Homework: Fraud Risk Brainstorming at Tesla
Read the following case study:
Hess, M. F., & Andiola, L. M. (2018). Fraud risk brainstorming at Tesla Motors. Issues in Accounting Education, 33(2), 19-34.
Case Requirements:
In a paper, address the following questions.
1) Fraud risks related to Tesla's culture, leadership, and governance
a) How would you describe the ‘‘tone at the top'' set by Tesla's leader, Elon Musk? How do Mr. Musk's leadership style and his ‘‘tone at the top'' contribute to possible fraud risk at Tesla Motors?
b) How would you describe the company's culture? How might this culture create pressures and rationalizations for fraud?
c) Review Tesla's Code of Business Conduct and Ethics (see ‘‘Tesla's Code of Business Conduct and Ethics''). How might any potential weaknesses in this code contribute to fraud risk at this company?
d) Describe some possible concerns regarding Tesla's board of directors. How might these concerns create opportunities and rationalizations for fraud?
2) Fraud risks related to Tesla's incentive structures and stock
a) To what extent are executives and employees incentivized with shares and stock options? [See Tesla's 2015 Annual Report, Item 7 Management's Discussion and Analysis (MD&A) and Item 8 Financial Statements and Supplementary Data section, Note ]
b) How do these pay structures create pressures/incentives for fraud?
c) Review Tesla's stock performance over the last two years (refer to Exhibit 3 in the article). What fraud pressures are created by this stock performance?
3) Fraud risks indicated by the results of preliminary analytical
a) 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 article.)
b) How does the company perform relative to its peers? (Refer to Exhibit 4 in the article.) Do these ratios and trends seem reasonable? Be
Format your homework according to the following formatting requirements:
(1) The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
(2) The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
(3) Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.