Question.1807 - I. Title: Bad Days at New Day Products II. Introduction The AICPA Pre-certification Core Competency Framework provides detailed explanations of the following: Project Competencies: § Research: o Identify, access and apply relevant professional frameworks, standards and guidance, as well as other information for analysis and to make informed decisions. § Governance perspective: o Understand the legal and regulatory environments affecting an organization and their effects on an organization’s operations, internal controls and enterprise risk management. Recognize an organization’s social and environmental responsibilities. § Professional behavior: o Practice in a manner that is consistent with the character and high standards set by the AICPA and the accounting profession. Demonstrate a work ethic and respect for diversity, as well as a commitment to continuously acquire new personal and professional skills and knowledge. § Decision-making: o Objectively identify and critically assess issues and use professional judgment to develop appropriate decision models, identify and analyze the costs and benefits of alternative courses of action and recommend optimal solutions. § Communication: o Actively listen and effectively deliver information in multiple formats tailored to the intended audience. The principals, Honer, Reich, and Sweeting, were impressed with how you addressed the prior high-profile case that when a new opportunity arose, your name was one of the first mentioned. You attended the weekly Monday morning meeting led by one of the three principals; this week Reich led the meeting. He announced a case had just crossed his desk involving a well-funded non-profit organization that he needs his best investigators to review and provide feedback.Page 2 of 4 Last updated by Sharon L. Levin Eager to advance your career, you ask to be assigned to high-profile fraud case. III. Steps to completion Step 1: Read the case study file in the Project 2 folder: Bad Days at New Day Products. Be sure to download and review the case file. Step 2: Review the grading rubric in the Project 2 folder to learn how your deliverable will be graded Step 3: Review APA Style, 7th ed because your report will be graded in strict APA Style format. Step 4: Using MS Word, answer questions 1, 2, 3, 4, and 6 at the bottom of the case study file on pages 10 - 11 in report format, not in numbered answers. For example, your report may include these subheadings or other relevant titles: § Behaviors and characteristics § Fraud risks of dark triad elements § Red flags and due diligence § Mitigate risk of fraud Step 5: Prepare and present a PowerPoint (PPT) presentation file to answer question #5. You have two presentation choices: 1) submit an audio enhanced PPT file whereby the slides advance automatically and the audio plays automatically throughout the slide presentation, or 2) present your non-audio enhanced PPT file to your professor and classmates via Zoom, which your professor will schedule. Many students prefer the live presentation because your classmates will share private confidential feedback immediately after your presentation via Zoom’s private chat feature. Step 5: Submit your draft Word document deliverable to the UMGC Writing Tutors. Edit your draft to incorporate feedback from the writing tutors. Step 6: Submit your corrected draft to your assignment folder and review the Turnitin Similarity Score. If the Similarity Score is higher than you prefer, you may need to add more citations. Your report should NOT look like this: Question 1: Answer, Question 2: Answer, Question 3: Answer, and Question 4: Answer.Page 3 of 4 Last updated by Sharon L. Levin Step 7: In Turnitin, review grammatical suggestions by clicking the purple ETS button. Make edits to improve your final deliverable. Step 8: Review the grading rubric one last time to ensure you have met the grading criteria. IV. Deliverables 1. MS Word Report in APA Style, 7ed. a. If you are unsure of APA Style, this sample paper may be helpful. Also, APAStyle.APA.org provides a plethora of resources to learn APA. The approximate length of your report will be 12 - 15 pages assuming you used APA Style. The title page, reference list, and any appendices may extend the report length. The body of the report must be no less than 12 pages in APA Style. 2. MS PowerPoint file a. Option 1: Presenting live via Zoom. Inform your professor if you will be making a live presentation via Zoom. Students presenting live via Zoom must submit the PPT file before presenting. b. Option 2: If you are not presenting live, submit an audio-enhanced PowerPoint file with continuous running slides and audio. V. Rubric The grading rubric and all files associated with this project are in Content/Course Resources/Projects & Rubrics. VI. Helpful Hints for Success § Read the rubric before you begin writing to ensure you understand the requirements. § Ask your boss (professor) questions as needed. § Practice presenting your presentation in front of a mirror or family/friends in advance. Be sure to have a quiet room when presenting. If needed, hire a babysitter to avoid being distracted while presenting. § Review and refresh your understanding of the 7th ed. APA Style formatting. § Review Turnitin resources in Content/Course Resources/Writing Resources § Submit your draft documents to the writing tutors at least 1 week before the project due date. Make edits to your deliverables after reviewing feedback from the writing tutors. § Submit your final project to Turnitin (TII) before the due date to receive a Similarity Score. o If you determine the Similarity Score is too high, edit your paper (usually by adding more citations and/or quotation marks) and resubmit to TII. Your professor will grade the last version submitted before the due date.§ Re-read the grading rubric before submitting your final project to ensure you have met all the requirements of this project and have uploaded all deliverable files. § If relevant, review the Late Policy, located in Learning Resources/Late Policy.
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Title: Bad Days at New Day Products Introduction With the help of the AICPA Pre-certification Core Competency Framework, professionals can be better prepared to handle complex cases like the one at New Day Products. This framework includes several vital competencies essential for negotiating the difficulties involved in conducting a fraud investigation. I am ready to use my experience as a seasoned investigator to use these skills to support the well-known New Day Products fraud case. To properly handle the difficulties and intricacies of the case, it is necessary first to establish the context for a discussion of my qualifications (Picard et al., 2022). Project Competencies Research Identifying the Right Frameworks: Finding, gaining access to, and utilizing the right professional frameworks, guidelines, and standards is essential for fraud investigation. Making well-informed decisions is based on it as the fundamental pillar. I have a firm grasp of this ability as an investigator. I would carefully identify and navigate through professional frameworks, such as the AICPA Code of Professional Conduct, and pertinent standards, such as Generally Accepted Auditing Standards (GAAS), when handling the New Day Products issue. These frameworks offer an organized method for professional accountability, ethical behaviour, and auditing processes—all essential for identifying fraud. Utilization of Information: Successful fraud investigation depends on the skilful use of multiple sources of information. I have acquired a wide range of skills in this regard. The New Day Products scenario requires a multimodal strategy for data collection and utilization. I would use the organization's communication channels, financial information, and transaction logs. In addition, I would use outside resources, including industry standards, rules of law, and professional advice. These many information sources give me a complete picture of the case, strengthening my analytical skills (Liikamaa, 2015). Governance Perspective Understanding Legal and Regulatory Environments: When evaluating an organization's governance approach, a thorough understanding of the legal and regulatory environments is essential. My comprehension of these facets of New Day Products enables me to recognize the crucial part they play in internal controls, enterprise risk management, and the organization's operations. Organizations must operate within the boundaries of legal and regulatory systems. They set the rules and expectations, promoting moral behaviour and conformity. The legal and regulatory environment is noticeably different for New Day Products, a nonprofit organization than for a for-profit company. Nonprofits are subject to a distinct set of restrictions that include strict guidelines on using funds, transparency in financial reporting, and preservation of their tax-exempt status. Social and Environmental Responsibility: Even for nonprofit companies such as New Day Products, the issue of social and environmental responsibility is becoming increasingly important. It is critical to realize that an organization's influence goes beyond financial dealings. New Day Products needs to understand its place in the community and the environment in the socially conscious world of today. Maintaining a positive reputation is crucial for nonprofit organizations, as they frequently depend on donations and public confidence (Kooiman & Bavinck, 2005). Professional Behavior Adherence to High Standards: The foundation of my approach as an investigator in the context of the New Day Products case is my unshakable dedication to professional behaviour. Respecting the high standards set by the AICPA and the accounting community at large is not just a desire; it is a basic necessity. Honesty, objectivity, professional competence, due care, confidentiality, and professional behaviour form the basis of the AICPA's rules. My goal is to uphold the most outstanding standards of integrity, openness, and moral behaviour—crucial in the event of possible fraud. Workplace Morality and Ongoing Education: My professional practice is based on a solid work ethic. I know that the complexity of the New Day Products case necessitates a relentless dedication to the search for justice and the truth. In addition, I understand that the accounting and investigative fields are constantly changing. Every day, new techniques, tools, and guidelines appear. It's critical to adjust to these developments. I am committed to professional development and ongoing education to achieve this (Arnold, 2002). Decision-Making Objective Issue Identification: When handling the complex New Day Products case, objective issue identification is a critical component of my investigative experience. There are many intricate concerns in this case, and it is critical that I can identify them with objectivity. I start by analyzing the situation carefully, following an evidence-based methodology that does not allow for preconceptions or personal prejudices. My top priority is to compile all of the case's information, including witness statements, internal documents, and financial data. I guarantee that all issues are based on factual evidence since this is necessary to establish a strong case and preserve credibility. Professional Judgement: In my decision-making, professional judgment is crucial, particularly when creating decision models, weighing the advantages and disadvantages of different options, and suggesting the best course of action in the New Day Products scenario. I draw on my thorough knowledge of accounting principles, industry norms, and regulatory needs while building decision models. With this knowledge, I can develop models that accurately capture the particular subtleties of the case. Moreover, offering the best solutions results from my objective problem assessment and expertise. I guarantee adherence to the ethical standards and standards of the AICPA while placing the organization's and its stakeholders' best interests first. I approach this assignment with a case-holistic perspective, knowing that suggested solutions should not only solve current problems but also reduce potential hazards in the future (Fülöp, 2005). Communication Effective Communication Skills: One of my strongest suits is effective communication, especially in a complicated scenario like New Day Products. Active listening abilities and the ability to present information in a variety of ways that meet the needs of the intended audience are prerequisites for my work as an investigator. The critical component of my communication style is active listening. Understanding all of the complexities of the case—which frequently include complex financial and operational details—is crucial while handling the New Day Products case. Whether in meetings, interviews, or over paperwork, active listening enables me to take in information accurately. For example, I can give a high-level summary of my findings with the main conclusions backed up by clear visuals when I present them to the organization board. On the other hand, I can go into great detail about the case when talking about the technical aspects of it with internal teams or legal specialists. The audience-centric approach: My communication style is essentially audience-centric. Good communication is about how well the intended audience understands and applies the information rather than what I say. This strategy works well in the context of the New Day Products instance. On the other hand, I modify my communication style to suit the needs of regulatory bodies, legal professionals, and internal audit teams. I can go into further detail on internal controls, financial records, and legal needs in these situations. Finally, my capacity to actively listen and modify messages to fit the needs of many stakeholders is the foundation of my communication skills. In the case of New Day Products, this flexibility in communication enables me to successfully communicate the nuances of the situation to any audience, promoting cooperation and mutual understanding between all parties involved (Grover, 2005). Conclusion To sum up, I am ready and excited to use my skills in communication, professional behaviour, governance viewpoint, research, and decision-making to tackle the intricate fraud issue at New Day Products. I'm committed to upholding the high standards of the AICPA and the accounting industry in every aspect of our examination. I recognize that properly navigating the complexities of this issue will need careful attention to detail, sound judgment, and clear, audience-centric communication. I will tackle this task with professionalism, dedication, and a solid resolve to expose the truth while adhering to the ethical principles of the AICPA. Case Requirements Attributes and Responsibilities of a Board of Directors The company's board of directors is its governing body, and its job is to supervise management and strategic direction. Independence, variety, competence, and moral conduct are essential for a board. Their primary duties include establishing the mission, vision, and strategic goals of the company; selecting and assessing the executive team; maintaining sustainability and control of the finances; maintaining legal compliance; and advocating on behalf of stakeholders (Epstein and McFarlan, 2011). Differences for Nonprofit vs. For-Profit Boards The following are some essential ways that nonprofit boards vary greatly from for-profit boards: Purpose: For-profit boards seek to maximize shareholder profits; nonprofit boards serve the public interest and mission, emphasizing social impact. Compensation: Usually, for-profit directors receive a salary, whereas nonprofit directors frequently volunteer their services without receiving any money. Funding and Accountability: To preserve their tax-exempt status, nonprofit boards must manage several intricate laws. They also have public and donor accountability. For-profit boards are answerable to the investors. Mission-driven: For-profit boards put profit generating first, while nonprofit boards must make sure that all of their operations are in line with their mission. Resource Allocation: While for-profit boards prioritize capital allocation and financial performance, nonprofit boards must raise money and distribute resources to carry out their missions. Therefore, nonprofit boards serve the community and have a more substantial commitment to social impact than for-profit boards. They are also accountable to diverse stakeholders and typically serve voluntarily (American Institute of Certified Public Accountants, 2017). Board Oversight and Preventive Actions The condition of the board of directors of New Day Products before the fraud's detection was suggestive of insufficient supervision, which facilitated the fraudulent operations. When assessing the board's supervision duties, it was found that several actions were either not taken or might have been taken better to stop the fraud. The board should have carried out its crucial duty of closely monitoring the company's finances. They were responsible for guaranteeing independent audits, timely financial reporting, and thoroughly examining the financial accounts. It was the board's responsibility to actively participate in evaluating and improving the company's internal controls. This includes putting in place segregation of roles, making financial transactions subject to several levels of approval, and conducting frequent internal audits. Particularly considering her access to and power over the organization's finances, the board needed to have appropriately assessed Nancy John's performance in her role as the recently promoted executive director. They need to put in place a strict review procedure and keep a closer eye on her actions. Finally, there was a potential for fraud because of the board's shortcomings in internal controls, financial monitoring, and executive director appraisal. If they had been more watchful when carrying out these tasks or had changed their strategy, the fraud might have been stopped (National Council of Nonprofits, 2020). The Fraud Triangle and Nancy John's Involvement Incentives/Pressures: Financial pressures or incentives were probably there for Nancy John to conduct fraud. She may have been pressured to reach performance goals, maintain a particular lifestyle, or experience personal financial difficulties in her capacity as executive director of New Day Products. She might have resorted to embezzlement to ease her financial stress. Opportunities: Nancy John had plenty of chances to deceive people. She could initiate and authorize transactions, view financial documents, and have considerable control over the organization's finances with little board monitoring. Attitude/Rationalizations: Nancy may have persuaded herself that she was entitled to the money or was borrowing it temporarily to justify her conduct. Maybe she thought she could pay it back before anyone saw it. These justifications can cause people to commit fraud because they persuade themselves that their actions are appropriate in the given situation. Differences Between Reviews and Audits Contrast of Objectives and Levels of Assurance Financial Statement Review: Providing a restricted level of assurance that the financial statements are free from substantial misstatements is the primary goal of a financial statement review. When compared to audits, review procedures are far shallower in scope and detail. Reviews are less comprehensive because they concentrate on questions and analytical processes. Financial Statement Audit: On the other hand, a financial statement audit aims to provide a reasonable degree of assurance regarding the lack of material misstatements in the financial statements. In an audit, internal controls, substantive testing, and a thorough review of financial records are all conducted. Auditors are more sure that the financial statements are correct and follow generally accepted accounting standards (National Council of Nonprofits, 2020). Reasons for Voluntary Audit or Review Organizations such as New Day Products may decide to conduct an audit or review even if it is not legally mandated for several reasons: Stakeholder Confidence: Organizations may conduct an audit or review to show transparency and accountability to gain and keep the trust of stakeholders, such as creditors, investors, and contributors. Preferred Source of Funding: To guarantee the proper use of their funds, specific funding sources would prefer or need audited financial accounts. Legal or Regulatory Compliance: While not necessary, organizations may opt to abide by state- or industry-specific laws or guidelines that call for audits or reviews. Fraud Detection in Audits One would have thought that a well-conducted audit of the financial statements could have uncovered the fraud at New Day Products. Internal controls, a detailed review of financial records, and extensive testing of financial transactions are all part of an audit. One of an audit's main goals is to find fraud. There would have been a greater chance of discovering odd or fraudulent behaviours, such as embezzlement, if auditors had used the proper techniques, like substantive testing and forensic analysis. Nancy's Preference for a Review Since financial statement reviews are less thorough and need fewer audit processes than audits, Nancy would have preferred them. Because of their narrow scope, reviews are usually less expensive and less likely to reveal fraud. Choosing a review may have been Nancy's tactic to avoid suspicion and minimize scrutiny while continuing her fraudulent actions if she was trying to lower the likelihood of fraud detection. However, this strategy is against the law and unethical. Periodic Audits and Fraud Risk Internal Control Weaknesses (Red Flags) Segregation of Duties: There was not enough separation of roles because Nancy possessed considerable authority over all financial transactions, including the receipt and recording of money, the approval of payments, and the account reconciliation. Inadequate paperwork: It was occasionally possible to precisely track the movement of money and expenses because certain financial transactions needed more paperwork. Fraudulent activity may be made more accessible by incomplete documentation. Lack of Oversight: The board of directors needed more control over or engagement in financial affairs. Nancy's administration can function with less oversight as there is not an engaged and watchful board. Poor Bank Reconciliations: The bank reconciliations needed to be regularly and not prepared consistently. To find disparities and inconsistencies in financial data, proper bank reconciliations are essential (Mann, 2006). Lack of Independent Verification: Nancy could control both sides of financial transactions without third-party validation because funds were received and dispersed without independent verification. Financial Statement Inconsistencies: The financial accounts revealed several discrepancies that could be signs of possible manipulation, such as inexplicable variations in revenues or expenses. Absence of Board Involvement in Audits: When the board does not supervise audits or reviews, it fosters an atmosphere in which financial misstatements can go undetected. Lack of a Whistleblower Mechanism: Potentially useful as an early warning system, there was no formalized process in place for employees or stakeholders to report concerns of financial misconduct or fraud (Epstein and McFarlan, 2011). Audit Program Changes Intensive Transaction Testing: Expand the scope of substantive testing by examining specific transactions, especially those about financial transactions that Nancy has approved. Forensic Audit Procedures: Use forensic audit techniques, such as tracking down funds, looking for odd trends, and closely examining documents to find signs of fraud. Enhanced Duties Segregation: To guarantee segregation and reduce the risk of fraud, suggest reorganizing financial responsibilities. Board Engagement: Make a strong case for the board's active participation in the audit process, making sure that they are aware of and supportive of the goals and conclusions of the investigation (Grant Thornton, 2016). Independent Verification: Reduce reliance on internal records by introducing third-party verifications of financial transactions and accounts. Enhancements to Documentation: Assist management in implementing improved documentation procedures and guaranteeing the accuracy and completeness of financial data. Continuous Monitoring: To quickly spot odd trends and anomalies, continuously monitor financial data and systems (Mann, 2006). Financial Statement Review vs. Audit Due to its narrow scope and methods, a financial statement examination may miss these warning signs. Reviews concentrate on questions and analytical techniques, but they go deeper into substantive testing than audits do. They provide less assurance than audits, but they do provide a moderate amount. Reviews are intended to give a basic level of assurance that there are no significant misstatements in the financial statements, not to identify fraud (Bannock County District Court, 2011). Judgment of Nancy John's Culpability If the judge decided that Nancy John was responsible for the deception, I would concur. From the available data, Nancy John was heavily involved in and in charge of New Day Products' financial activities. Her activities suggested a high degree of responsibility, such as keeping financial records and authorizing payments. As the executive director, she had a responsibility to actively detect and stop any financial irregularities or fraud within the company. Given her positional responsibilities and inability to stop or identify the fraudulent activity, the judge's decision is reasonable (Grant Thornton, 2016). References American Institute of Certified Public Accountants (AICPA). 2017. Not-for-profit governance & management resources. Available at: Arnold, L. (2002). Assessing professional behavior: yesterday, today, and tomorrow. Academic medicine, 77(6), 502-515. Assessing Professional Behavior: Yesterday, Today, and Tomor... : Academic Medicine (lww.com) Bannock County District Court. 2011. State of Idaho vs. Nancy K John, CR-2011-12639. Pocatello, ID Epstein, M. J., and F. W. McFarlan. 2011. Nonprofit vs. for-profit boards: Critical differences. Strategic Finance 92 (9): 28–35. Fülöp, J. (2005, November). Introduction to decision-making methods. In BDEI-3 workshop, Washington (pp. 1-15). decision-making methods-libre.pdf (d1wqtxts1xzle7.cloudfront.net) Grant Thornton. 2016. Not-for-Profit Board Guidebook. Available at: https://www.grantthornton.com/content/dam/grantthornton/website/ assets/content-page-files/nfp/pdfs/2016/NFP-Board-guide/nfp-board-guide.pdf Grover, S. M. (2005). Shaping effective communication skills and therapeutic relationships at work: The foundation of collaboration. Aaohn journal, 53(4), 177-182. https://doi.org/10.1177/216507990505300408 Independent Sector. 2015. Principles for Good Governance and Ethical Practice. Washington, DC: Independent Sector. Available at: https://www.independentsector.org/wp-content/uploads/2016/11/Principles2015-Web-1.pdf Kooiman, J., & Bavinck, M. (2005). The governance perspective. Fish for life: Interactive governance for fisheries, 3, 11. MARE-3-4eRonde 1..427 (oapen.org) Liikamaa, K. (2015). Developing a project manager's competencies: A collective view of the most important competencies. Procedia Manufacturing, 3, 681-687. https://doi.org/10.1016/j.promfg.2015.07.305 Mann, G. A. 2006. A motive to serve: Public service motivation in human resource management and the role of PSM in the nonprofit sector. Public Personnel Management 35 (1): 33–47. https://doi.org/10.1177/009102600603500103 National Council of Nonprofits. 2020. Nonprofit audit guide. Available at: https://www.councilofnonprofits.org/nonprofit-audit-guide Picard, R. R., Burger, M., & Kraut, M. (2022). Bad Days at New Day Products. Issues in Accounting Education, 37(4), 107-120. https://doi.org/10.2308/ISSUES-19-047More Articles From Accounting
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