Question

In: Accounting

Explain how the Wells Fargo accounting information system (i.e., components and functions) contributed to the fraud...

Explain how the Wells Fargo accounting information system (i.e., components and functions) contributed to the fraud and / or embezzlement. You will need to focus on how each component / function of the accounting information system failed, which resulted in the scandal / case.

  1. Recommend a strategy that Wells Fargo may use to prevent future business information failures. Indicate how the company should approach the implementation of your recommended strategy. Provide support for your recommendation.

Please include any websites/references used

Solutions

Expert Solution

Sir

As far as I understand your question is about the control system implemented and flaws in between. since I am an accounting and control expert I give my best to explain on internal controls in the easiest way. I am skipping the technical portion on technology working inside.

How an accounting system work in such companies

  • The whole system normally works at 3 level TPS ( Transaction Processing System ), MIS ( Management Information system ), EIS ( Executive information system ) there are several other classifications but broadly we consider these three.
  • TPS is used by the lower management typically by the sales persons who actually find the customers for the bank.
  • Whenever a new customer finds out his/her all basic information enter via the system.
  • In case of banking KYC ( know your customer ) process need to be fulfilled like Identity proof, address proof etc.
  • When all necessary information collected and entered into TPS the bank account activated for the required customer.

What happened in the case of Wells Fargo

  • It was time just after the great economic rescission of 2009.
  • There was a fear of job loss all around Weel Fargo was not an exception.
  • The salesperson was under pressure to open new bank accounts.
  • But due to recession demand was very low.
  • So what the salesman actually doing he takes some few more signatures of customers either existing or new ones.
  • Since KYC documents photocopy was already with them and TPS accepted it as it is.
  • KPMG was the auditors which were responsible for cheeks and balances were bypassing the whole process of KYC verification.
  • Online Kits like Credit cards and banking login credentials did not send by registered post directly to the address proof.
  • Since customers were complaining a lot of time and they were assured to everything is ok middle-level management was also involved somehow.

Assumptions, Disclaimers & Fine Points

  • Since it was a fraud by lower level management hence the management fired employees were of lower management none of the executive level person fired in this case.
  • In 2009 that auditors ignorance was at the same level when companies like AIG were issuing insurance without even reading the reports.
  • At the time of recession, the banks failed in the USA, Japan, Canada, Germany nearly every part of the world except India because India is the only country in the world where they have prudential norms even for KYC same need to be implemented by regulators avoid such situation in future.
  • I cover a very narrow aspect of the case the case have many more aspects to elaborate.

Strategy and steps

  • Proper KYC System needs to be implemented to avoid such a situation.
  • Basic Job security needed to be given to its lower level employees.
  • Auditors Responsibility need to be fixed.
  • Customer complains grievance system needs to improve.
  • The confidential information needs to send to mailing address by registered post directly in a packed envelope.

Related Solutions

How did the Wells Fargo account fraud scandal affect the company financially?
How did the Wells Fargo account fraud scandal affect the company financially?
How did the Wells Fargo account fraud scandal the company financially? Please provide a financial ratio...
How did the Wells Fargo account fraud scandal the company financially? Please provide a financial ratio analysis
How did the Wells Fargo account fraud scandal affect the company financially? Please provide a financial...
How did the Wells Fargo account fraud scandal affect the company financially? Please provide a financial ratio analysis
How did the Wells Fargo account fraud scandal affect the company financially? Please provide a financial...
How did the Wells Fargo account fraud scandal affect the company financially? Please provide a financial ratio analysis
How did the Wells Fargo account fraud scandal affect the company financially? Please provide a financial...
How did the Wells Fargo account fraud scandal affect the company financially? Please provide a financial ratio analysis
read about the wells fargo account fraud scandel then discuss the ethical theories: utilitarinsim , kantian...
read about the wells fargo account fraud scandel then discuss the ethical theories: utilitarinsim , kantian ethics, and virtue ethics and apply them to wells fargos behavior. also, explain whether this story falls under the friedman theory or the freeman theory.
How did the Wells Fargo scandal affect the company financially?
How did the Wells Fargo scandal affect the company financially?
Explaining the specifics of the balanced scorecard system of Wells Fargo in your research. This presentation...
Explaining the specifics of the balanced scorecard system of Wells Fargo in your research. This presentation should include your analysis of the advantages and disadvantages of the company's Balanced Scorecard System. Be sure to clearly document the performance measures being used by the Wells Fargo?
Who were the key players in the Wells Fargo Scandal and how were they punished?
Who were the key players in the Wells Fargo Scandal and how were they punished?
How an Amazon Bank Could Rival JPMorgan, Citigroup, Wells Fargo? Explain with 300 words, please. (Only...
How an Amazon Bank Could Rival JPMorgan, Citigroup, Wells Fargo? Explain with 300 words, please. (Only Typing, no handwriting please and No Copy Paste sure)
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT