Hannah Company maintains two separate accounts payable computer systems. One is

Question

Hannah Company maintains two separate accounts payable computer systems. One is known to all the users, and is used to process payments to vendors. Employees enter the vendor code, or the name and address of new vendors, the amount, the account, and so on. The other system is a secret one. It is used to cross-check the vendors against an approved vendor list. If a vendor is not listed as approved, the payment process is halted. Internal audit employees seek to verify the existence of a bona fide claim by the vendor. All inquiries are made at the top management level, and very discreetly. No one but top management, the internal audit staff, and the Board of Directors of the company is even aware of the second system.

Required:
Is it ethical for a company to have a secret system like the one described? Explain

Explanation / Answer

Please read fully it take much time to conclude this case Thank you….

In this case first we have to know what are the duties of the audit employees and the top management

Auditors often focus on the existence of approved invoices, expense reports, and other supporting documentation to support checks that were cut. The presence of a confirmation or statement from the supplier is reasonable proof of the existence of the account. It is not uncommon for some of this documentation to be lost or misfiled by the time the audit rolls around. An auditor may decide to expand the sample size in such situations.

Top management

Manage complex issues and diffuse disputes and take corrective action facilitate prompt resolutions according to internal policies
provide service and support for multiple vendors and departments
manage and coordinate multiple supplier accounts

Explanation:

As per the audit employees there is nothing wrong happen in the company but the top management have to take care of ethical issues in the company and also to retain the vendors the management have to take care of the ethical matters

If we look into this case there is no wrong in maintaining secret system only when the company maintaining this only for cross-checking .But the problem of ethics will arise only when they use the secret system for malpractice.

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