brand new casinos in four of China’s largest cities“. In addition, the company announced the prospect of enormous revenues and profits for the coming financial year. The company’s share price tripled over a period of three days. Shortly after this announcement, many investors got caught up in “China Casino Fever”. These investors ranged from large institutional investors to small “mum and dad” investors, and they all believed that they were going to becoming very rich, very quickly. A few weeks after this announcement, the company’s chief financial officer suddenly disappeared. Rumours started spreading that his disappearance was very unusual and suspicious. This disappearance coincided with a report released by the ASX on its examination of the company’s cash handling operations and financial reports. The report revealed that there was evidence that the company was involved in a significant money laundering fraud, falsification of the financial reports, and other related criminal activities. The report concluded that, as result of these activities, the company’s Australian gambling license should be “suspended” until further investigations are carried out by Australia’s gambling regulator, who issues such licenses. After the money laundering fraud was uncovered by the ASX fraud investigators, initially, no-one was sure who was responsible. Many blamed the chief financial officer, who was in charge of preparing the financial reports. Others also blamed other senior company executives and personnel, including the company’s chief executive officer and the president. The company’s president was shocked at the news of the money laundering fraud, and ordered an immediate police investigation. During the police investigation, it was revealed that just before the chief financial officer went missing, the president and his chief executive officer (CEO) both made enormous profits from the selling of their shares. This was in addition to a history of alleged unethical behaviour at a previous entertainment and casino company that they had both been associated with, and the fact that they were leading very lavish lifestyles. In the end, the company’s share price went down, and enormous amounts of money were lost by investors, as news of “being granted gambling licenses for four brand new casinos in four of China’s largest cities” only ended up leading to the discovery of a huge money laundering fraud, falsification of the financial reports, and other criminal activities. Assessment Tasks: Answer all three questions below. There are six elements of the “perfect fraud storm”, e.g., “Greed”. Discuss any THREE “perfect fraud storm” elements that were present in this case? (3 Marks) What were some of the president’s and CEO’s motivations to commit fraud? (2 Marks) a. In what ways would investigating the president and senior management, who are heavily involved in corporate governance, have helped determine the true value of this company? (3 Marks) b. In what ways would investigating the financial results and assumptions behind the announcements have helped determine the true value of this company? (3 Marks) – END OF FINAL ASSESSMENT –


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