| Course | ACC 691 Detection and Prevention of Fraudulent Financial Statements |
|---|---|
| Module | Module 9 |
| Paper type | graduate milestone quantifying a fraud restatement by period |
| Length | About 1,020 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 9
Quantification of the 2024-2025 Restatement
[Student Name]
Southern New Hampshire University
ACC 691: Detection and Prevention of Fraudulent Financial Statements
Milestone Three
[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.
Quantification of the 2024-2025 Restatement
Introduction
The investigation completed in April 2026 found misstatements in every quarter from the third quarter of 2024 through the fourth quarter of 2025. The 2025 annual report had not yet been filed, so the company will restate its 2024 annual statements and the three 2025 quarterly reports and present corrected 2025 annual figures. This milestone reconciles the effects of all schemes analyzed in earlier modules, by scheme and period, carries them to net income and earnings per share, explains the treatment of reversals, classifies the misstatements and assesses consequences. A tax rate of 25 percent is applied throughout.
Reconciliation by Scheme
Overstatement of pretax income by scheme, in millions
| Scheme | Source module | 2024 | 2025 | Total |
|---|---|---|---|---|
| Bill-and-hold and dealer loading, net of reversals | Module Two | 11.0 | 4.1 | 15.1 |
| Reserve releases | Module Four | 2.4 | 3.6 | 6.0 |
| Engineering costs capitalized | Module Five | 9.4 | 7.4 | 16.8 |
| Inventory counted twice | Module Five | 3.6 | 4.0 | 7.6 |
| Guarantee liability and probable loss | Module Eight | 0.6 | 8.5 | 9.1 |
| Supplier invoices held | Module Eight | 0.0 | 3.2 | 3.2 |
| Total pretax overstatement | 27.0 | 30.8 | 57.8 |
The total of $57.8 million equals the cumulative understatement of net liabilities and overstatement of net assets at December 31, 2025, before tax, which provides a check on the reconciliation.
Treatment of Reversals
Two schemes require care because they shift income rather than create it. The revenue schemes recorded $27.4 million of revenue and $9.0 million of gross profit in the fourth quarter of 2024 that did not belong there. Of those sales, about $16 million of equipment shipped to customers or remained with dealers who kept it in 2025, so its revenue and gross profit move into 2025 on restatement. New schemes in 2025 added $13.1 million of improper gross profit, and the $9.0 million that properly belongs in 2025 offsets most of it, which is why the net 2025 figure is only $4.1 million. Without this adjustment, the restatement would overstate the damage in 2025 and understate restated 2025 revenue.
The same logic applies to the reserve releases, though in the opposite direction. The $6.2 million cushion built in 2023 was itself a misstatement of that year, understating 2023 income. Strictly, a full correction would also restate 2023, raising its income by the excess and lowering 2024 and 2025 by the releases. Because 2023 is presented only as a comparative year in the 2025 report, and its correction would increase rather than reduce prior earnings, the company will adjust opening retained earnings for 2024 and disclose the 2023 effect in the notes rather than reissue the 2023 statements. The table above shows only the releases, since those are what inflated the restated years. Inventory reverses in the same way: the $3.6 million overstated at the end of 2024 increased 2025 cost of sales when it became opening inventory, so only the growth in the overstatement, $4.0 million, affects 2025.
Effect on Net Income and Earnings per Share
Reported and restated results, in millions except per share
| Measure | 2024 reported | 2024 restated | 2025 as prepared | 2025 restated |
|---|---|---|---|---|
| Revenue | 640.0 | 607.2 | 671.0 | 659.4 |
| Pretax income | 69.3 | 42.3 | 74.1 | 43.3 |
| Net income | 52.0 | 31.7 | 55.6 | 32.5 |
| Diluted shares | 24.8 | 24.8 | 24.9 | 24.9 |
| Earnings per share | $2.10 | $1.28 | $2.23 | $1.31 |
Restated earnings per share for 2024 fall 39 percent, from $2.10 to $1.28, and the 2025 figure falls from $2.23 to $1.31. Restated 2024 earnings were below 2023's $1.90, so the company did not grow at all. That fact matters more to investors than any single scheme, because it shows the guidance was missed by a wide margin and the growth story was untrue.
Quarterly Effects
Pretax overstatement by quarter, in millions
| Quarter | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | Q4 2025 |
|---|---|---|---|---|---|---|
| Overstatement | 4.3 | 22.7 | 3.1 | 4.8 | 6.9 | 16.0 |
The quarterly pattern confirms what the earlier modules found: the schemes clustered at year ends, when guidance was measured, and grew as each quarter needed to cover its predecessor. Each quarterly report must be amended with its own restated figures, because analysts and lenders relied on them, and the amended reports should show the reported and restated columns side by side with the scheme reconciliation in a note. The first quarter of 2025 is the smallest because two reversals, the 2024 inventory overstatement passing through cost of sales and dealer returns of $7.9 million, offset most of that quarter's new schemes.
Presentation and Classification
Under ASC 250, correcting an error in previously issued statements requires restating the prior periods presented, adjusting opening retained earnings for any earlier effects and disclosing the nature of each error and its effect on each line and on earnings per share. Because the misstatements are material, the 2024 report must be reissued, the auditors' opinion withdrawn and the quarterly reports amended. Hennes et al. (2008) distinguish errors from irregularities using markers such as words like fraud or irregularity in the announcement, an SEC or Justice Department investigation and an independent inquiry by the board. All three apply here, and the evidence of intent is direct: backdated letters, side letters sent from personal accounts, altered count sheets and a guarantee kept from the board. The restatement is an irregularity.
Consequences
Palmrose et al. (2004) found that restatements involving fraud were followed by significantly larger negative returns than other restatements. Karpoff et al. (2008) estimated that, for firms subject to SEC enforcement, the reputational loss in market value far exceeded legal penalties. Beyond the share price, the company faces the covenant breach identified in Module Eight, likely securities class actions and SEC enforcement. Incentive compensation paid on the misstated results is subject to recovery under the company's clawback policy, which the listing standards required it to adopt. Hennes et al. (2008) also found that turnover of the chief executive and CFO is much more likely after irregularities than after errors, consistent with the board's decision to remove both.
Conclusion
The schemes overstated pretax income by $27.0 million in 2024 and $30.8 million in 2025, a total of $57.8 million that reconciles to the balance sheet. Restated earnings per share fall 39 percent in 2024, and the company's reported growth disappears. The restatement is an irregularity under any accepted test. The final project turns from measuring the damage to preventing it.
References
Hennes, K. M., Leone, A. J., & Miller, B. P. (2008). The importance of distinguishing errors from irregularities in restatement research: The case of restatements and CEO/CFO turnover. The Accounting Review, 83(6), 1487-1519. https://doi.org/10.2308/accr.2008.83.6.1487
Karpoff, J. M., Lee, D. S., & Martin, G. S. (2008). The cost to firms of cooking the books. Journal of Financial and Quantitative Analysis, 43(3), 581-611. https://doi.org/10.1017/S0022109000004221
Palmrose, Z.-V., Richardson, V. J., & Scholz, S. (2004). Determinants of market reactions to restatement announcements. Journal of Accounting and Economics, 37(1), 59-89. https://doi.org/10.1016/j.jacceco.2003.06.003
What the ACC 691 Module 9 instructions ask for
Milestone Three in ACC 691 asks you to bring the individual schemes together and measure their combined effect. The guidelines usually call for restated figures for each affected period, a reconciliation from reported to restated amounts by scheme, the effect on key measures such as net income and earnings per share, an explanation of how the restatement will be presented under the accounting standards and a discussion of consequences. Many versions also ask whether the misstatements were errors or irregularities, since that affects presentation and legal exposure. Expect substantial tables; the writing explains the numbers rather than repeating them. Accuracy across periods, especially for schemes that reverse, is where most of the marks sit.
How this ACC 691 Module 9 milestone three example is built
The paper restates 2024 and 2025. A reconciliation table adds each scheme by year: revenue schemes of $11.0 million and $4.1 million, reserve releases of $2.4 million and $3.6 million, capitalized engineering of $9.4 million and $7.4 million, inventory of $3.6 million and $4.0 million, the guarantee of $0.6 million and $8.5 million and held invoices of $3.2 million in 2025. Pretax income falls by $27.0 million and $30.8 million, and earnings per share from $2.10 to $1.28 for 2024. The paper explains why the 2025 revenue figure is net of 2024 sales that properly belong in 2025, classifies the restatement as irregularities and draws on research about market losses after fraud-related restatements.
Where the ACC 691 Module 9 rubric puts the points
Milestone Three is typically graded on the accuracy and completeness of the reconciliation, correct treatment of reversing items, carrying effects to net income and earnings per share, presentation under ASC 250, classification of the misstatements, analysis of consequences, use of research and clarity of tables. Top papers reconcile to the earlier milestones and assignments without gaps, explain each reversal, apply a consistent tax rate and show both annual and quarterly effects. They also justify the classification with evidence of intent rather than assuming it. Common deductions include double counting reversals, omitting tax effects, presenting a single total without periods and leaving out the guarantee or payables.
ACC 691 Module 9 help: the mistakes that cost points
The hardest part of this milestone is reversals. A sale recorded too early in one year is not simply removed; it usually belongs in a later period, so the later year's restated revenue rises. Inventory overstatements reverse through the next year's cost of sales. Map each scheme's entries by quarter before you build the annual table, and check that the cumulative effect equals the balance sheet difference at the end. Students also skip the earnings per share step or forget that taxes reduce the net effect. If your case asks about classification, cite the evidence of intent, such as backdated letters, rather than calling everything fraud by default.
Get ACC 691 Module 9 written to your instructions
Send the ACC 691 Milestone Three guidelines and your figures from the earlier modules. The paper will reconcile every scheme by period, carry the totals to EPS, explain reversals and classify the restatement. Count on about forty-eight hours, and a first order is on the house. 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 9 questions, answered
Where can I find a free ACC 691 Module 9 Milestone Three sample?
This page holds the complete ACC 691 Milestone Three paper reconciling a kitchen equipment maker's restatement by scheme, year and quarter.
How is a restatement presented under ASC 250?
Prior period financial statements are revised to correct the error, the cumulative effect on periods before those presented is adjusted in opening retained earnings, and the nature and effect of the correction are disclosed.
What is the difference between an error and an irregularity?
An error is an unintentional misstatement, while an irregularity is intentional; researchers classify restatements as irregularities when there is evidence such as an SEC investigation, fraud language or an independent inquiry.
Why does a fraud restatement move income between years?
Because many schemes shift income in time: a sale recorded early belongs in a later period, and an inventory overstatement at one year end reduces the next year's profit when it reverses.
How do markets react to fraud restatements?
Research finds that restatements involving fraud produce much larger price declines than other restatements, and that the losses from lost reputation can far exceed legal penalties.