Forensic Audit in the Bankruptcy Context: A Teaching Case

ABSTRACT Inspired by real-world bankruptcy events, we developed a case where students assist appointed forensic accountants in investigating pre-bankruptcy activities and accounting transactions to assess the likelihood of bankruptcy fraud. Students studied the guidance issued by the Association of Chartered Certified Accountants (ACCA) or other relevant sources to investigate the differences between forensic and statutory external auditing. They then identified the related parties and evaluated the purposes and consequences of transactions among them. Furthermore, students investigated why bankruptcy filings can be subject to fraud or abuse and performed a financial ratio analysis. They also investigated the value of fixed assets and trade receivables and reflected on the ethical issues. Feedback from the students revealed they felt the assignments had stimulated their critical and ethical thinking skills. This case can fit in an introductory forensic accounting, intermediate accounting, or ethics course.