Overview
For this assignment, you will analyze three cases of financial statement fraud and explore prevention and detection measures or techniques that could help prevent similar fraud schemes from happening in the future. Your case study will be divided into three parts.
First, you will need to choose three of the seven methods of financial statement fraud listed below:
- Fictitious revenue
- Manipulated timing
- Overstated or manipulated assets
- Understated or concealed expenses or liabilities
- Improper disclosures
- Inflated company valuation
- Expense reimbursement schemes
For each of the three methods you have chosen, conduct your own research to identify a real-life company or organization that committed (or is alleged to have committed) that type of financial statement fraud. You must select three distinct companies. They may be from the United States or abroad. You may not choose any of the companies that were profiled in the Unit III or Unit VII Lessons.
For Part 1, analyze the cases of fraud by addressing the following for each case:
- Briefly summarize the case for financial statement fraud against the company. What type of fraud was it, and why? What happened? Who was involved?
- How was the fraud uncovered?
- What were the outcomes or repercussions?
For Part 2, discuss specific types of preventative measures or techniques that each company could have employed to prevent or deter the financial statement fraud that occurred in each case. Include specific measures that would have eliminated the opportunities to perpetrate the financial statement fraud. Explain the larger value of these measures beyond the confines of the case.
Finally, for Part 3, explain the need for a company or organization to employ a comprehensive approach to fighting fraud. Include how creating a risk-aware culture of organizational ethics and integrity can help prevent fraud.
Your case study must be at least three pages in length, but no more than four pages in length. The title page (if used) and references page do not count toward the page length requirement.
You must use at least two sources to support your analysis in Parts 2 and 3. All sources used, including those used to identify the companies in Part 1, must have citations and references in APA Style.
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For this journal, you will provide your own analysis and opinions in a two-page case study of the fraud investigation at Austal USA and of three of its former executives. This journal measures your mastery of ULOs 5.2 and 5.3 and is worth 8% of your course grade.
Austal USA is an American shipbuilder Mobile, Alabama. It is a wholly owned subsidiary of Austal Limited, an Australian company that is traded over the counter in the United States, as well as on the Australian Securities Exchange.
Craig Perciavalle, Joseph Runkel and William Adams, former executives of Austal USA, were indicted in 2023 by the Department of Justice (DOJ) on criminal charges related to an accounting fraud scheme. The Securities and Exchange Commission (SEC) has also filed a twin, civil complaint related to the same alleged fraud. The scheme involved falsely overstating revenue that Austal USA was earning from shipbuilding contracts with the U.S. Navy. The three men are alleged to have conspired to mislead Austal’s shareholders and the investing public about the company’s financial condition. This artificially boosted the stock price and led to a write-down of over $100 million in previously wrongly booked profits.
After conducting your own further research on the Austal USA case, you will construct a case study summarizing the factors in the DOJ and SEC cases against Austal USA, Perciavalle, Runkel, and Adams.
Next, explore the distinctions between the civil and criminal cases of fraud at Austal USA by addressing each of the following:
- Compare and contrast the basic differences between a criminal case and a civil case for the same fraud. Include burden of proof, legal standards, and objectives of civil and criminal proceedings. Address how the same actions may lead to both civil and criminal consequences concurrently.
- Discuss how the alleged fraudulent actions may meet the criteria for civil fraud, emphasizing misrepresentation, materiality, and damages.
- Discuss how the alleged fraudulent actions indicted may fulfill the conditions for criminal fraud, focusing on intent, false representation, and knowledge of wrongdoing.
- Explore potential civil and criminal consequences for including additional lawsuits, sentences, and financial penalties.
- While the three executives are specifically named in the indictments, do you think Austal USA as an organization bears any liability and should be charged separately Explain your rationale.
Finally, if you were the lead fraud investigator in this case or if you were called as an expert witness in either the civil or criminal cases, identify and justify your top three priorities in ensuring your conduct adheres to strict ethical fraud examination standards to promote justice and fairness in the legal arena.
Your journal submission must be at least two pages, but no more than three pages in length. You must use at least two sources to support your analysis. All sources used must have citations and references properly formatted in APA Style.