Reference no: EM133111449

Question - Stan Misuse was seen as a "model employee" who deserved a promotion to CFO, according to John Much, the CEO of Much Corporation, a Maryland-based, a largely privately held company that is a prominent global designer and marketer of stereophonic systems. John considered Stan to be an honest employee based on performance reviews and his unwillingness to accept the promotion, stating that he wasn't ready yet for the position. Little did she know that Stan was committing a $50,000 fraud during 2015 by embezzling cash from the company. In fact, no one seemed to catch on because Stan was able to override internal controls. However, the auditors were coming in, and solidifying the deception, he needed the help of Ryan Helper, a close friend who was the accounting manager. Stan could "order" Ryan to cover up the fraud but hoped he would do so out of friendship and loyalty. Besides, Stan knew Ryan had committed his own fraud two years ago and covered it up by creating false journal entries for undocumented sales, returns, transactions, and operating expenses.

Stan went to see Ryan and explained his dilemma. He could see Ryan's discomfort in hearing the news. Ryan had thought he had turned the corner on being involved in fraud after he quietly paid back the $20,000 he had stolen two years ago. Here is how the conversation went. "Ryan, I need your help. I blew it. You know Kim, and I split up 10 months ago.""Yes," Ryan said. "Well, I got involved with another woman who has extravagant tastes. I'm embarrassed to say she took advantage of my weakness, and I wound up taking $50,000 from company funds."

"Stan, what were you thinking?" "Don't get all moral with me. Don't you recall your own circumstances?"Ryan was quiet for a moment and then asked, "What do you want me to do?""I need you to make some entries in the ledger to cover up the $50,000. I promise to pay it back, just as you did. You know I'm good for it."Ryan reacted angrily, saying, "You told me to skip the bank reconciliations-that you would do them yourself. I trusted you.""I know. Listen, do this one favor for me, and I'll never ask you again."Ryan grew increasingly uneasy. He told Stan he needed to think about it ... his relationship with the auditors was at stake.

1. Use the GVV and answer the 4 steps.

2. Analyze the facts of the case using the Fraud Triangle. Include a discussion of the weaknesses in internal controls.

3. Which rules of professional conduct should Ryan consider in deciding on a course of action? Explain. What are Ryan's ethical obligations in this matter?

4. What would you do in the situation if you were Stan? What would you do in this situation if you were Ryan? Please use an ethical framework to answer these questions and do not just make something up!