Teaching Using Accountancy Cases

Using accountancy case studies Evaluating accounting information

The backdrops: 

• it provides real world scenario enabling students to apply theoretical concepts to practical situations
• it bridges the gap between theory and practical 
• encourage critical thinking, analytical and problem solving skills
• case study expose students to various accounting issues, ethical dilemmas and decision making process.                                                                                                                                                     

Types of Cases

1. Problem-Based Case: Presents specific challenges requiring analysis and problem-solving.
2. Decision Case: Simulates real decision-making scenarios, requiring recommendations or choices.
3. Descriptive Case: Provides detailed descriptions of situations or events for context.
4. Illustrative Case: Offers clear examples of theoretical concepts applied in real situations.
5. Ethics and Governance Cases: Focus on ethical dilemmas and governance issues within organizations.
6. Integrative Cases: Require application of knowledge from multiple disciplines to analyze complex problems.

Guidelines for designing cases

1. Identify learning goals: Determining specific accounting concepts
2. Choose an engagement context: set/ developing case studies in real-word scenarios 
3. Develop a real world/ realistic scenario: incorporating financial statement, transactions, events relevant to learning goals.
4. Introduce Accounting Issues: build ambiguities, errors of dilemmas into the case study, do not make it too easy and value should be added 
5. Provide relevant data: include details in the case study like policy, memos and reports to analyze and avoid giving too much information 
6. Structure with stages: Break the cases in different stages 
7. Incorporate complexities: add auditing concerns and tax implications 
8. Develop assignment questions: such as High Order Thinking Skills questions 
9. Supply resources: full text references, if needed.

Example of case, that we have done as a class activity

XYZ Corporation, a publicly traded company, operates in the manufacturing sector and has been experiencing stagnant growth over the past few quarters. The pressure to meet revenue targets and investor expectations has been mounting on the management team, led by the CFO, Ms. Jennifer Hayes.

Facing pressure to boost financial performance, Ms. Hayes devises a fraudulent scheme to manipulate the company's financial statements. She orchestrates a series of fictitious sales transactions, inflating revenue figures to meet quarterly targets. Additionally, she understates expenses by delaying recognition of certain liabilities and inflating asset values.

Initially, the fraudulent activities create an illusion of financial stability and growth, leading to an increase in stock price and investor confidence. However, over time, the true financial health of the company deteriorates as the fabricated numbers mask underlying issues such as declining sales and mounting debt.

Detection Methods:

1. Whistleblower Allegations: An employee in the finance department becomes suspicious of irregularities in the financial records and reports the concerns to the company's audit committee.

2. Forensic Accounting Analysis: External auditors conduct a detailed forensic analysis of the company's financial statements, scrutinizing transaction records and comparing them with industry benchmarks.

3. Data Analytics: Utilizing advanced data analytics tools, auditors identify anomalies in revenue and expense patterns, uncovering inconsistencies that indicate potential fraud.

Legal and Ethical Implications:

Once the fraudulent activities are uncovered, Ms. Hayes and other implicated individuals face severe legal consequences, including fines, imprisonment, and civil lawsuits. The company's reputation is tarnished, leading to loss of investor trust and damage to stakeholder relationships. Moreover, the incident underscores the importance of ethical conduct and transparency in financial reporting, highlighting the need for robust internal controls and oversight mechanisms.

Questions for the above case:

1. Knowledge (Remember): What are the key indicators of fraudulent activity in financial statements, as discussed in the case study of XYZ Corporation?
2. Analysis (Understand):How did the fraudulent scheme devised by Ms. Jennifer Hayes impact the financial health of XYZ Corporation over time? Provide specific examples from the case study to support your answer.
3. Evaluation (Evaluate):Assess the effectiveness of the detection methods employed by XYZ Corporation's audit committee and external auditors in uncovering the fraudulent activities. What alternative measures could have been implemented to enhance fraud detection and prevention within the organization?