CASE STUDY TOPIC 1

a. Explain 4 (four) potential social implications of the independent academic research’s

discovery about the health risks among the production workers of OSS on affected
stakeholders. (10 MARKS)

1. Losses of jobs in the various stages of the OSS supply chain. The forecast losses,
even in the best case scenario, would be likely to involve the loss of jobs and
employment levels at OSS plants and its suppliers. The worst case scenario, in which
the company itself would be lost, would involve the loss of the 45,000 OSS jobs plus
many more among suppliers and in the communities supported by the OSS plants.

2. Loss of, or serious damage to, communities in which the operations are located.
This includes the economic and social benefits in the developing countries and a very
high level of social loss in Middlebrouh. It is likely that Middlebrouh, effectively a
“company town” with 45% of the jobs at OSS, will be very badly affected and the
good causes in Middlebrouh, such as the nursery and adult education classes, will no
longer be able to be supported. The loss of a major employer from a town can lead to
a loss of community cohesion, net outward migration and a loss of, or deterioration in,
community facilities.

3. There will be a loss of economic value for shareholders, and a reduction in the
standards of living for those depending upon the company’s value for income or
capital growth. This might result in a reduction in pension benefits or endowment
values, where OSS shares are a part of the value of such funds. Individuals holding
OSS shares may lose a substantial proportion of their personal wealth.

4. The discovery by the academic research will lead, whether by a tightening of

controls or by a reduction in OSS’s activities, to lower exposures to highly toxic
substance in Middlebrouh. There will, in consequence, be fewer people suffering,
and, accordingly, less misery for the affected families and friends of sufferers. A
lower mortality from the substance-related disease will benefit communities and
families as well as those individuals directly affected.

5. Allow other relevant impacts such as loss of taxes to fund states services, increases
in state funding to support unemployed/sick workers, etc.
1. The communities will lose confidence in the company products due to the company
produces the harmful products. The research report that reveals that the company uses
toxic chemicals in the production will cause the public to refrain from buying OSS
products. The toxic materials probably will bring health problems to the user, so the
consumer tends to choose other products in the market which are more safety compared
to OSS products. OSS tries to hide the huge compensation costs which are nearly 2
million but discovered by the independent academic research and reported publicly will
cause the company to lose its reputation.

2. The toxic working environment will cause the workforce in the market not to choose OSS
as their employer. Due to the past decades, OSS employs around 45% of the workforce in
Middlebrouh in order to let the workers routinely handle more than 3000 highly toxic
substances. This causes the work-related illnesses among the employees and retirees. This
kind of working environment cannot give any safeguards or guarantees of the employee’s
health. The worker probable will suffer the health problem if they are long exposure in
the harmful chemical working environment. The doctor reports suspected that the toxic
material that was used by the company in the production will bring health problems to the
workers such as the miscarriages, birth defects and respiratory ailments due to the
harmful working environment conditions.

3. The shareholders will lose confidence in the company profitability status due to the
unprofessional auditors that hide the huge compensation amount. Due to the personal
interest which is the increase in the share option that the auditor received, the auditor
promises the CEO will not report the high compensation amount nearly 2 million. The
accountant is considered as unethical in their professional due care, the accountant acting
on their self-interest which has caused the conflict-of-interest with the shareholders. The
credibility of the financial report also will be affected by the accountant’s personal
interest, which has caused the financial report to be unreliable to the shareholders.

4. The government will focus more on the worker’s safety issues in the workplace and
enhance consumer protection. The increase in the worker safety issue in the workplace
due to the exposure of toxic materials will cause the government to pay more attention to
the industrial and production safety rules to protect the worker and consumer health. The
government will impose heavy fines and imprisonments on the company which will not
follow the rules and regulations that are set by the government.

5. An independent academic research discovered that OSS’s product was very harmful to
human health due to wide range of fatal respiratory disease which is negative impact. It
was also found in the 840 reports from doctors that OSS highly toxic substances was used
to produce the products that cause an above average incidence of miscarriages, birth
defects and respiratory ailments among production workers. The employees have faced
work-related illness and their working ability in future might be affected. Due to the
work-related illness, they have to spend money to cure it. It will cause financial problem
for the employees. OSS would have a high employee turnover.

6. Economic loss. This is because the unhealthy workers’ performance will be ineffective.
Hence, productivity of the company is affected. The company will need to find more
workers to complete the job and this increases the costs and causes economic loss. Also,
the company needs to pay compensation for the work-related illness among employees
and retirees.
7. Unemployment rate increases. Since OSS company is responsible for 45% of labor in
Middlebrough, therefore if OSS is being affected, the job of the labor in OSS will no
longer be secured. It will affect the employees as they might lose their jobs or be
unemployed, then they will lose their source of income and cannot afford for family
expenses.

8. Loss of corporate reputation and image. OSS's products are harmful to the health of
human due to wide range of fatal respiratory diseases. Therefore, OSS will lose the
reliability and trustworthiness from customers and the public.

9. Risk on employees' health and safety. The workers' health and safety are at risk as they
need to handle highly toxic substances daily. It affects employees’ health and there might
have future effect to the employees. The ‘epidemic’ of work-related illnesses among
employees and retirees will affect them and their family all over their life, they may
contribute their money earned to these illnesses and affect their living style and quality.

10. Threaten accountant professional ethics. Integrity, objectivity, professional competence &
due care, professional behaviour are being threaten. The accountant (Jane Lee) will be
disqualified as an accountant since she has decided not to report nearly RM2 millions of
compensation cost. This decision is against the fundamental principle of objectivity and
integrity. For the integrity, Jane Lee is not honest and straightforward as she has decided
to conceal nearly RM2 million compensation cost. Then, regarding to the objectivity,
Jane Lee allows the CEO and the promise of substantial increase in her share option to
influence her judgement.

11. Raise awareness about workers’ health among the public. Public authorities will take
necessary action to protect the workers in the workplace regarding their safety and health
like amending the laws or government setting new rules and regulations. For example, the
government will create and enforce stronger laws to protect the workers’ rights to work in
a safe environment. Punishment and penalty will be given to those companies that don’t
take serious of the worker’s safety.

12. OSS’s investor or shareholders will suffer a loss on what they have invested in OSS. This
is because it was discovered that the company products are harmful to human health and
it would ruin the company’s reputation. It might cause loss of customers and decrease in
company profit. Shareholders suffer loss from their investment in the company because
the share prices drop due to the controversy.

13. OSS will start to emphasize the safety of the workplace. An effective workplace safety
program will be developed to educate the workers. Education and training are important
tools for informing workers and managers about workplace hazards and controls so they
can work more safely and be more productive. Safety workplace also can help OSS to
reduce the high cost of work-related injuries and illnesses. OSS will have the awareness
to improve the working environment. Industries related to toxic chemicals should be more
cautious to handle the toxic chemical and defined the critical needs for data to improve
the assessment of toxicity to humans. They might improve the quality of specialized
occupational health services.
CASE STUDY TOPIC 2
Refer to Fraud Triangle Theory, discuss three factors motivate Pamela Nervosa to commit
fraud.

1. Pressure/Motivation
Pressure or motivation refers to a trigger for the individual to make fraud action, the
reason may be due to facing a situation that the individual may not handle or solve with
their current ability or authority, hence they are seeking an unusual way to encounter the
issue. In other word, under the pressure, the individual able to commit criminal act when
feel pressure about financial or emotional force.
The factors that motivate Pamela to commit fraud are:
 Financial pressure.
o Pamela suffered a huge financial pressure since she was a single mother and had
to support the living cost for herself and her son as well.
o She had the pressure to commit fraud due to personal situations that have driven
her to go out of their way to ease the financial burden. For instance, she
committed the fraud/embezzlement for the first time because she was desperate
in order to hire a lawyer for her son who was charged as a felon and jailed.
 Non-financial pressure.
o After her son was released, Pamela still continued with her embezzlement due to
her greed and addictive behavior. The previous success motivated her to
embezzle more and more. As a result, she embezzled $345,000 over
approximately four years. She also embezzled to buy frivolous items.
o Pamela was an overachiever and people pleaser, who wanted to accomplish
more. For example, she used the money from the embezzlement to help people
in financial hardship. She enjoyed people’s appreciation of “her generosity” and
savior status. It motivated her even more to embezzle funds from her company.

2. Opportunity
Opportunity refers to the circumstances in which it allows fraud to be committed.
Individual may have found ways where it is unlikely that he or she would be discovered
by the authority. Opportunity theory means the ability of a person to commit fraud
without being caught.
The opportunities for Pamela to commit fraud are:
 Weak internal control. Pamela’s employer didn’t care about internal controls. She jad
access to all computer modules and bank accounts. When she had access to the
company assets and information, it allowed her to commit and conceal the fraud. Her
employer trusted on her work performance, so he didn’t spend too much time to
oversight the company internal control.
 No separation of duties. Poor segregation of duties increases the opportunities for
fraud. Pamela could simply print checks in the accounting software test module and
forge the vice president’s signature. She also paid her personal credit card account
with company checks.
 The company is lack of supervision as it didn’t use positive pay and review the
activities in the test module regularly. Pamela got her opportunities to hide her
embezzlement in the cost of goods for the company’s largest customer, and the
company didn’t review the costing reports and pay attention to signs in the financials.
  The employer or colleagues over-trusted her. Her employer over-trusted on Pamela's
work ethic and let his guard down. The president even ignored the CPA’s advice.
Besides, the colleagues never suspected on her, and it made opportunities for Pamela.
3. Rationalization
Rationalization refers to an individual’s justification for his or her wrong doing.
Wrongdoer trying to relate positive traits to his or her actions to rationalize his or her
wrong doing. They may rationalize their behaviour by determining that it is okay to do for
a variety of reasons.
 For example, Pamela justified the theft by working harder and putting in more hours
as it would make her feel less guilty and less shameful about the unethical behavior.
 She convinced herself that it was just “borrowing” from the company, and she
promised to pay back the money in the future. Therefore, it made her think that it was
fine for her to commit the embezzlement since she is planning to pay back. Her
thoughts to pay back the money somehow made her action look reasonable for
herself. The theft was then rationalized and continued.
 She justified that she was doing right things because she used the money embezzled
to save her son and to help the people who were in financial hardship. She might
have justified that the money she took was not for her own use, but for others who
have difficulties.