Info
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Course 2018-2019 a.y.

20563 - FRAUD DETECTION AND RISK ASSESSMENT

Department of Accounting

Course taught in English


Go to class group/s: 31

CLMG (6 credits - I sem. - OP  |  SECS-P/07) - M (6 credits - I sem. - OP  |  SECS-P/07) - IM (6 credits - I sem. - OP  |  SECS-P/07) - MM (6 credits - I sem. - OP  |  SECS-P/07) - AFC (6 credits - I sem. - OP  |  SECS-P/07) - CLEFIN-FINANCE (6 credits - I sem. - OP  |  SECS-P/07) - CLELI (6 credits - I sem. - OP  |  SECS-P/07) - ACME (6 credits - I sem. - OP  |  SECS-P/07) - DES-ESS (6 credits - I sem. - OP  |  12 credits SECS-P/07) - EMIT (6 credits - I sem. - OP  |  SECS-P/07) - GIO (6 credits - I sem. - OP  |  SECS-P/07)
Course Director:
NICOLA PECCHIARI

Classes: 31 (I sem.)
Instructors:
Class 31: NICOLA PECCHIARI


Prerequisites

To feel comfortable in this course, you should be familiar with financial accounting and financial statement analysis (basic) and corporate governance (basic).


Mission & Content Summary
MISSION

The course major educational objective is the analysis of the risk assessment, internal controls and auditing methodologies with a specific focus on those corporate frauds that can have an impact on financial statements and other corporate financial disclosures. Firstly, the course introduces the distinction among the concepts of errors, frauds and crimes, also highlighting the difference, as regards the financial reporting, among earnings management, abuse of accounting standards and fraudulent financial statements. The course further illustrates a brief history of corporate frauds and the potential connections with other significant crimes, like money laundering, bankruptcy frauds, organized crime infiltration in the legal economy and more. From a conceptual perspective, fraud risk assessment, fraud prevention and fraud detection are interesting in order to understand the strength and quality of the corporate risk management and managerial control processes. That is why these topics and the related techniques and tools for identifying frauds are relevant for several professionals: external and internal auditors, financial accountants and controllers, fraud examiners, compliance specialists, private equity and M&A specialists and more. Particular relevance is given to the analysis of case studies for real companies (Enron, Parmalat, WorldCom and many more) in order to develop students' skills in identifying critical fraud risks and evaluating their impact.

CONTENT SUMMARY

Part I (Concepts and Methodologies):

  • Introduction to some definitions: frauds vs. crimes; earnings management vs. abuse of accounting standards vs. fraudulent financial reporting.
  • (A brief) History of corporate frauds; historical evolution of risk management/internal controls/compliance and crime prevention laws and regulations; the main professional roles involved in risk management, internal controls and fraud prevention.
  • Enterprise Risk Management, risk assessment and internal controls: prevention vs. detection of errors, frauds and crimes.
  • The lesson from fraud examiners: the fraud triangle, the fraud tree (occupational frauds classification system), the empirical research about occupational (corporate) frauds.
  • Focus on financial frauds: a classification of earnings management practices, abuse of accounting standards and fraudulent financial reporting.
  • The main quantitative and qualitative methodologies and tools for the prevention and detection of frauds.

Part II (Case Studies): the second part (a major part of this course) is dedicated to the analysis and discussion of real case studies. Some case studies concern very famous financial scandals from the recent years. For each topic, the teacher introduces the problem and the case study; conceptual and practical learning is aided by one-two specific readings from either academic or professional practice journals. Here below some purely indicative examples of frauds discussed with case studies:

  • Introduction to Accounting Frauds - Complex Companies Structures and Related Parties: Part I – The Special Purpose Entities.
  • (cont.) Part II – Common Companies Structures (and Ralated Parties) used for fraudulent purposes.
  • (cont.) Part III – Network Analysis for Fraud Investigation.
  • A Comprehensive case Study: The Parmalat Scandal.
  • The "Abuse" of Accounting Standards: incidents for real companies (some famous scandals).
  • Income Smoothing and Big Bath; focus on Cookie Jar Accounting.
  • Financial Institutions and Frauds; The Ponzi's Scheme.
  • Fraudulent M&A and Consolidated Financial Statements - Toward the concept of "Virtual" Net Equity.
  • Organized Crime and Money laundering.
  • Organized Crime - Criminal Infiltration into Legal Economy and Corruption.

Intended Learning Outcomes (ILO)
KNOWLEDGE AND UNDERSTANDING
At the end of the course student will be able to...
  • Understand what are the typical corporate frauds (corruption, misappropriation of assets and fraudulent financial reporting).
  • Which is the difference between fraud prevention and fraud detection (and what the the relevant methodologies and techniques).
  • Understand the difference between real earnings management, earnings management, abuse of accounting standards and fraudulent financial reporting.
APPLYING KNOWLEDGE AND UNDERSTANDING
At the end of the course student will be able to...
  • Make an overall assessment of fraud risks (fraudsters, opportunities, fraud schemes and red flags).
  • Apply some fraud detection techniques based on accounting and network analysis.

Teaching methods
  • Face-to-face lectures
  • Exercises (exercises, database, software etc.)
  • Case studies /Incidents (traditional, online)
  • Group assignments
DETAILS

Students are required to understand how to use network analysis techiniques (with the help of a specific software).


Assessment methods
  Continuous assessment Partial exams General exam
  • Written individual exam (traditional/online)
  •     x
  • Group assignment (report, exercise, presentation, project work etc.)
  •     x
    ATTENDING STUDENTS

    The faculty team determines student grades by using a combination of assignments and final exam. Students' evaluation is based on:

    • Individual written exam (open questions and short case discussion): 70%.
    • Overall group assignment evaluation: 30%.

    The final exam (written) consists of 5 multiple choice questions and 3 essay questions relating to class conceptual sessions and case studies discussions. It lasts approximately 1 hour. The written exam is based on all the subject detailed in the Course Website, including case studies.

    • In order to promote active participation to classes and to improve the quality of learning, students are asked to accompany their class participation with 1 group assignment: it is a case study based on a real example of fraud/crime. This assignment is estimated to require on average 5-days working time and is evaluated by instructors, thus becoming an integral part of the final individual evaluation. The assignment is supported by written guidelines and formats prepared by instructors and uploaded on the course website. Each group delivers the written output of the assignment to the instructor according to the guidelines received. Each group must be ready to make a brief presentation to the classroom according to a schedule that is defined and communicated by the instructors.
    NOT ATTENDING STUDENTS

    Non attending students are those students that do not participate to the group assignment. For these students the evaluation is only based on the written exam. The final (written) exam includes one additional question concerning 2 readings: you find details about these readings on the Course Website.


    Teaching materials
    ATTENDING STUDENTS
    • Slides, readings and case studies and other materials (optional readings) are provided during the course.
    • Students need to refer to each specific session in the Bboard e-Learning space (the course web site).
    NOT ATTENDING STUDENTS

    Two supplemental readings in addition to the materials required for attending students.

    Last change 27/06/2018 08:29