| Course | ACC 691 Detection and Prevention of Fraudulent Financial Statements |
|---|---|
| Module | Module 6 |
| Paper type | graduate milestone evaluating board and audit committee oversight failures |
| Length | About 1,060 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 6
Governance and Oversight Failures, 2024-2025
[Student Name]
Southern New Hampshire University
ACC 691: Detection and Prevention of Fraudulent Financial Statements
Milestone Two
[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.
Governance and Oversight Failures, 2024-2025
Introduction
Milestone One showed that the company's 2024 statements carried enough red flags to warrant investigation. This milestone asks why the people responsible for oversight did not act on them. It evaluates four layers of governance as they operated in 2024 and 2025: the board of directors, the audit committee, internal audit and the ethics hotline. For each, it describes the structure, explains how the structure allowed the fraud to continue and identifies a moment when the layer could have intervened. Recommendations follow and will feed the prevention program in the final project.
The Board of Directors
The chief executive had founded the company's restaurant division in the 1990s and had chaired the board since 2016. Of the other six directors, four met the stock exchange definition of independence, but their ties to him were close: one was his former college roommate, one had been the company's outside counsel for a decade, and two had served on boards he chaired elsewhere. Board meetings followed his agenda, and materials were distributed two days in advance. The board approved the 2024 guidance and tied most of his equity awards to meeting it.
Research suggests why this structure matters. Agrawal and Chadha (2005) found that firms whose boards included independent directors with financial expertise were less likely to restate, while the chief executive's role in governance mattered as well. A board that relies on one person for its agenda and its information is unlikely to see what that person does not want shown. In this case, the board's approval of guidance-based pay created the incentive analyzed in Module One, and its closeness to the chief executive removed the most obvious check on it.
The Audit Committee
The audit committee had three members. The chair, a retired partner from a regional accounting firm, was the designated financial expert; the other two were a former restaurant executive and a university trustee. It met four times a year, each meeting lasting about ninety minutes, and most of that time went to the external auditors' quarterly reports. It held no private session with the internal audit director in either year. Klein (2002) found that earnings management was lower when audit committees were more independent, and Abbott et al. (2004) found that restatements were less likely where committees were independent, included a financial expert and met at least four times a year. The company met the meeting count on paper, but the substance of oversight was thin.
Internal Audit
The internal audit director reported to the CFO, who approved the annual plan and the budget. In 2024 the plan concentrated on plant safety and procurement, and the 2025 plan added a review of travel expenses. Neither year included revenue recognition, reserves or capitalized costs, the three areas Milestone One ranked highest. When an internal auditor asked in mid-2025 to test fourth-quarter bill-and-hold sales, the CFO deferred the request to 2026. Because the audit committee never met internal audit privately, it did not learn of the deferral.
The reporting line mattered more than the size of the department. Internal audit had five staff and a reasonable budget, enough to test revenue cutoff at year end. What it lacked was the freedom to choose where to look. An internal audit function that depends on the CFO for its plan, its budget and its director's performance review will, without any explicit instruction, avoid the areas the CFO considers sensitive. The committee's role is to remove that dependence, and in this company it never tried.
The Ethics Hotline
The company's hotline was answered by a vendor that forwarded every report to the general counsel, who reported to the chief executive. In September 2025, a sales coordinator reported that she had been asked to draft customer letters requesting bill-and-hold arrangements after the fact. The general counsel classified the report as a sales process concern and referred it to the sales vice president, one of the people involved. In their study of large fraud cases, Dyck et al. (2010) found employees among the most frequent sources of detection, yet a report only helps when it reaches someone independent of the people involved. Here the report reached the opposite.
Missed Opportunities
Three moments stand out. In February 2025, a director asked at the board meeting why receivable days had risen to 71; the CFO answered that a large chain had been granted longer terms for its remodel, and no one asked to see the contract. In September 2025, the hotline report was routed back to the sales organization. In November 2025, the external auditors noted unusual year-end transfers between plants and raised them with management but not with the committee. Each moment required one person to ask a second question or to pass information to the right place. None required forensic skill. The director needed only to request the contract that supposedly extended the chain's terms, which did not exist. The general counsel needed only to send the report to the audit committee chair. The auditors needed only to put the transfers on the committee's agenda, where an independent member might have asked why goods were moving between plants in the last three days of the year.
Recommendations
The board should separate the chair and chief executive roles or appoint a lead independent director with authority over the agenda. Independence reviews should consider personal and professional ties, not only the listing definition. The audit committee should add a fourth member with recent public company reporting experience, meet at least six times a year and hold private sessions with internal audit and the external auditors at every meeting. Internal audit should report functionally to the committee, which should approve its plan and require coverage of revenue, reserves and capitalized costs. Hotline reports involving financial reporting should go directly to the committee chair. Farber (2005) found that firms that improved governance after fraud recovered credibility with investors, which gives the board a reason to act beyond compliance.
Conclusion
The company's governance met most formal requirements yet failed in practice: the board was too close to the chief executive, the audit committee too thinly staffed and informed, internal audit answered to the CFO and the hotline ran back to management. Each failure turned a red flag into a missed opportunity. The final project will build these recommendations into a full prevention program.
References
Abbott, L. J., Parker, S., & Peters, G. F. (2004). Audit committee characteristics and restatements. Auditing: A Journal of Practice & Theory, 23(1), 69-87. https://doi.org/10.2308/aud.2004.23.1.69
Agrawal, A., & Chadha, S. (2005). Corporate governance and accounting scandals. The Journal of Law and Economics, 48(2), 371-406. https://doi.org/10.1086/430808
Dyck, A., Morse, A., & Zingales, L. (2010). Who blows the whistle on corporate fraud? The Journal of Finance, 65(6), 2213-2253. https://doi.org/10.1111/j.1540-6261.2010.01614.x
Farber, D. B. (2005). Restoring trust after fraud: Does corporate governance matter? The Accounting Review, 80(2), 539-561. https://doi.org/10.2308/accr.2005.80.2.539
Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal of Accounting and Economics, 33(3), 375-400. https://doi.org/10.1016/S0165-4101(02)00059-9
What the ACC 691 Module 6 instructions ask for
Milestone Two in ACC 691 turns from the numbers to the people responsible for overseeing them. It generally asks you to evaluate the board of directors, the audit committee, internal audit and the whistleblower process in the case company, explain how weaknesses in each allowed the fraud to begin or continue and recommend improvements. The guidelines usually expect you to use governance research and the requirements that apply to listed companies, such as audit committee independence and financial expertise. Strong submissions tie each weakness to a specific moment when the fraud could have been caught. This milestone carries forward the red flags from Milestone One and feeds the prevention program in the final project.
How this ACC 691 Module 6 milestone two example is built
The paper works through four oversight layers. The board was chaired by the chief executive, and four of its seven members had business or personal ties to him. The audit committee had three members, only one with accounting expertise, and met four times a year for about ninety minutes, mostly to hear the auditors. Internal audit reported to the CFO, so its plan was set by one of the people directing the schemes, and the ethics hotline was answered by the general counsel, who reported to the chief executive. A director asked about rising receivable days in February 2025 and accepted a two-sentence answer. Recommendations include an independent chair, a fourth committee member and private sessions with internal audit.
Where the ACC 691 Module 6 rubric puts the points
The Milestone Two rubric commonly scores the analysis of board structure and independence, audit committee composition and practice, internal audit and reporting lines, the whistleblower process, use of research and requirements, connection to the case and recommendations. The best papers explain the mechanism by which each weakness mattered, such as how internal audit's reporting line shaped what it tested, rather than listing best practices the company lacked. They also point to specific missed opportunities. Graders mark down papers that blame the board in general terms, that ignore the role of incentives or that recommend changes too vague to implement. Accurate references to listing standards and research support the analysis.
ACC 691 Module 6 help: the mistakes that cost points
A frequent weakness is describing ideal governance without showing what went wrong in this company, which reads like a textbook chapter. Instead, start with the moments when the fraud could have been noticed and ask who should have noticed and why they did not. Another common problem is assuming that formal independence is enough; directors who meet the listing rules can still be too close to management to challenge it. If your case company had a whistleblower complaint, trace exactly where it went. Finally, make recommendations measurable, such as the number of private sessions with internal audit each year, so the final project can build on them.
Get ACC 691 Module 6 written to your instructions
Send the ACC 691 Milestone Two guidelines with the case's governance facts. The paper will judge board independence, audit committee practice, internal audit and the hotline against research, then recommend specific changes. Delivery usually takes a couple of days; a first-time order is written without charge. 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.
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ACC 691 Module 6 questions, answered
Where can I find a free ACC 691 Module 6 Milestone Two sample?
A full ACC 691 Milestone Two paper is on this page, evaluating the board, audit committee, internal audit and hotline at a kitchen equipment maker.
How does audit committee independence affect fraud risk?
Research finds that firms with more independent audit committees, and committees with financial expertise that meet more often, have lower levels of earnings management and fewer restatements.
Should the CEO also chair the board?
Combining the roles concentrates power over the agenda and information the board sees; studies of fraud firms find the combination more common, so many governance codes favor a separate or independent chair.
Who should internal audit report to?
Functionally to the audit committee, which approves its plan and meets it privately, with only administrative reporting to management, so that it can examine senior executives' areas.
Why do whistleblower hotlines fail?
Often because reports reach people who report to the executives involved, because employees fear retaliation or because no one tracks whether complaints were investigated.