MGMT E-1680 (14288) Forensic Accounting and Fraud Examinations Number of credit hours: 4 Fall Course Objectives

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1 MGMT E-1680 (14288) Forensic Accounting and Fraud Examinations Number of credit hours: 4 Fall 2014 Professor Vijay Sampath Telephone: (646) vsampath@fas.harvard.edu Section Meeting Time: Wednesday, 7:40 pm 9:40 pm Web Conference (via Blackboard Collaborate) Course Objectives This course explores the forensic accountant's role in today's economy. Topics covered include fraud detection and fraud investigation techniques, valuation of closely held businesses, lost profits analyses, and various types of litigation support services. Fundamental legal concepts governing expert witness testimony are also examined, and students are required to quantify economic damages in cases. By the end of the course students are able to understand both the pervasiveness and the causes of fraud and white-collar crime in our society, examine the types of fraud and fraud schemes that affect business enterprises, explore methods of fraud detection and prevention, and increase their ability to recognize potential fraudulent situations. Though there are no prerequisites for this course, it is highly beneficial if you have taken courses on financial accounting and basic financial statement analysis. It would be easier for you to follow along in class. Required Textbook: Forensic Accounting and Fraud Examination by William Hopwood, Jay Leiner and George Young, McGraw-Hill Companies, Inc. (2011) - ISBN We will cover the chapters mentioned hereunder during the semester. I will cover the materials in the chapters in no particular order. More important than reading the book would be to follow along in the classes and read the supplemental materials presented. I will post additional materials on Blackboard during the semester. Chapter 1 Introduction to Forensic Accounting and Fraud Examination Chapter 2 The Forensic Accounting Legal Environment Chapter 7 The Fraud Investigation and Engagement Processes Chapter 8 The Evidence Collection Process Chapter 9 Fraud Examination Evidence I: Physical, Documentary and Observational Evidence Chapter 10 Fraud Examination Evidence II: Interview and Interrogation Methods Chapter 12 The Fraud Report, Litigation, and the Recovery Process Chapter 14 Financial Statement Fraud Chapter 19 Business Valuation Optional Books Forensic Accounting for Dummies, Frimette Kass-Shraibman and Vijay Sampath, Wiley Publishers 1

2 A Guide to Forensic Accounting Investigation, Thomas Golden, Steven Skalak and Mona Clayton, Wiley Publishers Forensic Accounting and Fraud Examination, Mary-Jo Kranacher, Richard Riley and Joseph Wells, Wiley Publishers Financial Shenanigans How to Detect Accounting Gimmicks & Fraud in Financial Reports, Howard Schilit, McGraw Hill Publishers Litigation Services Handbook The Role of the Financial Expert, Roman Weil, Michael Wagner and Peter Frank, Wiley Publishers Supplementary cases, notes, solutions to in-class exercises and other handouts will be posted on Blackboard. Some of them include the following: J. Wells, When You Suspect Fraud, Journal of Accountancy, June D. Wolfe and D. Hermanson, The Fraud Diamond: Considering the Four Elements of Fraud, CPA Journal, December M. Lehman and M. Weidenmier, Detecting Occupational Fraud: Billing Schemes, CPA Journal, April R. Clark, Revenue-Recognition Decisions: A Slippery Slope? CPA Journal, October J. Wells, When the Boss Trumps Internal Controls, CPA Journal, February lcontrols.htm Guest Speakers I will also bring in guest speakers from time to time; the topics covered by these speakers would include investigative techniques, government enforcement, forensic technology and damages analysis. As it is difficult to predict whether and when these speakers would be available, I have not included the topics in the class schedule. Grading Letter grades will be assigned for the course based on the following scale: % A A B+ 2

3 80-85 B B C C 59 or less F For additional information, please refer to the Harvard Extension School grading policies ( Grading will be weighted as follows: Class Participation 10% Group Project 20% Term Papers (2) 20% Midterm Exam 25% Final Exam 25% Class Participation Attendance in class is mandatory. The course and students also benefit from active participation. Students are expected to contribute throughout the course. Group Project The class will be divided into groups of two or more students and cases will be assigned (please see list of cases under Tentative class schedule ). The team members are jointly required to do two tasks: prepare and present (PowerPoint/Prezi) on the date mentioned and a report (three pages, single-spaced, Times Roman 12 font); the report will be due at the time of final exam. Term Papers You will be individually required to prepare two papers, each two pages in length (single-spaced, Times Roman 12 font) about other types of misconduct based on recent cases. Both papers are due at the time of the final exam. You have to discuss what steps/measures you would take as a forensic accountant to investigate the cases. I will provide you more details during the first week of class. Suggested topics are as follows : Foreign Corrupt Practices Act (FCPA) investigations Anti-money laundering Insider trading 3

4 Exams There will be two exams a midterm and a final exam. There will be three types of questions: multiple choice, true/false and short answer. Arrangements will be made with the School to have the exam proctored. Only calculators are allowed, not PDAs, cellphones, etc. The final exam will be held during finals week. The exams will be closed book; it will be in your best interests to study and work through the materials prior to the exams. In case you are not able to take the exams on the scheduled dates, you will need to the Extension School office s approval to take a late exam. Optional Paper (5%) For extra credit purposes, you can write a paper analyzing a company s financial statement fraud that was not covered in class. The paper should not exceed two pages (single-spaced and Times Roman 12 font) in length and is due at the time of the final exam. Examples: Sunbeam Corporation Computer Associates HealthSouth Tentative Class Schedule DATE TOPIC CASE September 3 Introduction to Forensic Accounting and Legal Environment (Chapters 1 and 2) September 10 Introduction to Forensic Accounting and Legal Environment (Chapters 1 and 2) September 17 Financial Statement Analysis and Analytic Techniques September 24 Financial Statement Analysis and Analytic Techniques October 1 Revenue Fraud (Chapter 14) Enron October 8 Inventory Fraud (Chapter 14) WorldCom October 15 Midterm Exam October 22 Fraud on Reserves (Chapter 14) Tyco October 29 November 5 Business Valuation and Damages Business Valuation and Damages Symbol Technologies Satyam 4

5 November 12 Business Valuation and Damages November 19 Chapters 7 and 8 Auditor Responsibility November 26 Thanksgiving Break December 3 Chapters 9 and 10 Other Types of Misconduct December 10 Chapter 12 Final Exam Review December 17 Final Exam Groupon Bristol-Myers Squibb Citadel Manufacturing Damages Analysis Based on my experience, I would suggest that spending six hours every week should allow you to do well in this course. The six hours include the two hours of class time and doing the assigned cases. In addition to asking questions about the materials covered in class, I encourage you to reach out to me with other academic issues such as writing recommendations or advice regarding career options and/or graduate work. I wish you all the best and look forward to a productive and fun semester! Vijay Sampath 5