Professional Ethics in the Management of the Fraud Case Study

The concept of professional ethics encompasses the corporate, organizational, and personal standards of behavior that people from different professions should follow. It consists of rules and ethical codes of conduct that govern professional behaviors, these rules play a significant role in setting limits of what are acceptable and unacceptable behaviors in the context of the profession. It provides people with best approaches to address key ethical issues that might arise or occur during their careerjourney. This paper, therefore, discusses professional ethics taking into consideration the management fraud case study The paper will provide a detailed analysis of the case by seeking to understand what professional ethical rules were violated This case was published first in the Journal of accountancy article entitled Lessons from on $8 million fraud released on lst August 2014.

The article describes how Mr. Nathan J. Mueller who was working in the accounting department at the ING Insurance Group managed to steal a total of $ 8.5 in different occasions from his employer within a period of four years since 2003 up to 2007.

In his day-to-day job where he was working as part of the changeover team, Mr. Nathan .1. Mueller, and his co-workers in the department of accounting had the permission and the authority to approve and sign a check up to $ 250,000. According to him, after discovering this permission, he realized that there was a huge opportunity of making money from issuing and approving checks. However, in the beginning, he did not take that advantage until one fateful day when he was in a serious need of money to cover up the medical bills of his pregnant wife and was overwhelmed by debts.

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In fact, the position he held in this company would allow him to request and approve the checks for payments without having to consult the senior management. The only people who had this privilege at ING Insurance Group include Mueller and his other two colleagues who were the controller and the assistant controller working in the same department.

Furthermore, since they knew everyone else‘s passwords in the accounting department, it could facilitate them to get something done when another co-worker was not around In fact, Mri Mueller was free to log in as someone else and do things as though it is that person who did it. This was a good opportunity for anyone in the accounting department to do something as someone else without being discovered (Carozza, 2015), This thought kept on growing in the mind of Mr. Mtteller until in 2003 when he decided to give it a try and steal some money to cover up his medical bills of his pregnant wife and to clear up some debt which according to him could not be possible with his $ 80,000 annual salary. In his first attempt in 2003, he logged on as CW which helped him to request a check and stole $1,100. The second time two weeks later, he requested another check for $ 1,800 and he managed to clear up all his debt during the same period using the same universal card.

After getting used to stealing the money from his employer without being caught, an idea came into his head that if he could register an Ace business consulting firm with lots of branches it would facilitate him to transfer the money to the company from his employer‘s account without having to use his details as the beneficiary. According to him, the choice ofAce business is because ING Insurance Group had many business transactions with another company with Ace in its name. This earned him a huge amount of money as he managed to steal $ 1 million in 2004, two million in the next year, $ 4 million in 2006 and $ 1 million in 2007‘ Unfortunately, in 2007 Mueller was caught after suspicions were raised and he had no explanations about Ace checks and the supporting voucher. During all this time, Mrs Mueller was living a fancy lifestyle buying expensive cars and flying first class to Texas to gamble because he wanted something to justify his expensive lifestyle. He did not wish to let his wife know or have an idea of where he was exactly getting the money from, nor did his friends know where he was getting the money from.

For example, when his wife and friends started questioning his lavish lifestyle and expensive cars, he always told them that he was a successful accountant and that he was doing other jobs, He also used to tell his friends and his wife that he was winning a lot of money from gambling. It is amazing how Mr, Mueller did this for over four years without being caught until when a special audit was assigned to investigate more about where he was getting all that money from. He ended up divorcing his wife and later got investigated and arrested for fraud and embezzlement of money. Mueller was sentenced to 87 weeks to prison and served 51/2 in prison. He served his sentence until when he got released from prison. The violation of AICPA code of professional conduct accounting, auditing, as well as finance or any other related professions have a specific code of professional conduct that needs to be respected by every person practicing this profession Failing to honor this code can affect the professional accountant and any other member of the AICPA in many ways.

It is therefore obvious that different principles and code of professional conduct were violated as far as the case study of this paper is concerned. The integrity principle: In the accounting profession, integrity ha a great role [0 play due to the fact that accountants hold the key to the organizational success. According to the American Institute of Certified Public Accountants, professional accountants should act responsibly when reviewing sensitive information or engaging in their day-to-day accounting practices. Integrity, therefore, requires all professionals in this area of accounting to demonstrate a high level of honesty, forthright and candid in all their endeavors This is, in fact, a way of encouraging professional accountants to be more trustworthy and to work in a way that might not put the business or their clients at risks. For example, the AICPA does not support fraud or similar practices in the accounting profession.

In addition to that, integrity focuses on the reliability of the professional accountant by asking him/her not to disclose the sensitive information of his clients or employer. Taking into consideration the case study in this paper, Mr. Mueller did not respect the principle of integrity. He instead violated this code by engaging himself in illegal practices that could put his employer and his colleagues at risk. Due care principle: Due care requires all professionals to review and apply the generally accepted principles (GAAP) in order to deliver quality work consistence with the accepted standards. It is also important to note that due care does not only facilitate professionals in their work but also it facilitates executive managers or internal auditors to detect and identify mistakes and errors easily hence mitigating risks associated with these errors. Unfortunately, Mrr Mueller knew all this but did nothing about it.

He instead tried to conceal evidence using his professional skills in accounting which made it impossible for his colleagues or internal auditors to find out about his illegal practices. This means that these GAAPs should be used in ways that benefit the employer of the clients Objectivity and independence principle: The objectivity and independence in the AlCPA code of professional conduct requires professional accountants to avoid questionable business relationships This means that in order to remain free from conflicts of interests, professional accountants should remain free and independent. The concept of objectivity and independence encompasses many aspects such as the fairness, the state of mind that enables the professional accountant to recognize his obligations towards other members, creditors, clients as well as stakeholders. For example, independence in this context means that an auditor or professional accountant should have no interest or obligations in the company, management or client that could make his work and result questionable.

In other words, he should be credible and trusted by all the stakeholders it is in this regard that usually the accounting industry does set limits to the number of accounting services that can be offered by an individual certified accountant or public firm. As far as the case study is concerned, Mueller violated this rule by taking advantage of his position and putting other people including his colleagues and employers at risk. The violation of this code can have severe effects on the employer and the organization as a whole For example, during all this time Mueller was stealing this money, nobody knew what was going on. Furthermore, his colleagues had no idea of what he was doing under their noses. It is important to note that the management of the organization also made a very big mistake of allowing the employees to requests for checks and then giving them permission to approve those checks without checking them.

In addition to that, the company did not consider what the consequences of allowing employees to approve checks could be. In fact, this can be referred to as a serious negligence. Another question that can be raised by this case is how a company can go more than three years without conducting an internal audit to find out key issues within the organization. INC as a big company that has a high reputation and strong management system demonstrated a high level of carelessness in this case. For example, it shows that there are many other illegal practices that happened in this company before that of Mr, Mueller come to light. Furthermore, it cannot be easy to detect and identify such practices within such big corporations without using independent and external auditors who possess advanced and required skills to diagnose key issues such as fraud. A recent article in the journal of accountancy pointed out various reasons that push employees and CPAs to commit fraud.

According to the report, many employees engage themselves in illegal practices due to three main factors such as the pressure, opportunity and rationalization . The abovementioned factors play a significant role when an employee is feeling the temptation of committing fraud. As stated above in the case study, Mr. Mueller was tempted to commit fraud when he realized that it is possible to request and approve checks himself. This is an opportunity that was given to him and made him think of engaging in such illegal practices. However, different studies pointed out that it is not only a matter of opportunity but also the motivation behind the fraud committed by employees. For example, the case study indicates the extent to which M. Mueller was not satisfied with his salary. This is due to the fact that he had many family responsibilities and was feeling unable to handle them.

Furthermore, since his annual salary of $80,000 could not cover the medical bill of his pregnant wife, it is a clear indication that he was not happy in the first place. As a result, he seized the opportunity that he had to solve the problems that he thought his salary could not solve. Moreover, he was not only frustrated by the medical bills but also the debts he could not to clear with his salary. It is therefore obvious that he was not happy and he was not feeling satisfied by his salary. The opportunity coupled with responsibility can push the employees to commit fraud. Just like Mueller and his co-workers had the opportunity to do what they wanted with the checks without being questioned offered him with a huge opportunity to do what he wanted and to steal money for a period of four years. This is a long period in business and it demonstrates that if the other two co-workers of Mueller had decided to do the same as he was doing, there is no doubt that this company could experience total and deep bankruptcy as it could be very difficult to detect those illegal practices.

Responsibilities principle: This principle is set to remind professionals that when carrying out their professional activities they should use their moral judgment. This is because professionals are obliged to act in a way that will honor the trust that the public has in them as well taking into consideration the public interest. In fact, professional accountants are required to demonstrate their commitment to their work, This principle was violated in this case because Mueller embezzled money that belongs to the clients of the ING insurance group, hence violating the public interest. Lesson learned From the analysis of the case study and the way Mueller managed to steal a huge amount of money that is estimated at $8,5million within a period of yours years, it is important to think about some questions. The first question every person could ask himself is how money can be stolen from a big corporation such as ING insurance group and go unnoticed.

This, on the other hand, raises the problem of the competency of the executive managers. The question of how does a competent manager assign two interrelated responsibilities to one employee knowing that these responsibilities offer the employee the opportunities to commit fraud. Furthermore, the theft of such a big amount of money from a high reputable corporation like ING Insurance Group is an embarrassment both to the executive management and to the external auditors Having failed to detect such fraud over a period of four years indicates that the external auditor did not do his work properly, For example, there were many ways of detecting and identifying these frauds in the first place if the external auditor had the willingness to do it. Secondly, the executive management and the board did not care to assess the risks associated with allowing the accountants to approve the checks.

In addition to that, it seems that the communication between ING Insurance Group and its banks is narrow due to the fact that the money was stolen using the bank checks which could have been checked and detected earlier before it was too late. Another possible way of detecting it was simply to know each and every beneficially of the bank check issued by the company. This could have facilitated the company to find out that some fraudulent acts that are being done on the company’s account. Finally, the lifestyle that Mueller was living could raise suspicion since his salary could not cover all the expenses of his fancy lifestyle and afford to buy those high end cars. In professional ethics, some behaviors such as gambling and other similar life acts are not allowed in professional accounting.

Based on the integrity code of conduct, a professional accountant who engages in gambling or similar practice may affect his credibility and trust of the clients. In conclusion, the purpose of this paper was to discuss professional ethics basing the paper on the facts and evidence from the case stud. The case assessed indicated the extent to which one single mistake by executive managers can cost a lot to the entire organization For example, the executive management of IN G Insurance Group made a mistake of giving to its group of accountants the permission of requesting and approving the checks up to $ 250,000 without considering that it can result in theft (Kasher, 2005). In fact, the executive management of NC should bear the blame that what happened was a result of negligence and overconfidence in their employees. It is therefore logical to conclude that professional ethics has a great role to play on both sides such as the employees‘ side and that of the managers of the organization.

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Professional Ethics in the Management of the Fraud Case Study. (2023, Mar 20). Retrieved from

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