With detailed accounts of accounting irregularities, cross-shareholding manipulations, and deceptive financial practices, the book is a practical case study for fraud analysis.
Course Objectives:
- Understand the mechanics of financial fraud.
- Learn techniques for forensic auditing and fraud detection.
- Analyse real-world cases of corporate misconduct for red flags and audit failures.
Key Questions:
- What forensic accounting techniques could have uncovered the discrepancies in Capitec’s loan book earlier?
- How do auditors become complicit in corporate fraud, and what systemic changes can strengthen audit independence?
- What are the red flags of corporate fraud, and how were they present (or ignored) in the cases discussed in the book?
- How should regulators and stakeholders respond to financial institutions that exhibit strong growth despite underlying risks, as seen in Capitec’s resilience following critical reports like that from Viceroy Research?
Short Harvard Business Review Type Answer: Regulators and stakeholders must adopt proactive risk assessment frameworks that go beyond surface-level financial metrics. The author reflects on Capitec’s resilience: “Capitec’s resilience became more than a curiosity to me; it became an obsession. By 2024, it had defied every grim prediction” (p. 15).
The Financial Stability Board (FSB) recommends a macroprudential approach to regulation, emphasizing the importance of stress testing and scenario analysis (FSB, 2013). Additionally, HBR’s “What Boards Need to Know About Risk” (Mikes & Kaplan, 2014) highlights that “effective risk governance requires boards to challenge management assumptions actively, even when growth appears robust.” This approach could have mitigated blind spots in Capitec’s oversight.
References: Mikes, A., & Kaplan, R. (2014). What Boards Need to Know About Risk. Harvard Business Review. Financial Stability Board (2013). Principles for an Effective Risk Appetite Framework.
Discussion Points:
- Fraud Detection: What forensic accounting techniques could have exposed Boland Bank’s irregularities earlier?
- Audit Failures: How do auditors become complicit in financial fraud, intentionally or unintentionally?
- Red Flags: Identify key warning signs of financial manipulation from the book’s examples.
- Ethical Auditing: How can auditors maintain integrity when facing pressure from powerful corporate clients?
- External Criticism: What is the appropriate way for company executives, regulators and auditors to respond to negative company reports?
Assignments:
- Forensic Analysis Project: Conduct a mock forensic audit based on financial discrepancies described in the book.
- Audit Simulation: Role-play an internal audit committee meeting addressing suspicious financial activities.
Select another subject:-
Business Ethics and Corporate Governance
Financial Management and Risk Analysis