Statement of Ethics Issue

Oct 20 2012 Oct 20 2012 ACCT 3121 Instructor: Ms. Julie Chenier ACCT 3121 Instructor: Ms. Julie Chenier | Written Assignment| | Student: Yichen Chen| | Written Assignment| | Student: Yichen Chen| To: Manufacturing Manager From: Becky Knauer Date: Oct 20 2012 Subject: Action of Ethnic Issue for Mueller Imports Dear Officer, My name is Becky Knauer, the new controller in Mueller Imports. Being selected as an experienced automotive professional to join such a huge management team, I aim at using my objective view and competency in addition to all available sources to best assist the organization.Recently, while managing the financial statement, I realized there are several transactions that are susceptible for ethical issue. A $5000 monthly invoice billed from the jeweler was personally approved as â€Å"selling expense† by the company’s owner Frank Mueller. My investigation exposes that the red flag involves significant fraud: 1. The periodic watch offering to regional sa les managers and other sales exclusives indicates the bribery. By receiving expensive rewards from Mr.Mueller, sales exclusives give biased car distribution to dealers. 2. The invoice billed by a local jeweler reveals the probability of collusion. Because the watch seller does not bill the transaction as a regular sale but explained it as a â€Å"miscellaneous service†, the jeweler has the high incentive to set the underground agreement with Frank Mueller. I suspect the indirect service charge conceals this fact. 3. The false financial statements presented by Mr.Mueller reveal the misrepresentation. Mueller’s action violates the policy of segregation of duties by overriding his right to authorize the controllable cost. His statement of this expenditure â€Å"selling expense† overstates the expense and understates the net income as well. He indirectly gains comparative advantages from the transaction called into question. Frankly, in the supply shortage market, t he substantial sale and high profit goal are pushing the upper level management into a dilemma.It seems that the fraud is initiated by the owner Frank Mueller, regional sales managers, and other involved exclusives, trying to gain personal interests by committing the fraud. Even though the outstanding sales can bring in large profits for Mueller Imports in the short term, the significant performance will be reevaluated and disclosed to the public. Consequently, all individuals within the organization and third parties committing to fraud will receive their deserved penalties.In addition, if Mueller Imports announces bankruptcy, employees who are innocent from the fraudulent activities will also suffer unemployment. According to Tom York (Segregation of Duties, 22), engaging in corrupt practices creates a very unfavorable business environment by encouraging unfair advantage and anti-competitive practices. As a controller within the company, I have the right to establish the monitorin g plans for internal controls to ensure that funds are expended and recorded appropriately on the financial report (Controller Job Description, 10).Referring to the IMA’s Statement of Ethical Professional Practice, the issue should be discussed with the higher level of supervisor or management who is not involved in the issue. Since the fraud is committed by the the top level of the organization, it is inappropriate to submit the issue to any level within the organization. However, it is impractical to hands-off because the activity of committing to the fraud which violate the code of ethnic. If I do nothing, I will be drawn into the concealment of fact as well.As far as I am concerned, it is not wise to fight the unethical issue with the upper level management, nor do I want to build a hostile relationship with the people of Mueller Imports. The most viable actions are: 1. Gather enough potential fraudulent statements, 2. Take an investigation of sale managers’ life a ctivities 3. Carefully evaluate the control system. After gathering substantial evidence, I would like to initiate a confidential discussion with you as well as the IMA ethnic advisors.In accordance with code of ethics (IMA Statement of Ethical professional Practice, Page 1), I will provide objective information and concerns to the appropriate business associates in the confidential manner. Following the guidance of the code of ethics, I want to utilize my professional skills supported by the appropriate authority to address the issue. Your responses and concerns will be very important to deal with the issue. I hope it can be solved in a professional manner resulting the in the car market returning to a fair and healthy state in the long run.I am looking forward to hearing from you. Sincerely, Becky Knauer Work Cited: Controller / Business Manager Job Description The Association for Accountant and Financial Professionals in Business, IMA Statement of Ethical Professional Practice, York, Tom, Segregation of Duties, UNC Charlotte,