Asis Electronics – Anti-Corruption Convention
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Business Case Assignment # 4: ASIS Electronics
Do you believe that the “unattached receipts” totalling $6 million are potentially problematic with regards to corruption?
The “unattached receipts” totalling $6 million are potentially problematic with regards to corruption. According to Asis’s Anti-Corruption handbook, the standard procedure is that every receipt should be documented, correctly approved and coded to the correct expense description. Obviously, in this case, the correct procedure was not followed. This irregularity in itself should arouse suspicion.
Furthermore, Asis’s previous transgressions and its commitment to the “Anti-Corruption Convention” invites scrutiny from external sources. Additionally, considering that the receipts amount to $6 million (or 20% of the contract value) and the fact that this contract is with the Ministry of Defence invites further inspection and review. More information is required to ascertain if corruption was in fact involved, but there is sufficient circumstantial evidence to warrant a thorough investigation by either the government, Transparency International or the OECD Anti-Corruption Convention.
What are the potential consequences if Inge fails to report the accounting irregularity?
If Peter Inge does not report the anomaly and Asis is investigated, then Inge as the controller is liable to be held responsible for this discrepancy. As an individual, he could be held accountable for the irregularity in both criminal and civil lawsuits that might follow. Depending on the jurisdiction, this might translate to personal fine and perhaps even jail time. The irregularity does not seem to concern the CFO. Either he is indifferent or involved in the incident. If the corporate management is indeed involved in this, they might also conspire to find a scapegoat for this incident and it could be Peter Inge.
Additionally, as a company, Asis can potentially lose its contract and be disbarred from participating in such bids in the future. Asis could be potentially fined for the same. Furthermore, this incident could have repercussions (such as sanctions and disbarment) to its business dealings in other countries particularly OECD member-countries; especially considering Asis’s past offences.
Even if the irregularity is not investigated, it will likely demoralize Peter Inge. In a study by Harvard Business School, it was found that such incidents can hurt a firm even if no one outside the firm ever found out about it (Healy and Serafeim, 2011). The lack of commitment (or malice) of the corporate management (CFO) will impact Inge’s perception of them.