CaseRef:046
Whistle-Blowing
ABC Company Limited was a publicly listed company. Howard, aged 35, joinedthecompanyasaninternalauditor.
One day, he received an anonymous letteralleging a possible fraud in the company. Following Howard's diligent investigation, there was evidence showing some wrongdoings of Mr Szeto, the Purchasing Director and a close relative of the Managing Director. Themalpractices included operating bogus companiestosupplymaterialstoABC,acceptingsecretcommissionsinawarding contractsandclaimingprivateexpensesthroughthecompany'saccounts.
He presented his findings to the ManagingDirectorandexpectedpraiseand appreciationforhisdetectivework. However, the response of the Managing Directorwastotallyunexpected.
TheManagingDirector"accused"Howardofbeingover-zealousinthecase. He said that Mr Szeto was a respected senior member of staff in the company. The evidence was also questioned inminute detail and thevariationswere describedasminor. Finally,theManagingDirectoradvisedHowardtostay away from the case.
HowshouldHowardreact?What would you do if you were Howard?
CaseAnalysis
ItisevidentthatHowardhasreceived an unsatisfactory answer from the ManagingDirector. Assuminghis findings are accurate, he should present a reporttotheotherdirectorsofABCCompanyLimited,settingoutthedetailsofhis findings of the malpractice of the Purchasing Director.
If the action taken by the board is satisfactory, then Howard needs take no further action. However, if the board action is unsatisfactory, then Howard should consider reporting the matter totheappropriateauthoritiesafterseeking legal advice. While maintaining confidentiality of company matters is an importantconsideration, Howard has to weigh this consideration against the publicinterestindisclosingsuchmatters to the appropriate authorities.
As there is no definition of public interest given by the courts, the Hong Kong Institute of Certified Public Accountant’s Professional Ethics Statement 1.290C suggeststhefollowingmatterstobeconsidered:
1) therelativesizeoftheamountsinvolvedandtheextentofthelikelyfinancial damage;
2) whethermembersofthe public are likely to be affected;
3) thepossibilityof likelihoodofrepetition;
4) thereasonsfortheemployer'sunwillingnesstodisclosethematterstothe properauthority;
5) the gravity of the matter; and
6) anylegaladviceobtained.