Evaluate A Company Recently Exposed To Financial Fraud

Evaluate a company recently exposed to financial fraud and

For this assignment, you will select a different company than in the prior assignments and one that was recently exposed to financial fraud. The fraud could be an internal or external type of financial fraud; it is strictly a financial type of fraud. You will evaluate how financial information could have helped early detection of the financial fraud, and how auditing procedures would have helped to mitigate financial risk. You will develop a recommendation for a strategy to develop auditing and monitoring procedures that will improve efficiency, monitoring, controlling, and corporate financial governance practices and also influence financial governance policies. You will address potential risks for ethic violations and how the new procedures will mitigate the risk and justify why these procedures will increase efficiency, monitoring, controlling, and corporate governance.

Paper For Above instruction

The focus of this paper is to analyze a recently exposed case of financial fraud involving a specific company, with the aim of identifying opportunities for early detection through financial information and enhancing corporate governance through improved auditing procedures. The selected company serves as a pertinent example of how weaknesses in financial oversight can lead to significant fraud, and how strategic reforms can mitigate future risks.

For illustration, let's consider the case of Wirecard AG, a German financial services provider that was embroiled in a major financial scandal involving the misrepresentation of assets and fraudulent accounting practices (Reuter & Nolke, 2020). Wirecard's fraud was characterized by inflated revenue figures and fictitious cash balances, which misled investors and regulators about the company's true financial standing. This case exemplifies how deficiencies in financial oversight, internal controls, and effective auditing can enable significant fraud to go unnoticed until it causes substantial damage.

In analyzing Wirecard’s case, it becomes evident that weaknesses in financial operations, such as inadequate oversight of accounting applications and deficient internal controls, contributed significantly to the fraud’s concealment. The lack of independent audits and insufficient scrutiny of cash balances allowed management to manipulate financial reports. Moreover, the absence of robust monitoring and early warning systems meant that irregularities persisted over several years before being exposed by external auditors and investigative journalists (Schmid, 2020).

Enhancing corporate financial governance in such cases requires implementing targeted strategies to bolster early detection and prevent recurrence. A comprehensive approach involves at least three integrated solutions for auditing and monitoring: first, the deployment of real-time financial monitoring systems utilizing automation and data analytics; second, routine independent internal audits with increased scope and frequency; and third, reinforcing ethical standards through ongoing staff training and a robust whistleblower program. These measures collectively enhance transparency and accountability, making financial manipulation more difficult and more likely to be detected early.

Potential risks for ethical violations remain significant, particularly when there is an institutional culture of complacency or management pressure to meet financial targets. The integrated solutions aim to mitigate these risks by establishing clear accountability frameworks, fostering an organizational culture of ethical behavior, and implementing mechanisms for prompt reporting of unethical conduct. For example, real-time monitoring systems can flag irregular transactions immediately, reducing the window for unethical manipulation (Kranacher et al., 2019). Furthermore, regular independent audits act as an external safeguard, ensuring unbiased oversight, while staff training emphasizes ethical standards and compliance.

In addition to internal reforms, adopting industry best practices can substantially improve financial governance. The Institute of Internal Auditors (IIA) recommends integrating continuous auditing techniques with enterprise risk management frameworks, which ensures ongoing evaluation of financial processes (IIA, 2022). Similarly, the implementation of the COSO Internal Control-Integrated Framework provides a structured approach to risk identification, control activities, and monitoring, which strengthens the overall governance architecture (COSO, 2017). Integrating these practices within the company’s operations creates a resilient environment where financial integrity is prioritized and fraud risks are minimized.

Finally, developing a strategic plan to help the company reach its revenue goals must incorporate ethical decision-making, cost-effective outsourcing options, and robust fraud detection methods. Ethical decision-making includes setting clear standards for financial reporting and performance expectations aligned with corporate values. Costing approaches such as activity-based costing can offer more accurate insights into profitability, facilitating better resource allocation. Outsourcing specific functions, such as internal audits or compliance monitoring, can help maintain high standards while reducing internal workload (Gibbs, 2021). Lastly, consistent fraud detection protocols, including anomaly detection algorithms and forensic analysis tools, are essential to identify irregularities promptly and prevent significant financial losses.

References

• COSO. (2017). Internal Control — Integrated Framework. Committee of Sponsoring Organizations of the Treadway Commission.
• Gibbs, M. (2021). Cost Management Strategies for Enhancing Financial Performance. Journal of Financial Planning, 34(2), 45-60.
• Institute of Internal Auditors (IIA). (2022). Integrating Continuous Auditing and Enterprise Risk Management. The IIA Global Bulletin.
• Kranacher, M. J., Riley, R. A., & Wells, J. T. (2019). Forensic Accounting and Fraud Examination. Wiley.
• Reuter, T., & Nolke, G. (2020). The Fall of Wirecard: An Analysis of Financial Misconduct. Financial Times Case Studies.
• Schmid, M. (2020). Lessons from the Wirecard Fraud Scandal. Journal of Financial Crime, 27(4), 1234-1247.