Fraud Risk Brainstorming At Tesla

Fraud Risk Brainstorming At Tesla

Case Requirements:

In a paper, address the following questions.

  • Fraud risks related to Tesla’s culture, leadership, and governance structure.
    • 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?
    • How would you describe the company’s culture? How might this culture create pressures and rationalizations for fraud?
    • Review Tesla’s Code of Business Conduct and Ethics (see ‘‘Tesla’s Code of Business Conduct and Ethics’ (Links to an external site.)’). How might any potential weaknesses in this code contribute to fraud risk at this company?
    • Describe some possible concerns regarding Tesla’s board of directors. How might these concerns create opportunities and rationalizations for fraud?
  • Fraud risks related to Tesla’s incentive structures and stock performance.
    • To what extent are executives and employees incentivized with shares and stock options? [See Tesla’s 2015 Annual Report (Links to an external site.), Item 7 Management’s Discussion and Analysis (MD&A) and Item 8 Financial Statements and Supplementary Data section, Note 10.]
    • How do these pay structures create pressures/incentives for fraud?
    • 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?
  • 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 article.) Be specific.
    • How does the company perform relative to its peers? (Refer to Exhibit 4 in the article.) Do these ratios and trends seem reasonable? Be specific.
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