Because misappropriations of assets are rarely material to the financial statements as a whole, I don’t spend much time talking about them during my basic undergraduate auditing class. But in my master’s level class, I spend four weeks discussing fraud investigation. The Association of Certified Fraud Examiner’s biannual Report to the Nations on Occupational Fraud and Abuse is a valuable resource for showing students the wide variety of occupational fraud perpetrated against organizations.
"Tallahassee BeanCounters" is, in my opinion, the best auditing-related teaching case Issues in Accounting Education has ever published. Its most innovative feature is that students do not receive all the data they need to solve the case at the outset. Students must decide what information they need and request it from the instructor - if they don't ask the right questions, they can't catch the thief. I have used "Tallahassee BeanCounters" the last four years and look forward to trying its successor, "Return of the Tallahassee BeanCounters," next spring.
Examples of Employee Theft:
“At Koss, Books Will Get More Scrutiny,” Milwaukee Journal Sentinel (December 29, 2009). A Koss vice president is charged with embezzling $4.5 million, using company funds to buy clothing and jewelry.
“KPMG Accountancy Chief Fiddled £545,000,” Julie Moult, Daily Mail (August 26, 2009). A KPMG partner stole £545,000 by submitting false claims for travel expenses.
“Mr. John Pleads Guilty,” Stephen Taub, CFO.com (August 5, 2008). A construction company accountant embezzled $2.8 million by submitting phony invoices from a fictitious portable toilet company.
“Relating Operational and Financial Factors to Assess Risk and Identify Fraud in an Operational Setting,” Richard Gifford & Harry Howe, Issues in Accounting Education (May 2011): 361-376. Students analyze production and shipping data to assess the risk of fraud in a manufacturing company’s scrap operations.
“Mountain State Sporting Goods: A Case of Fraud? A Case Study in Fraud Examination,” Robert Rufus & William Hahn, Issues in Accounting Education (February 2011): 201-217. Students must review journal entries and read transcripts of interviews to determine whether fraud is occurring at a sporting goods store.
“Return of the Tallahassee BeanCounters: A Case in Forensic Accounting,” Carol Callaway Dee & Cindy Durtschi, Issues in Accounting Education (May 2010): 279-321. Students review documentary evidence and conduct mock interviews to uncover employee fraud at a fictional minor league baseball team.
“Playing the Ponies: A $5 Million Embezzlement Case,” Martha Howe & Charles Malgwi, Journal of Education for Business (Sep/Oct 2006): 27-33. This case describes embezzlement by a high school treasurer. Students must identify control weaknesses and red flags.
“Interstate Business College: A Case Study in Fraud Examination,” Bonita Peterson & Thomas Buckhoff, Issues in Accounting Education (November 2004): 505-527. Students examine accounting information, financial statements, and payroll data to uncover misappropriation of student funds at a vocational business college.
“The Tallahassee BeanCounters: A Problem-based Learning Case in Forensic Auditing,” Cindy Durtschi, Issues in Accounting Education (May 2003): 137-173. Students must review documentary evidence to discover three employee embezzlements at a fictional minor league baseball team.
“Student Health Services: a Case of Employee Fraud,” Bonita Peterson & Thomas H. Gibson, Journal of Accounting Education (2003): 61-73. Students must identify control weaknesses that permitted an employee to embezzle approximately $500K and identify red flags that should have helped management and the auditors suspect fraud.
“Developing Student Abilities to Recognize Risk Factors: A Series of Scenarios,” Carolyn Strand, Sandra Welch, Sarah Holmes & Steven Judd, Issues in Accounting Education (February 2002): 57-67. Students must identify red flags suggesting employee theft in the finance department of a small town.
“Embezzlement at the University of California: An Instructional Case in Employee Fraud,” Peggy Dwyer, Issues in Accounting Education (November 1998): 975-985. Describes an actual embezzlement of $900 thousand from the University of California. Students must identify internal control weaknesses that permitted the fraud and select audit tests that should have detected the fraud.
“Fraud Detection and Investigation: Microcomputer Consulting Services,” Bonita Peterson & Thomas Gibson, Issues in Accounting Education (February 1999): 99-115. Describes internal auditors’ investigation of embezzlement committed by a university employee.