Business

ACCT 317_Accounting Fraud Group Project

Due: May 10, 2015

The purpose of this project is to use a combination of financial ratios to analyze some publically traded firms that committed accounting fraud, study if these tools are useful and apply these tools in your future investment decisions.

Step 1 of the project (do it as a group):

Read papers and discuss the “red signals” or “warning signs” that are indicative of a possible financial fraud;

References: ACFE Article Formulas for detection Analysis.pdf;

Understanding the Language behind the Numbers_ Financial Fruad _ Robin Singh _ White Collar Investigator.pdf

In a group (5~ 6 students), determine 10 financial ratios (including relationship between financial ratios) that are good indicators of potential financial fraud and explain why.

Step 2 of the project (do it individually):

In your group, choose one manufacturing company (NOT financial institutions and utility companies) that committed accounting fraud between year 2011~ 2014. (SEC website or http://securities.stanford.edu/) . The company must have at least 3 years of financial data. The accounting fraud must fall into one of the five categories (type of accounting fraud): overstating revenues, understating expenses, false asset value, disclosure, or understating or hiding debts). Collect the following data: Company name and ticker, filing date (year of the litigation), year of damage, type of accounting fraud.

Step 3 of the project (do it individually):

Go to the SEC website (company search), or Bloomberg terminal, collect the 3 years of following (note that the 3 years must include the damage year) information for the companies you choose in step 1: firm size (market capitalization or total assets), industry SIC code, year of IPO, auditor, auditor opinion, name and gender of the CEO, 3 years of financial statements (balance sheet, income statements and cash flow statements) and the “indicators” information you determined in step 1....