Crossing the Line - Cases in Financial Statement Fraud and Auditor Deception (Course Id 1323)

• Who is this course for?
  This course is intended for anyone needing Continuing Professional Education (CPE), particularly CPAs, accountants, and professionals in the auditing field.

• What is this course about or what problem does this course solve?
  The course examines two significant cases of financial statement fraud and auditor deception—Dewey & LeBouef and ContinuityX—highlighting how fraud was perpetrated and undetected, and the consequences that followed.

• How can the knowledge from this course be used?
  Learners can apply the insights from these fraud cases to identify red flags and better align audit procedures to detect similar financial irregularities in their professional practice.

• Why is this course important to a CPA or Accountant?
  Understanding the mechanics of real-world financial fraud and how auditors were misled enhances professional skepticism and improves audit quality, fulfilling both regulatory and ethical responsibilities.

• When is this course relevant or timely?
  The course is especially timely for professionals fulfilling fraud-specific CPE requirements, such as those mandated by the California Board of Accountancy, and remains relevant due to ongoing concerns about audit failures and financial misrepresentation.

• How is a course like this consumed or used?
  This self-study course is delivered via QAS text format and includes review questions and a final exam that must be passed within one year of purchase to earn CPE credit.

This course is based on two recent financial statement fraud cases; Dewey & LeBouef and ContinuityX. Dewey & LeBouef was a high-profile law firm that, at its peak, had over 3,000 employees and over 1,400 lawyers. It is alleged that personnel at Dewey & LeBouef made inappropriate financial adjustments starting in 2008 to meet its bank lending covenants and planned to conceal these adjustments from its “clueless auditor”. Dewey & LeBouef declared bankruptcy in 2012.
ContinuityX was an internet services reseller that, according to an SEC complaint, fabricated 99% of its revenue. It was audited by a firm that was fined and disciplined by the SEC and the partner responsible for the audit was also fined and permanently suspended from practicing before the SEC. ContinuityX declared bankruptcy in 2013.
Both cases involve financial statement fraud, auditor deception and some lessons to be learned.

Please Note: These Fraud CPE credits satisfy the California Board of Accountancy (CBA) fraud requirement.

NASBA QAS - Text - NASBA Registry - 1323

Course Learning Objectives

• Recognize the primary elements of financial statement fraud in the Dewy & LeBouef and ContinuityX cases
• Associate the primary elements of financial statement fraud in the cases in this course with audit procedures that may have detected the fraud

Chapter 1 - Crossing the Line - Cases in Financial Statement Fraud and Auditor Deception

Course Overview

Dewey & LeBouef

Background

Principle Administrative Personnel at Dewey & LeBouef

Financial Statement Fraud in 2008

2008 Adjustments

Damaging Emails

Financial Statement Fraud in 2009

2009 Adjustments

More Damaging Emails

Reduction in Covenant

The $150 Million Bond Offering

Collapse of Dewey & LeBouef

The Auditor

Criminal Charges and the Outcome

Discussion of the Dewey & LeBouef Case

The Motivation Behind the Adjustments

How was the Auditor Deceived?

Lessons Learned

ContinuityX

Background

Principle Personnel

Alleged Financial Statement Fraud

The Scheme is Exposed

Source of Funding

The Auditor

The Outcome

Discussion of the ContinuityX Case

The Motivation

Lessons Learned

Chapter 1 Review Questions

Glossary