Cik Nordiana (Account Exec/Accountant) got the call she had been waiting for over

six long months. Her complaint to the human resources department of Bina Maju
Bhd had been dismissed. It was Human Resource (HR)’s conclusion that she was
not retaliated against for reporting an alleged embezzlement by the Accounting
Department manager. In fact, HR ruled there was no embezzlement at all. Cik
Nordiana had been demoted from assistant manager of the department to staff
supervisor seven months ago after informing En. Herman, the controller, earlier
in 2018, about the embezzlement. Her blood started to boil as she thought about all
the pain and agony she’d experienced these past six months without any level of
satisfaction for her troubles.
Role – Do account /responsible financial reporting
Issue – Complaint against account manager
HR Dept – not agree (no embezzlement)

Cik Nordiana is a CPA who works for Bina Maju Bhd, a publicly owned company and
manufacturer of trusses and other structural components for home builders
throughout the nation. Six months ago she filed a complaint with HR after discussing
a sensitive matter with her best friend and co-worker, En. Khai Bahar. Cik Nordiana
trusted Bahar, who had six years of experience at Bina Maju Bhd. The essence of
the discussion was that Cik Nordiana was informed by the accounting staff of what
appeared to be unusual transactions between Idham King, the department
manager, and an outside company no one had never heard of before. The staff
had uncovered over RM5 million in payments, authorized by King, to Vico
Construction. No one could find any documentation about Vico, so the staff dug
deeper and discovered that the owner of Vico Construction was Vicotoria King.
Further examination determined that Vicotoria King and Idham King were
siblings.

Issue – Embezzlement (conflict of interest transaction between Bina Maju with Vico
– unusual transaction)
Once Cik Nordiana was convinced there was more to the situation than meets the
eye, she informed the internal auditors, who investigated and found that Vico
Construction made a RM5 million electronic transfer to a separate business owned
by Idham King. One thing lead to another, and it was determined by the internal
auditors that King had funnelled RM5 million to Vico Construction, which, at a later
date, transferred the money back to King. It was a RM5 million embezzlement from
Bina Maju Bhd.

- How the embezzlement took place

Cik Nordiana met with En. Khai Bahar that night and told him about the HR decision
that went against her. She was concerned whether the internal auditors would act
now in light of that decision. She knew the culture at Bina Maju Bhd was “don’t rock
the boat.” That didn’t matter to her. She was always true to her values and not afraid
to act when a wrongdoing had occurred. She felt particularly motivated in this case—
it was personal. She felt the need to be vindicated. She hoped Khai would be
supportive.
- Main concern (internal auditor reaction)
- Bina Maju culture - don’t rock the boat.”

As it turned out, Khai cautioned Cik Nordiana about taking the matter any further. He

had worked for Bina Maju Bhd a lot longer than Cik Nordiana and knew the board of

directors consisted mostly of insider directors. The CEO of Bina Maju Bhd was also

the chair of the board. It was well known in the company that whatever the CEO

wanted to do, the board rubber-stamped it.

Issue CG – BOD is insider directors ?? ; CEO = CHAIR of the board – DUALITY

ROLE???

Cik Nordiana left the meeting with Khai realizing she was on her own. She knew

she had to act but didn’t know the best way to go about it. Even though Khai

cautioned against going to the CEO or board, Cik Nordiana didn’t dismiss that

option.
Dikehendaki/Required:
Discuss why ethical misconducts as mentioned in the above are more difficult to
overcome than poor financial performance.
- Ethical misconducts (EM) more difficult to overcome than poor financial
performance because of EM is INTANGIBLE NOT APPEARED IN NATURE.
- Example ……… conflict of interest between the managers and lower staff -
hubungan (Giles vs Regas)
- Implications – Reputation; Loss of trust and confidence; conflict with a key
shareholders; loss our customers
- Example implications – Reputation severe overcoming it will be more difficult.
Rebuilding reputation is always difficult. Examples of action to be taken:
o Management change
o Strengthening the function of board of directors.
o Empowering the role of Audit Committee and Whistleblower
o Make known to the investors internal control weakness identified
- and strategies (short and long term) to overcome the weakness
- In comparison, poor financial performance has the following features:
 Tangible in nature.
 Indicated in financial statements (loss or low profits)
 Being tangible, it is relatively easier to overcome through:
 Changing business strategies
 Cutting expenses
 Increase revenue generating activities

(10 markah/marks)

Analyze the corporate culture practice by Bina Maju Bhd as described in the
above.
Analyzing the corporate culture practice:
1- Fear of unethical leadership – Khai corporate culture “doesn’t rock the boat.”
2 - Fear loss of employment for raising issues – Khai and HR managers’ fear of
raising the issue to the BOD

3 - Pressure to meet numbers - Internal auditor

4 - Constant focus on numbers and results

(4 point x 3 points explanation)
 (12 markah/marks)

What is Cik Nordiana most powerful and persuasive response to the reasons and
rationalizations she needs to address? To whom should the argument be made?

Cik Nordiana has reported the suspected fraud to the controller and HR, now she is
faced with [the issue of whether she should go on up the chain of command to the
CFO, CEO, the audit committee and the board of directors ( 2m)]. She is trying to
counter the argument that there is no fraud or embezzlement by the accounting
department manager. The rationalization would be standard operating practice and
locus of loyalty to the organization (1 m).

The Accounting Department manager has the most at stake as he stands accused of
embezzlement by Cik Nordiana ( 1m). He could lose his job and be prosecuted for
his offense. Cik Nordiana is the protagonist in the case and the one with the ethical
dilemma. She was demoted after lodging a complaint with the controller about the
embezzlement. She has lost her retaliation complaint and now has to decide what
her options are. She should consider resigning her position to maintain integrity
(1m). The company’s future is at stake as the financial statements contain an asset
misappropriation. Idham King is in big trouble as he funneled Food Frozen funds to a
company owned by his sister. He has committed fraud. Cik Nordiana’s friend, En.
Khai Bahar, has a stake in the outcome of Cik Nordiana’s actions as he cautioned
Cik Nordiana about taking the matter to higher-ups in the organization because
of the insular culture of the company.[1m] – end fired

The company, board, CEO, CFO, and audit committee would have to report the
fraud to the SEC and adjust the financial statements (2 m). It is possible that the
fraud has been going on for some time and the company might have to restate prior
years’ financial statements. The management, audit committee, and auditors would
have to admit that there was a material weakness in the controls over financial
reporting (1 m). This would harm the company’s reputation and could cause the
stock price to decrease. The accounting manager could also be arrested, indicted
and placed on trial for the embezzlement.

(8 markah/marks)

Do you think Cik Nordiana has sufficient standing to file and become a whistle-
blower by holding the concept of human governance? Explain.
Issue to use as a evidence on Whistleblower Action

Cik Nordiana would be entitled to become whistleblower (1 m) if the disclosure to the SEC is
needed to prevent “substantial injury” to the financial interest of an entity or its investors
(RM5 million fraud and cover-up could be substantial injury to investors); Cik Nordiana
reasonably believes that the entity is impeding investigation of the misconduct (1 m) (entity
does not believe that there is a fraud so it is hard to know if it is impeding by destroying
documents or influencing witnesses); or the violation has been reported internally and have
passed with no action.(1 m)

Is it Nordiana has fulfilled the whistleblower criteria

If Cik Nordiana had been a compliance officer she would have to report the matter
up to the audit committee to meet her whistleblowing obligations.(1m) Relatedly, that
AICPA Interpretation describes the internal reporting obligations for all CPAs and
that Cik Nordiana should be certain she has met those requirements before
becoming a whistleblower under Whistleblower Act 2010.(1m)

Human governance refers to being human. Being human means being guided by a
common set of principles inherent in every human being. From time immemorial,
cultures around the world attempted to identify the qualities of what it means for a
human being to do the right thing. It is beyond being moral and ethical, which is
being fundamentally human. Being a human is insufficient if one does not behave
with a “conscience” (1 m) . Cik Nordiana have to take the right action (what she
believe to be truth) for the feeling of consciousness and conscience, (affect other
person in the business and society), with the ability to consider what is best for the
Common Good, being trustees of life as we know it. Common qualities such as
honesty, integrity, respect, trust and excellence, which are collectively known as
virtues, are recognised in every society [1m]. Besides, these qualities lead the
development and survival of every culture. Its success has shown to cause
civilisations to flourish whereas its neglect causes eventual decay

Similarly, organisations and businesses follow the same principles. In this case, Cik
Nordiana had seen corporations doing a lot on positive theory, which emphasis is on
the interest of maximising profit and personal interest. The communities,
shareholders, and employees (stakeholder) have become the fallen victim towards
greedy and selfish executives from major corporate scandals same as Enron, Arthur
Andersen (1m). Therefore, she need to address the issue of integrity in the
stewardship of corporations ( 1m). However, corporate players need to re-equip
themselves with the right knowledge for transformation to take place, which includes
the subjective besides objective ( 1m). This means that they need to move to the
cause of accounting failures, addressing the individuals who somehow manifest as if
they do not want to be accountable