GLOBALSCAPE INC.: Sales Go Rogue

• In Event: Public Interest and Auditing

Abstract

This instructional case is based on the publicized fraud occurring at GlobalSCAPE Inc., a publicly registered IT firm in the U.S. On August 7, 2017, GlobalSCAPE disclosed that its audit committee assisted by forensic accounting advisors was investigating suspicious transactions that occurred in the fourth quarter of 2016. The investigations subsequently revealed that those transactions circumvented the firm’s internal controls and resulted in inflated revenues and earnings. The case highlights how weak controls provide opportunity to management to manipulate and circumvent the revenue recognition process. The case is designed to deepen students’ understanding of the nature of financial statement fraud, how financial statement fraud can occur and the implications of weak internal controls. It is also designed to encourage students to think critically about fraud risk factors and how to prevent fraud in an organization.

Authors

• Muniratu Kelly, Morgan State University

• Bilal Makkawi, Morgan State University