Discussion Board Replies/Forensic Accounting

(3 Discussion Board Replies) (150 words per reply) (400 words total) (2 apa citations) (in-text citations are a must)

Discussion Topic

For the past year, you have been working as a secretary/processor for a local construction company, XYZ Homes, which specialixes in the building of low-cost limited-option homes. You left a comfortable, good-paying job to work for XYZ because it was family-owned and operated by long-time friends.

Soon after you began working for XYZ, you noticed questionable behavior on the part of Mr. and Mrs. XYZ’s two sons, who are company salesmen. In fact, you are positive that they are falsifying documents to increase their commissions and to trick local banks into approving mortgages to customers who don’t meet credit standards.

You are trying to decide how to handle the situation when one of the sons approaches you and asks you to produce and sign a memo to a bank, falsely stating that a certain potential home buyer is creditworthy. You refuse to do so and after much consideration, approach Mr. XYZ about the situation. to your surprise, he simply brushes of your comments as unimportant and laughingly states that “boys will be boys.”

What would you do in this situation? Is the fact that you correctly refused to produce and sign a false memo enough, or are you obligated to report these crimes to the banks and proper authorities? Discuss the options, responsibilities, and implications you are facing.

Would this change if you were a CPA?

Reply to these 3 posts

1. I would not write or sign a memo falsifying information to a bank or any other entity in any situation. Providing a memo with false information would be against my morals and ethics, and I would not perform the task under any circumstance. This activity would be fraudulent in that I would be writing it with the intent to mislead the bank to lend money to someone who is not creditworthy. This would also be a form of bank fraud and would fall under criminal law for violating Title 18, U.S. Code §1344 (Albrecht et al., 2019, p. 12). I would inform the son that I would not write the memo and that the next step would depend on his reaction or response. I agree that alerting a manager or, in this case, the company’s owner is the next step in alerting someone of more authority of the concerns and issues. In this scenario, the report was made to the owner of the company, who did not give importance to the claim. It is unclear if the owner is playing an active part in the fraudulent memos or isn’t taking the claim seriously. As an employee, I did my ethical duty to report it to someone of higher management. Once this is done, I would face the decision of whether or not this has only happened one time or if it continues to be an issue. I would decide whether to continue working for XYZ Homes or find other employment. If I am confident and have proof that they have been falsifying multiple documents and know that the owner is involved, I would contact an attorney to find the best course of action. If there are investors or stakeholders that the report could be made to, this might be an option to hold the owner accountable. However, to pursue anything legally would be costly and time-consuming (Albrecht et al., 2019, p. 81). As an employee, I would want to resign from the company and find another place of employment. I do not wish to work in an unethical and illegal environment.

As a CPA, I would still refuse to write or sign any memo falsifying financial information. I would still follow the same steps of reporting the concern to someone in upper management and then base my future actions on their response. I would also get legal counsel before discussing any activity with any other party outside of the company due to the complexity of ethical and legal requirements that a CPA is bound to in terms of confidentiality (Arman, 2023).

I had a similar situation happen during my employment right after high school. I was asked to hold invoices for cash payment to the manager for expenses that he had paid for personally or on account. The corporate office became suspicious and asked me why we were holding over so much daily cash. I explained that the branch manager requested the funds and had invoices he needed to pay. It was unusual but not against policy to have larger invoices that needed to be paid through petty cash. After some time, the invoices continued, and I became suspicious. I discovered the invoices were not legitimate because they were from a company I was positive did not provide invoices and only receipts. I confirmed that the company did not provide the invoices and reported them to my supervisor. The manager discovered that I had made the discovery and tried to fire me for being unable to perform job duties that were not in my job description. Thinking back, it was pretty comical that the job duties he required me to do involved lifting heavy machinery. I was hired as an office person and not a warehouse employee. I requested a witness to be present during the discussion, and the manager refused to bring the assistant manager or anyone else in the room. Due to my inability to lift the amount of equipment he was requiring of me, he informed me I was terminated. A manager in human resources contacted me quickly later that day and asked for a full disclosure of what had transpired. I reported the entire situation and provided copies of the fraudulent activity. Due to my impeccable work history and annual review reports, they did offer me my job back. The manager informed them that he did not fire me and that it was a misunderstanding. I was assured that the information I provided was confidential and would not receive any repercussions from the manager. However, due to the time it would take them to investigate, I decided to leave my job. At the time, being very young and inexperienced, I did not want any conflict in the workplace and did not know how to handle the situation. After several months, they finally terminated the employment of the manager.

2. This is always a tough scenario especially when working with friends and/or family. Even though you are friends with the owners this can’t be something that can continue and needs to be reported. When the first step of notifying the business owner was unsuccessful shows that the tone at the top is not a good one. I would feel obligated to notify the proper authorities or entities that were being lied to. This is probably just the start of more you will eventually find out that they are doing to cook the books. I would also be looking for another job and maybe even look to go back to my old employer. Even though you refused to be a apart of the actual fraud you still have an obligation to report weather you are a CPA or not. Eventually they are going to get caught and you don’t want to have any contribution or turning a blind eye to it for it will come to hurt you as well.

3. This is an ethically challenging situation. As an employee of XYZ Homes, I have a responsibility to act with integrity even if it means reporting misconduct within the company. I would Schedule a meeting with Mr. XYZ to clearly explain the severity of the falsified documents and potential fraud. I’d appeal to his ethics and avoid sweeping it under the rug as “boys will be boys.” As well as stress the legal risks to the company and employees if caught. Another option would be to consult an attorney to understand my legal obligations. As an employee, I likely have a duty to report criminal actions that harm others, despite company leadership downplaying it. I would even consider anonymously reporting the misconduct to proper authorities – the banks being defrauded, regulators overseeing lending practices, etc. This could be done confidentially through a whistleblower tip line. As a last resort, I would resign from my position and report the unethical practices. This may be necessary if the company does not act internally.

As a CPA, I would have enhanced ethical and legal duties to report financial fraud or falsified records. CPAs must comply with a professional code of conduct and have a responsibility to act in the public interest above employer loyalty. Remaining at a company engaged in illegal actions could jeopardize my CPA license. In this case, reporting to authorities would likely be obligatory sooner.

Overall, I have a moral obligation not to enable unethical behavior that harms others, regardless of my position. Though uncomfortable, reporting misconduct is vital to protect the public from predatory and fraudulent practices. I would pursue all internal options first, but ultimately must be ready to disclose the truth externally if necessary, accepting potential professional consequences.