Ethical aspects of fraud evaluated through the "Fraud Triangle'
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1. Is it ethical for a manager to permit an employee to continue working after finding the employee embezzling a significant amount of funds? Is it ethical for a manager not to report a subordinate caught in fraud to others in the organization? Explain.
2. Consider the fraud triangle. What does it suggest regarding fraud indicators in the case of a cashier who may be skimming sales receipts? Explain.
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Solution Summary
The write up illustrates the ethical aspects of allowing an employee to continue working after discovery of fraud being committed by him/ her. It evaluates the example of sales clerks skimming sales orders through the framework of fraud triangle and provides illustrations of control mechanisms and actions that organizations can undertake to reduce the likelihood of fraud.
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Part 1: It is not ethical for a manager to permit an employee to continue working after finding the employee embezzling a significant amount of funds the following reasons.
• The employee has a moral and fiduciary to serve the best interests of the employer as part of his/ her employment contract. Not doing could harm the interests of the employer.
• A significant part of a manager's job requirements is to act as the supervisor for employees. The manager is morally and ethically responsible for the adverse effects of the actions of the subordinate arising out of negligence of his/ her supervision responsibilities.
• Permitting the employee to continue working encourages the employee to continue the embezzlement, possibly at a greater extent. It deprives the employee of an opportunity for corrective action which may have benefited him/ her significantly in the long run. Ultimately, such actions affect the dependents for the employee including the immediate family and permitting the employee to continue working contributes to putting their future and reputation at risk.
• Such action deprives the organization of taking corrective actions by way of procedural lapses or inadequate safety measures to be addressed which can prevent such embezzlements in the future.
• Allowing the employee to continue ultimately causes a significantly ...
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