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    Anonymous allegations - investigate or not?

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    Robert Ford, Director of Internal Auditing, received an anonymous tip from an employee in one of the high-tech manufacturing plants. The employee noted that there was a major embezzlement taking place in one of the divisions. Internal audit had completed a routine review of internal control of that division the previous year and found that the control system was properly designed and operating effectively. Only minor recommendations were made, and the next review would be scheduled for 3 years.

    The employee noted the erratic behavior and lavish lifestyle of plant controller and that the controller has been overriding existing controls so that any audit would not be able to detect the embezlement. The plant controller is well respected and highly trusted by the CEO and CFO and their families are involved in the same civic and religious organizations. Investigating the plant controller could cause considerable disruption in the company and in the personal lives of the employees.

    1.Given the situation, discuss some of the options the company has for handling this situation.
    2.Assuming you decide to investigate these allegations, describe the investigation steps.

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    Solution Preview

    1.Given the situation, discuss some of the options the company has for handling this situation.
    First, it is important to consider that the anonymous informant may have had his/her own agenda. The allegations they informed the company about may be false ones. There could be other, completely legitimate reasons why the company controller is displaying erratic behaviour and spending lavishly, which might indicate other genuine problems, but which might have nothing to do with embezzlement or illegal activities on the job - in private, perhaps, but not on the job. For example, perhaps the man just got a diagnosis of cancer in himself, or a close family member. Perhaps the marriage is going through real problems - this could ...

    Solution Summary

    Anonymous allegations of fraud have been reported against a respected administrator. Investigate? Don't investigate? If you do investigate, how will you begin? How will you proceed?

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