| Course | ACC 691 Detection and Prevention of Fraudulent Financial Statements |
|---|---|
| Module | Module 10 |
| Paper type | graduate final project designing a financial statement fraud prevention program |
| Length | About 1,030 words, 6 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | MS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 691 Module 10
Fraud Prevention and Detection Program
[Student Name]
Southern New Hampshire University
ACC 691: Detection and Prevention of Fraudulent Financial Statements
Final Project
[Instructor Name]
[Date]
The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.
Fraud Prevention and Detection Program
Introduction
This report proposes a fraud prevention and detection program for adoption by the board following the 2026 restatement. The schemes described in earlier modules overstated pretax income by $57.8 million over six quarters, and the governance review in Milestone Two found that oversight failed at every layer. The program follows the six-part structure of the joint fraud risk guide: governance, risk assessment, prevention, detection, investigation and corrective action, and monitoring (Committee of Sponsoring Organizations of the Treadway Commission & Association of Certified Fraud Examiners, 2016). Each element responds to a specific failure in this case.
Fraud Risk Assessment
The first step is a formal assessment, refreshed each year and presented to the audit committee, that identifies how the company's statements could be misstated and who could do it. The table ranks the risks the case revealed.
Fraud risk assessment summary
| Risk | Likelihood | Impact | Owner | Key response |
|---|---|---|---|---|
| Revenue cutoff and dealer terms | High | High | Chief accounting officer | Terms in contract system only; quarter-end shipping review |
| Reserve estimates | Medium | Medium | Controller | Reserve model approved by committee; claims comparison |
| Capitalized costs | Medium | High | Controller and engineering | Policy with criteria; hours tested by activity |
| Inventory at multiple sites | Medium | Medium | Operations finance | Simultaneous counts; transfer matching |
| Off-balance sheet commitments | Low | High | General counsel and treasurer | Guarantee register; two signatures |
| Management override | Medium | High | Audit committee | Journal entry analytics; private sessions |
Incentives and Culture
Pressure began with pay. Erickson et al. (2006) did not find a consistent link between equity incentives and fraud in their sample, but the evidence assembled by Feng et al. (2011) points to finance chiefs who joined manipulations under pressure from chief executives with strong equity incentives, which matches this case. Schrand and Zechman (2012) describe how overconfident executives can drift from optimistic reporting into misstatement. The program therefore removes annual guidance as a pay metric. Bonuses will depend on three-year operating income, cash flow from operations and a quality measure, and equity awards will vest over four years. The clawback policy required by listing standards will be extended voluntarily to the sales vice presidents and regional managers. The company will stop issuing annual earnings guidance for two years, which removes the specific target that drove the fraud.
Governance and Oversight
The board will separate the chair and chief executive roles, appointing an independent chair. Independence reviews will include personal and professional ties. The audit committee will grow to four people, the newest chosen for current experience preparing SEC filings, will meet every other month and will set aside time at each meeting, with management absent, for internal audit, the external auditors and the chief accounting officer. Internal audit will report functionally to the committee, which will approve its plan, budget and the director's evaluation. The committee will require that the plan cover revenue, reserves and capitalized costs every year.
Preventive Controls
Payment terms and return rights will exist only in the contract system, and any change will require credit department approval. Bill-and-hold sales will require a finance checklist of the four criteria and the chief accounting officer's signature. Capitalized costs will require monthly certification by engineering managers outside the project and testing of a sample of hours against work descriptions. Every interplant transfer will carry a document matched at receipt. Guarantees, letters of credit and similar commitments will require board approval above $1 million and two signatures, and will be recorded in a register reconciled quarterly to the notes. Payables cutoff will be enforced by matching receiving reports to invoices in the last week of each quarter.
Detective Controls
Prevention can be overridden, so detection must look for the patterns the case revealed. Internal audit will run the following analytics each quarter and report results directly to the committee.
Quarterly fraud analytics
| Measure | Scheme it detects | Threshold for review |
|---|---|---|
| Receivable days by channel, dealers separately | Dealer loading, side terms | Rise of more than 10 days |
| Revenue in the last ten days of the quarter | Bill-and-hold, pull-forward | Above 30 percent of quarterly sales |
| Warranty reserve against claims paid, four quarters | Reserve releases | Reserve falls while claims rise |
| Capitalized hours by activity code | Improper capitalization | Non-software activity above 10 percent |
| Interplant transfers in last five days | Double counting | Above twice the quarterly average |
| Beneish M-score | General manipulation | Above -2.22 |
| Manual journal entries over $250,000 at quarter end | Management override | Any without support |
These measures would have flagged each scheme in the case within one quarter. The external auditors will receive the same reports.
Reporting and Investigation
The hotline will route every report involving accounting, financial reporting or senior executives directly to the audit committee chair and the internal audit director, with a log reviewed at each committee meeting. Reports will be acknowledged within two business days, and the committee will retain outside counsel and forensic accountants for any credible report involving an officer. Retaliation will be a dismissal offense, and employees will be reminded of their right to report directly to the SEC.
Implementation and Monitoring
The program will be implemented over two years. Governance changes, the guarantee register, the hotline and the pay redesign come first, in the first two quarters. Contract system changes and capitalization testing follow between months seven and twelve, and the full analytics suite by the end of the second year. Estimated costs are about $2.4 million: $0.9 million for two additional internal audit staff and analytics software, $0.6 million for contract system changes, $0.5 million for the fourth committee member and an outside governance review, and $0.4 million for training. The board will judge the program on four numbers: the portion of hotline reports that arrive at the committee, the number of analytics exceptions resolved within a quarter, internal audit coverage of the six ranked risks and the absence of material weaknesses in the auditors' report.
Conclusion
The fraud succeeded because pressure was high, oversight was weak and no one connected the warning signs. This program reduces the pressure by changing pay and dropping guidance, closes the specific gaps with preventive controls, watches for each scheme with analytics and makes sure that warnings reach people independent of management. Adopted in full, it gives the board a reasonable basis to tell investors that the conditions behind the restatement have been addressed.
References
Committee of Sponsoring Organizations of the Treadway Commission & Association of Certified Fraud Examiners. (2016). Fraud risk management guide. Committee of Sponsoring Organizations of the Treadway Commission.
Erickson, M., Hanlon, M., & Maydew, E. L. (2006). Is there a link between executive equity incentives and accounting fraud? Journal of Accounting Research, 44(1), 113-143. https://doi.org/10.1111/j.1475-679X.2006.00194.x
Feng, M., Ge, W., Luo, S., & Shevlin, T. (2011). Why do CFOs become involved in material accounting manipulations? Journal of Accounting and Economics, 51(1-2), 21-36. https://doi.org/10.1016/j.jacceco.2010.09.005
Schrand, C. M., & Zechman, S. L. C. (2012). Executive overconfidence and the slippery slope to financial misreporting. Journal of Accounting and Economics, 53(1-2), 311-329. https://doi.org/10.1016/j.jacceco.2011.09.001
What the ACC 691 Module 10 instructions ask for
The ACC 691 Final Project asks you to design a program that would prevent financial statement fraud in the case company, or detect it early, based on what the milestones revealed. Guidelines usually require a ranked list of fraud risks, controls that stop schemes and others that catch them, changes to board oversight, an approach to incentives and culture, a response and investigation process and a plan for implementation and monitoring. The program should respond to the specific schemes and failures in your case rather than listing every recognized practice. Most versions expect a professional report addressed to the board, with tables, and recommendations that are concrete enough to implement. Expect a substantial paper of eight to ten pages.
How this ACC 691 Module 10 final project example is built
The paper opens with a risk assessment that ranks each scheme from the case by likelihood and impact and assigns an owner. It replaces bonuses tied to annual guidance with a mix of three-year measures and cash flow targets, and adds a clawback that reaches the CFO and sales leaders. Governance changes include an independent chair, a fourth audit committee member and internal audit reporting to the committee. A table of quarterly analytics ties a measure to each scheme: receivable days by channel, reserves against claims, capitalized hours by activity and plant transfers in the last five days of a quarter. The hotline routes financial reports to the committee chair, and a two-year rollout costs about $2.4 million.
Where the ACC 691 Module 10 rubric puts the points
The Final Project rubric typically scores the fraud risk assessment, preventive controls, detective controls, governance and oversight, incentives and culture, response and investigation, implementation and monitoring, use of research and frameworks, and professional presentation. The best projects tie every control to a specific risk from the case, explain why the control would have worked where the old ones failed and include measures to show whether the program is working. They also address incentives directly, since controls alone cannot offset strong pressure. Graders mark down generic lists of controls, recommendations without owners or costs, and programs that rely entirely on the people who committed the fraud being replaced.
ACC 691 Module 10 help: the mistakes that cost points
Final projects in this course often read as catalogs of best practice. Anchor each element to a finding from your milestones: if the warranty reserve was drained, the analytics section should compare reserves with claims each quarter, and someone outside finance should see the result. Another weakness is ignoring pay; research links equity incentives and executive overconfidence to misreporting, so the program should change what executives are rewarded for. Give the plan a timeline, a budget and a way to measure success, such as the share of hotline reports reaching the committee. Write it as a report the board could adopt next month.
Get ACC 691 Module 10 written to your instructions
Send the ACC 691 Final Project guidelines along with your three milestones. Your milestone findings become a plan the directors could vote on next month, covering ranked risks, pay, board structure, analytics, the hotline and a costed rollout. Allow about two days; the first final project we write for you is free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
More ACC 691 papers and related MS Accounting samples
- ACC 691 Module 1 Discussion: Why Executives Misstate Results
- ACC 691 Module 2 Revenue Schemes Assignment: Bill-and-Hold and a Stuffed Channel
- ACC 691 Module 3 Milestone One: Reading the Red Flags and the M-Score
- ACC 691 Module 4 Discussion: Cookie Jars and a Big Bath
- ACC 691 Module 5 Asset Overstatement Assignment: Capitalized Costs and Missing Inventory
- ACC 691 Module 6 Milestone Two: How the Board and Audit Committee Failed
- ACC 691 Module 7 Discussion: Why the Auditors Missed It
- ACC 691 Module 8 Concealed Liabilities Assignment: A Guarantee Nobody Disclosed
- ACC 691 Module 9 Milestone Three: Quantifying the Restatement
- ACC 550 Module 9 Transfer Pricing Assignment: What Should Candy Pay for Halves?
- MBA 540 Module 7 Global Ethics and Social Responsibility Discussion
- ACC 640 Module 5 Internal Control Assignment: Controls Over Online Sales
- ACC 645 Module 6 Milestone Two: A Whistleblower and Backdated Contracts
ACC 691 Module 10 questions, answered
Where can I find a free ACC 691 Module 10 Final Project sample?
The complete ACC 691 Final Project is on this page, written as a board report that rebuilds safeguards at a kitchen equipment maker after its restatement.
What should a fraud prevention program include?
A fraud risk assessment, governance and oversight, preventive and detective controls, incentives and culture, a reporting and investigation process, and ongoing monitoring with someone accountable for each part.
How do clawbacks help prevent financial statement fraud?
They allow a company to recover incentive pay awarded on results that are later restated, which reduces the reward for inflating results; listed companies must now maintain such a policy.
What data analytics detect financial statement fraud?
Measures tied to known schemes, such as receivable days by customer group, reserve balances against actual claims, capitalized costs against project records and unusual entries near period end.
Why are incentives part of a fraud prevention program?
Because research finds that pay tied heavily to short-term results and equity value raises the pressure to misreport, so changing what executives are paid for reduces one side of the fraud triangle.