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Ethan Lester’s Fraud in Financial Statements

Financial misconduct is a combination of the criminal trying to meet their needs match with their ability to steal money. Ethan Lester is a model CPA that deserves a promotion, according to a CEO. However, the man committed a theft of $50,000 to impress a woman. The crime was concealed by circumventing internal controls and his own personal participation in the falsification of documents. Ethan asked another CPA, Vick, to make fake entries in the ledger for keeping his friend’s secret, who also stole $20,000, which was later returned. In light of Vick’s actions, this case’s ethical dilemma is determined between the reporting of a violation or the concealment and complicity in the crime.

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Analysis

Internal control of a company’s financials is a complicated process that requires a multi-faceted audit. Ethan is an accounting specialist and enjoys a positive reputation in the company. The crime was committed because the CPA sought to succeed in his personal life and use corporate finances for individual gain. This is a rationalization of fraud, as Ethan experienced a feeling that transcends the pro-social position from the Fraud Triangle perspective (Mintz & Morris, 2020). Moreover, Lester viewed theft as an activity that outweighed the benefits of conducting business honestly. In other words, obtaining $50,000 illegally will give a person benefits in the short term, while career advancements and salary increases will only happen in the future. This represents a failure of internal control, as independent auditors did not control Ethan, and the CPA’s positive reputation nipped any suspicions of colleagues (Mintz, 2016).

Vick is Ethan’s colleague and has the authority to report workplace abuse. Even though the specialist also undertook fraud, this money was returned, and it did not become known. Therefore, Vick has to say that such a large sum is likely to show up as a noticeable hole in the budget, and independent auditors will find it missing. This action may have consequences because Ethan has a good reputation, and the management may accuse another CPA of stealing. Vick can influence the company and auditors’ actions through open dialogue and disclosure of future fraud. It is also exposed through the Giving Voice to Values ​​(GVV) framework, whereby workers are free to express personal concerns and dispense with the burden of responsibility (Mintz, 2016). Therefore, Vick must reach out to Fostermann and the internal auditors either through an anonymous statement or in person. This approach will be fair, given the CEO’s confidence in Ethan’s congeniality.

This situation has no rational explanation since Lester will not be able to prove Vick’s previous intentions. The fact is that the stolen money was given back, and the loss was not noticed during the audit. Consequently, Ethan will not use this knowledge to fire the colleague as it is not provable. Therefore, Vick is faced with the choice of resigning or contacting authorities about the fraud scheme. Any of these scenarios will cause distrust from the management directed at Ethan, who either did not understand the ward’s situation personally or initiated the theft of corporate finances.

Conclusion

Ethan Lester stole $50,000 from the company because of his authority to cover up the crime. It happened due to his excessive desire to receive money quickly and simply over painstaking work and promotion. The CPA asked Vick to facilitate the crime due to the colleague taking similar action. However, it is not a blackmail tool, as Vick returned the money, and the loss was not recorded. The colleague must report the violation, as Ethan has no practical way of avoiding punishment in this case. It is the implementation of the GVV model, in which the employee has the right to transfer values ​​to the team, namely, to avoid responsibility for masking dishonest actions.

References

Mintz, S. (2016). Giving voice to values: A new approach to accounting ethics education. Global Perspectives on Accounting Education, 13, 37-50.

Mintz, S., & Morris, R. (2020). Ethical obligations and decision making in accounting (5th ed.). McGrow Hill.

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StudyCorgi. (2022, May 29). Ethan Lester’s Fraud in Financial Statements. Retrieved from https://studycorgi.com/ethan-lesters-fraud-in-financial-statements/

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StudyCorgi. (2022, May 29). Ethan Lester’s Fraud in Financial Statements. https://studycorgi.com/ethan-lesters-fraud-in-financial-statements/

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StudyCorgi. 2022. "Ethan Lester’s Fraud in Financial Statements." May 29, 2022. https://studycorgi.com/ethan-lesters-fraud-in-financial-statements/.

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StudyCorgi. (2022) 'Ethan Lester’s Fraud in Financial Statements'. 29 May.

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