The Anti-Fraud Collaboration has developed and published a fictitious case study of a potential material fraud to serve as a training resource and discussion starter for audit committees, financial executives, internal auditors, and external auditors.

The “Hollate Manufacturing Case Study” and a companion discussion guide provide a roadmap to interactive discussions that are meant to inspire dialogue on what can be done to mitigate the risk of fraud. The case study sets the scene at a company that manufactures products for the home construction industry, profiling CEO Jack Brennahan along with key members of his management team and the board of directors. The company is following a growth-through-acquisition strategy, even as it struggles through a downturn, leading to sales pressure on division heads. Then Brennahan receives a call from the company's external auditor and audit committee chairman reporting the discovery of accounting regulators in a window products division.

The Anti-Fraud Collaboration that produced the materials in a joint effort of the Center for Audit Quality, Financial Executives International, Institute of Internal Auditors, and National Association of Corporate Directors. The Hollate piece is the first in a planned series of anti-fraud case studies that the Collaboration wants to produce in its effort to develop thought leadership, awareness programs, educational opportunities, and other materials targeted at deterring and detecting financial reporting fraud. Organizations in increasing number are stepping forward with tools targeting audit committees and to bolster to anti-fraud effort and initiative at public companies.

“Historically, financial reporting fraud is the workplace fraud that has had the highest cost impact on public companies,” said Cindy Fornelli, executive director of the CAQ, in a statement. The Hollate case study recreates conditions that could allow fraud to occur and provides opportunities to discuss steps that can be taken to mitigate the risks of such instances, she said. “It is an important new resource for the deterrence of such frauds.”

The discussion guide that accompanies the case study provides a framework for leading interactive dialogue, the Collaboration says. It is designed specifically for use by individuals with experience in training or teaching in the financial reporting supply chain or in college or university settings. The case study and discussion guide are inspired by the case study method followed by the Harvard Business School, and two Harvard faculty members consulted on the development, the Collaboration said. The Collaboration also offers videos on how to effectively lead a discussion using the Harvard method for the sake of instructors who may not be familiar with it.