ACF5000 Business Communication for Accounting Professionals - Written Report (Individual assignment) - Fraudulent financial reporting case study: Luckin Coffee
ACF5000 Business Communication for Accounting Professionals
2.Written Report (Individual assignment)
Weighting: 30% of the total marks for the subject (marked out of 100 in total) Due Date: Friday, 3 May 2024, 11:55 PM
Word Limit: 1,600 words (excluding executive summary, references and any appendices) Submission Method: electronically, via the Moodle Dropbox
Learning Outcomes Assessed:
This assessment task is designed to assess your achievement of the following unit learning outcomes:
1.develop an understanding of the professional environment in which accountants operate
2.assess and develop competencies in the different communication needs of accountants and their diverse stakeholders
4.employ intercultural and interpersonal understanding to enhance effective professional communication
5.create key professional documents that are designed to influence specialist and non-specialist audiences.
Overview of Assignment
Cases of fraudulent financial reporting (‘accounting scandals’) frequently cause immense financial and non-financial damages to a wide range of corporate stakeholders and society as a whole. They strain or even destroy trust that stakeholders, like employees, customers, suppliers, shareholders and the wider public, had placed in the company or brand. Communication to stakeholders in such times of crises becomes even more important than usual and an important instrument to limit reputational damages and to start rebuilding trust.
According to the International Standard of Auditing (ISA) 240 ‘The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements’, “[f]raudulent financial reporting involves intentional misstatements including omissions of amounts or disclosures in financial statements to deceive financial statement users” (ISA 240, A2). The reasons for financial reporting fraud are commonly classified into three categories, the so-called Fraud Triangle (ISA 240, A1 – with summarising amendments in italics):
•Incentive or pressure to commit fraudulent financial reporting may exist when management is under pressure, from sources outside or inside the entity, to achieve an expected (and perhaps unrealistic) earnings target or financial outcome (deficiencies in performance management systems e.g. ill-developed KPIs, unrealistic
market expectations) – Similarly, individuals may have an incentive to misappropriate assets, for example, because the individuals are living beyond their means (social pressure, gambling, drug and/or alcohol addictions, etc.)
•A perceived opportunity to commit fraud may exist when an individual believes internal control can be overridden, for example, because the individual is in a position of trust or has knowledge of specific deficiencies in internal control (deficiencies in corporate governance)
•Individuals may be able to rationalize committing a fraudulent act. Some individuals possess an attitude, character or set of ethical values that allow them knowingly and intentionally to commit a dishonest act.
However, even otherwise honest individuals can commit fraud in an environment that imposes sufficient pressure on them (deficiencies in corporate culture)
For more detailed examples of fraud risk factors from the three categories please refer to Appendix 1 of ISA 240 (available on the ACF5000 Moodle site under ‘Assessment). Accounting scandals can commonly be traced back to a combination of risk factors across these categories.
Assignment Requirements:
Choose one of the accounting scandals from the list provided in Appendix 1 that has caught your interest. Undertake independent research (company resources, academic literature, reputable newspapers, financial information providers, statements of stock exchanges/regulators/courts and other authorities) to gain a deep understanding of the affected company, its business model and the background of the accounting scandal.
You are to prepare a report that critically analyses and discusses the potential causes for your chosen accounting scandal and provides recommendations for strategic measures the executive leadership group of the affected company should take to avoid similar financial reporting fraud in the future. Based on these recommendations you are tasked to draft a communication piece for the Board of Directors that aims to limit reputational damage and to restore trust in the company. In particular,
1.provide a brief overview of the accounting scandal as an introduction to your report (around 300 words);
2.critically analyse and discuss the causes of your chosen accounting scandal along the Fraud Triangle (see ‘Overview of Assignment’ above). Focus on one of the three categories of the Fraud Triangle based on what you believe was the most important risk factor in your chosen case (around 600 words);
3.provide recommendations for strategic measures the executive leadership group of the affected company should take to avoid similar financial reporting fraud in the future (around 400 words);
4.as a conclusion, draft a communication piece for the Board of Directors to send out to the stakeholder group YOU believe is the most important in the context of your case. The piece should aim to limit the reputational damage and to restore trust in the company. Depending on your chosen stakeholder group your communication piece can be a press release, a letter (to external stakeholders) or an internal communication (email to internal stakeholders) (around 250 words); and
5.provide a short justification for your chosen communication piece (around 50 words).
Your work should be presented in a concise written business report. If you are insecure how to prepare such a report please consult the Monash University ‘Student Academic Success’ sites for this type of assignment. The report should at least include a title page (incl. your name, student ID, course title, assignment title), executive summary, table of contents, introduction, body, conclusion, list of references, and address the main points above. The audience you are communicating to is the Executive Leadership Group of your chosen company. It is important to keep this in mind when you are preparing and writing your report. This assignment is to be undertaken individually.