Anonymous Caller

I would recommend that the caller try to gather more evidence (sales transactions) to try and determine if what occurred is actually fraud. Then, the caller should have a talk with the CEO and CFO to see if any useful information can be taken from them. If they are uncooperative, then the Bank needs to be called and be informed as to what is going on. The risks with continuing to work for the company are any legal action brought by the bank for the company falsifying its records.

The risks of resigning immediately are it looks bad if the top-level accounting person of the company just up and quits. Also, if the caller were to quit right when she found out what happened, and then she might not get the appropriate evidence to make a decision. The records wouldn’t be copied and stored for further investigation. The State Board of Accountancy is only for public companies, and this is a private enterprise.

There is the risk of jumping the gun and calling the Bank, even though there wasn’t a fraud. It could just be that management was new and didn’t mean to do anything wrong. This can lead to a lot of issues with the bank. The caller should only call the Bank as a last resort, and this is only the case if upper management isn’t cooperative. She should hire a lawyer to help her through any legal issues.

The external auditors should be notified in addition to the bank. The caller shouldn’t tell them everything she did (hire a lawyer, take records for further investigation), but she should tell them that she thinks there is fraudulent financial reporting happening by management. The concern with notifying the external auditors is any possible recourse that they may take. This is why the caller shouldn’t tell them everything she did.

While I would hope they weren’t, yes, I do think that situations like this are common in practice. From the cases that we read about Enron and WorldCom, there are a lot of people out