Accountability, Representation, and Control: Wells Fargo - Case Study Example

Wells Fargo Introduction It is well known about the wells Fargo activities that it involved by creating fictitious account to misrepresent their financial performance. What well Fargo did is not correct by including the inflation price of the stock based in the misleading information as well as incorrectly using the individual information of the clients that they used in creating the fake account that comprised of deliberate infringement of clients privacy rights. Whilst the law provides that financial institution as well as similar banks to cross sell to its clients, the law doesn’t permit sharing of individual information with non linked third parties. More specifically, financial institution that involves in internal cross selling are mandated to inform their clients of their right to quit from such cross selling and prove a simpler approach for clients to so. 1. Representation Kind of picture did the Annual Reports provide about Wells Fargo, and for whom As a result of cross selling activities made by wells Fargo bank, it was evident that it depict a stern effect on the bank financial p-performance since, the reported net profit reduced b y 9.4% for the q3 2016. The contribution to the bank overall profit from the retail segment is substantial, valued at $3.23 billion of the net $5.64 billion net profit. There people affected are the customers re large institution since, the state of California for instance had a stern ties with the well Fargo bank (Burns, 2012). Before making the verdict, California had done almost &1.65 billion worth of business in the last one and half years, but the revenue will disappear as well speak , because the state will no longer in use of the wells Fargo as a broker in buying the securities, California will not buy any extra debt securities, valued at $800 million As bank fees since the state is the biggest issuer of the debt (Classe, 2015). The human resource will as well be affected from the cross selling scandal since, it will take more than 4 years to rebuild the company’s corporate image in terms of sales and management layout which is extraordinary duty. Retention might entail as much as 100000 workers at more than 6000 localities with issues involving the recruiting and retention talents. Why the bank engaged in these fraudulent activities The cross align strategy is important in justifying the waves of mergers and take over on significant new unlike the low interest rate that squeeze the profits on lending. The problem is that many tougher to pull in reality. This strategy is tricky since customers are reluctant t switch lenders and many prefer to spread their cash. Bowers might simply shop for the best deal online cheap prices on product like the saving account that often found outside the normal bank. 2. Accountability The role of accounting as an accountability system at Wells Fargo, as an example of a large public corporation Discipline and self-discipline in the management accounting system of the bank Management accounting is a system that measures as well as provides operational and financial information that provides guidance in managerial actions. encourage attitudes as well as support and create the cultural value that is needed to attain the strategic goals of an organization. Management accounting system is therefore important in ensuring that a business attain its strategy. Strategy is the approach of a company position as well as distinguish itself from its competitor in terms of quality, cost as well as time (Haire, 2005). Different customers depict diverse anticipation concerning the features as well as performance dependability in term of quality they need, the product/services. In terms of merger and acquisition, the accounting input is restricted to what might be explained as due diligence procedure while the strategic as well as cultural fit and the likelihood of cross selling of current business is deem to depict no significant effort if attempting to appraise the financial effect of the strategy result, this is as a result of the uncertainty in the outcome of the financial analysis that might be generated which may severely damage the company’s reputation and financial performance (Henry, 2011). The key areas to Which the management accounting system is utilized to support strategic verdict is in the information collection and analysis phase, although in line with the existing performance, strategy formation as well as supervising and evaluation phase, this is mainly through provision of performance information, re-forecast as well adventure evaluation. The use of simpler reforecast approach is deeming to contribute to the strategic management procedure since, it aids in shaping the strategy or indicating the needs for strategic actions. The effect is of strategic verdict on re-forecasting was observed as contributing factor to the strategy development. It is not clear who should be held accountable In much institution, being held accountable is frequently assumed to be happening automatic due to occupation of an accountable job, where the manager is expected t act responsibly in their duty, and not needs. But in this situation, trust and assumed processes eaves the accountability seriously uncontrolled by the companies and this is big blunder. Being officially held accountable is often appeal to just on the event of failure. But this is restricted by the exception view of requiring being accountable being risky (Hocevar, 2005). An ideal process for delivery of things that matters the most must be perceived as a constituent of goof standard management practices as well as governance and be must executed anytime, not just when things is wrong and thus people need to be held accountable for what they are required to do and for what they have done wrongly. When there is mistake, they must cover the act of commission and act of omission. For the wells Fargo scandal, fine is not sufficient penalty and thus, bankers must be held accountable and the banks must be broken up when they are too big to be controlled. The relevance and problems of corporate governance Corporate governance is the approach of companies policing itself. It is an approach of governing the company, installing its own custom, policy as well as law to its workers. Corporate governance is aimed at increasing the accountability of the company and getting rid of huge disaster prior to happening. Corporate governance is important to the business. When executed efficiently, it might get rid of scandals like those of wells Fargo bank, fraud and the civil liabilities of the business. It as well improves the company’s corporate image as a self policing company practice as well as culture of a business and its workers. Company devoid of system of corporate governance is at times considered as a body devoid of soul. Corporate governance ensures that a business is trustworthy and in no troubles. Where the company philosophy is broken down, then the product will be defect and management will grow their self satisfaction and corruptions (McNair-Connolly, 2012). This will lead to fall of the business and its reputation in the public prompting for criminal investigation as well as federal problems which may lead the company of bankruptcy, dishonest and unethical transactions that may lead to shareholders fleeing due to fear, destruct as well as repugnance. For wells Fargo, the workers create fictitious account without the consent of their customers which is against the law and policy of good corporate governance with regards to disclosures, the impact of poor governance in wells Fargo leads to loss of customers, decline in reported net profit, damage in company’s’ corporate image as well as loss big corporate business partners that boos the company financial performance (Menguc, 2006). 3. Control The limitations of accounting Sales incentives and how lower-level employees were controlled In September, wells Fargo entered into a contract to pay $185 million in fees incorrectly charged to clients. The settlement stern from the bank workers purportedly opening over 2 million bank and credit card account devoid of the clients consent and approval. To control the sales workers and existence of scandals like this, wells Fargo, fired more than 5300 workers due to inappropriate conduct. The bank eliminated the sales goals since; they need to ensure that the clients have trust in their retail bank with regards to best interest rates. Sales people are provided with big cash in term of reward for attaining the sales objectives, goals that workers consider as excessively high. The sales managers are also rewarded for the objectives attainment, so they exert pressure on the sales personnel to deliver the objectives. The sales personnel are enticed with the promise of big rewards that makes them fearful of losing their job or status quo in the company and thus, they will do all means to ensure that their sales objectives are reached (McNair-Connolly, 2012). The key to success is on the new culture on balanced methodology to controlling and managing the sales. The methodology will require the use of tool unlike the incentives. For instance, interesting work, improved procedure for choosing the best salespersons as well as managers, a dethatched information sharing, empowering the sales team, teamwork, manager support and control as well as enhanced performance management system in order to encourage sales personnel as well as guide and control sales attitude. Once this is successful in the bank, the cash used for sales person incentive in attaining the sales goals will be sued as customer incentives. Some challenges of internal controls and especially Enterprise Risk Management systems As a notion of enterprise risk management (ERMO is frequently battle examined in the private and public sector, business approves the tool to addressing the risk by efficiently and effectively focusing management attention on the areas of high risk to the vital business process for the company, the current reality calls for stead support and improved effort in reducing the cost and delivering the best customer services. These objectives depict a direct effect on the fraud prevention since they grow the pressure of administration, more specifically financial and marketing management to adhere to the high sales as well as earning performance standard. The current disaster at wells Fargo is case of this sales goals and earning performance pressure out of control at apparently every stage of the organization (Frein, 2012). The challenges represented by the vital work of ERP system in wells Fargo bank is merely compounded by the intricacy of collecting as well as filtering intellect from the difference and constantly changing management team with diverse level of expertise and armed with diverse plans. An overall company posture of ideal enterprise resource system management starts with the risk framework of the organisation as well as linked governance structural design centered on the verdict making process that direct fraud risk mitigations (Haire, 2005). But in a heap of diverse administration duties as well as accountabilities, it is hard to get the needed data to identify vital changes to the business’s risk appetite as well managers emerging fraud risk on the basis of the changing appetite. Efficient risk mitigation turns to be ultimate challenge and it’s hard to undertaking the duty effectively of mitigating a threat that is not seen. It is evident in the wells Fargo bank that the communication is made easy between the top level management and the lower level management and business process risk owners who might nit in a constant direct contact with one another. The risk owners from one branch or operating unit in wells Fargo might depict an incomplete idea of fraud risk or situation but not a view of the whole risk posed by the entire situation as depicted by the consulting inspector. Indecision present risk and chances, with the potential of eroding or improving the value. ERP makes management to be more efficient in dealing with indecision as well as linked risk and chances, improving the ability of building the value under the COSO model, the wells Fargo bank did not put into priority risk that may put at risk the company’s mission, efficiencies and effectiveness. It as well turns to be that it was in deficit of it taking immediate action to stop the primary workers fraud situation from growing and spreading wide to more workers, just after the fact did it stop the plans of impractical workers sales goals. (Reed, 2003) Value is capitalized when the administration set strategy as well as aims to strike an utmost equilibrium between growth and returns objectives as well as the linked risk, and efficient use of resource in chase if the business aims. The application of the rationale features on the current supervision of the performance of the risk model, evidently, at the first signal of fraud, wells Fargo bank might have reexamined risks, sets risk to the utmost and assumed immediate steps to stop the identified fraud situation. The biggest question is whether the ERM would have helped wells Fargo bank. The process defined by COSO might have provided some aid in provision of risk monitoring and immediate remediation approach to reexamine the risk in acting in response to the initial whistleblower call alert to the present of workers aid fraud. There no indecision that the forensic accounting as well as the CFE community may play a significant role in the provision of the required guidance as well as procedural support in the implementation of the dynamic, ERM, fraud response programs. As the wells Fargo bank experienced and so other situation recommends, the time has come to the use of the entire capabilities of enterprise risk management system (ERM) as a tool to aid in the identification as well fast remediation fraud prior to the expense of the entire shareholders turning to be inappropriately high (Wilson, 2012). Bibliography Burns, N. (2012) The paradox of strategic management, new york. Classe, J. (2015) Business Aspects of Optometry: Association of Practice Management, London: John Wiley. Frein, J. (2012) Handbook of Construction Management and Organization - Page 430, London: John Wiley. Haire, B. (2005) 'A Strategic Posture toward Corporate Social Responsibilit', California Management Review, vol. 18, pp. 48-58. Henry, A. (2011) Understanding Strategic Management, London: Cingage Learning. Hocevar, C. (2005) cross-industry comparative analysis of strategic management accounting techniques application, New York. Jazayer, N. (2011) The role of management, london. McNair-Connolly, C.J. (2012) New performance measurement and management, London: John Wiley & Son's. Menguc, N. (2006) 'Corporate Responsibility, Stakeholders and', European Journal of marketing , vol. 39, pp. 1184-1198. Reed, F. (2003) 'Stockholders and stakeholders: A new perspective on corporate governance', California Management Review, vol. 25, pp. 93-94. Wilson, R.M.S. (2012) Strategic Marketing Management - Page 534, New York. Read More