Read the following case study:
Hess, M. F., &Andiola, L. M. (2018). Fraud risk brainstorming at Tesla Motors (Links to an external site.). Issues in Accounting Education, 33(2), 19–34.
Answer the following questions in a paper.
- Fraud risks related to revenue recognition at Tesla.
- What does Tesla sell and how does the company account for revenue, accounts receivable, and COGS? (See ‘‘Tesla’s 2015 Annual Report(Links to an external site.),’’ Item 1 Business, Item 7 MD&A, and Item 8 Financial Statements and Supplementary Data, Note 2.)
- How might these revenue-recognition practices create opportunities, incentives, and/or rationalizations for fraud?
- Fraud risks related to Tesla’s business and operating conditions.
- Review the business risks disclosed by the company (see Tesla’s 2015 Annual Report(Links to an external site.), Item 1A Risk Factors, Item 8 Financial Statements, Supplementary Data, Note 2, and Note 13). How might some of these business risks from the external environment also create fraud risks within Tesla?
- What fraud risks are posed by Tesla’s expansion plans and the company’s ability to operate as a going concern? (See Tesla’s 2015 Annual Report(Links to an external site.), and refer to Item 1A.)
- What related-party transactions support Tesla’s financial performance? (See Tesla’s 2015 Annual Report, Item 1 Manufacturing.) How might these transactions create opportunities for fraud?
- Fraud risks indicated by the results of preliminary analytical procedures.
- What fraud risks may be indicated by the year-to-year comparisons of Tesla’s financial statements (refer to Exhibits 1 and 2 in the case study)?
- How does the company perform relative to its peers (refer to Exhibit 4 in the case study)? Do these ratios and trends seem reasonable?
Assignment Paper Requirements:
- Write a paper (memo) of a minimum of five double-spaced pages, not counting the title and reference pages, which you must include.
- Copy and paste each one of the questions into your paper in bold type to ensure you have answered each of the assignment requirements.
- Use terms, evidence, and concepts from class readings, including professional business language.
- Cite at least three credible academic or professional sources for this assignmentas well as the FASB Codification.
- Format your paper according to APA.