Financial statement is one of the most costly types of fraud and can have a direct financial impact on businesses and individuals, as well as harm investor confidence in the markets. Analyzing financial statement fraud also helps us to understand diverse aspects of accounting and corporate governance. E.g. what happens, if financial statements as governance mechanism fail? Why do managers commit fraud?  What accounting techniques are exposed to fraud and why? What are the measures to detect financial statement fraud?

This course

• describes major and emerging types of financial statement fraud, using real-life cases to illustrate the schemes
• explains the underlying accounting principles, citing IFRS that are violated when fraud is perpetrated
• provides ratios, red flags, and other techniques useful in detecting financial statement fraud schemes

This course covers the basics of financial statement fraud including red flags and ways to detect potential schemes, with a focus on International Financial Reporting Standards (IFRS). It provides an overview of IFRS and guidance related to specific accounting techniques. The basic structure of the course is as follows:

• Financial Statement Fraud
• Responsibility for Financial Statements and Ethics
• Basics of International Financial Reporting Standards (IFRS)
• Specific IFRS techniques, fraud and related red flags:
  • Revenue Recognition Fraud Schemes
  • Improper Deferral of Costs and Expenses
  • Improper Asset Valuation
  • Improper Recording of Liabilities
  • Inadequate Disclosures
• Detecting Fraud Through Financial Statement Analysis

Students will learn technical and behavioral aspects of financial reporting fraud.

After completing this course, students will have the ability to:

• assess international financial reporting standards and their impact on the financial reporting process
• examine financial statement fraud in general and related fraud schemes
• identify red flags of financial statement fraud schemes
• determine methods of detecting financial statement fraud

Apart from that, completing this course will contribute to students' ability to:

• efficiently work and communicate in a team
• improve their oral and written communication and presentation skills
• learn to give and receive constructive feedback

In order to successfully pass this course, your absence is limited to 20 % of our appointments.

This course will combine various learning methods to deliver the different topics to the students. These will include readings, open class discussions, teamwork, case studies, exams and presentations.

The final grade of the course will depend on:

• Pre-assignment 10 %
• Group assignment 40%
• Solving a Problem set 25 %
• Quiz 15 %
• Class participation 10 %

Class participation is mandatory with continous assessment of student performance.

Grading scheme: 

The intended audience for this course is students with prior basic knowledge of financial accounting who understand:

1. the recording of economic transactions in the accounting records;
2. the basic financial statements that summarize a firm's economic transactions (the balance sheet, the income statement and the statement of cash flows) and
3. the fundamental concepts needed to prepare or understand published financial statements (e.g. use of accrual accounting).

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Univ.Prof. Dr. Anne d'Arcy