The Anti-Fraud Collaboration between the Center for Audit Quality, Financial Executives International, the Institute of Internal Auditors and the National Association of Corporate Directors has released the fourth in a series of case studies highlighting ways to deter financial fraud.

The new case study focuses on LDC Cloud Systems, a fictitious global technology company whose board is dealing with bribery accusations and accounting shenanigans. The case study offers a timeline of management and board decisions after potential problems are uncovered. It demonstrates how complex accounting practices typical in a fast-changing business environment can make a company prone to fraud. The hypothetical scenario shows how fraud situations can develop and be addressed, such as through strong board oversight. For classroom use, the Anti-Fraud Collaboration has developed a video series to bring scenes from the case study to life. The videos are available at the Anti-Fraud Collaboration website.

Center for Audit Quality executive director Cindy Fornelli at the CAQ's 10th anniversary event
Center for Audit Quality executive director Cindy Fornelli at the CAQ's 10th anniversary event Courtesy of the CAQ

“The Anti-Fraud Collaboration is pleased to present the latest case study in our series designed to raise awareness of financial reporting fraud,” said Center for Audit Quality executive director Cindy Fornelli in a statement. “These case studies have proven to be valuable educational tools for all members of the financial reporting supply chain, as well as students.”

The Anti-Fraud Collaboration’s case studies take participants through a hypothetical scenario about a fictional company dealing with fraud. Guided by an instructor, participants can then discuss what could have been done to address or avoid the situation. Each case study offers a companion discussion guide for instructors, available on request.

LDC Cloud Systems is the Collaboration’s fourth case study. Others include:

Hollate Manufacturing focuses on the conditions that can lead to fraud and misrepresentation in financial reporting.

Carolina Wilderness Outfitters aims to facilitate a discussion about how to perform an internal investigation when fraud is suspected in a company.

Kendallville Bank focuses on the need for professional skepticism in the financial reporting process.

“New technologies can make for a disruptive business environment, and can create new challenges on existing business practices,” said FEI president and CEO Andrej Suskavcevic in a statement. “Resources like this case study provide a practical tool to help financial executives explore and deter financial reporting fraud.”

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Michael Cohn

Michael Cohn

Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985.