The Wells Fargo fake account scandal

The Wells Fargo fake account scandal

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September 3, 2023
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Specify the scandal you chose, and be sure to cite any sources where you conducted your research. Then respond to ALL of the following questions in your initial post:

Were there controls in place that should have prevented the scandal or fraud from happening? Explain what types of controls existed using the terminology in your reading (feedback, proactive, concurrent, strategic, operational, tactical, top-down, objective, normative, financial, nonfinancial).
If so, why do you think the controls were ineffective? If not, why do you think the business didn’t have sufficient controls in place?
What was management’s role in the failure of the controls?
Did the business implement new controls in response to the scandal? If so, do you think they’ll be effective?

Answer and ExplanationSolution by a verified expert

Managerial Controls
I choose to discuss a business scandal in the Wells Fargo organization. The scandal happened to employees who were under pressure from the management to sell more products and to more customers. Typically, this made the employees start developing manufacture fraud alerts on the customer's accounts which caused them to close those accounts and open new ones. The fraud cost many employers to lose their jobs together with their bosses who knew what was happening in the organization (Peters, 2020).
1. Were there controls that should have prevented the scandal or fraud from happening?
Controls in a business setting mean guiding a business's employees, activities, and processes to achieve goals, abide by the law, and prevent errors. Every organization has controls that can prevent fraud, but fraud will still happen if these policies are ignored. Some policies that could have prevented the scandal are top-down control, where high-level executives make all the decisions. In the case of Wells Fargo, the employees decided to fraud the customer's accounts under the pressure of the top executives.
2. Explain what types of controls existed using the terminology in your reading (feedback, proactive, concurrent, strategic, operational, tactical, top-down, objective, normative, financial, nonfinancial) and how they were used.
Different controls existed in the Wells Fargo organization, although they were not well used. The executives used feedback control, demanding the employees do all they could to sell more services to customers. After getting feedback on how to achieve that, they never stopped using their technique, which later cost the entire organization. Proactive control, also called proactive control, was not used since the executive never prevented the process that employees were using to sell products to their customers through fraud. Additionally, concurrent control never took part during the fraud of Wells Fargo since the bosses never monitored the process and activities that
were taking place in the organization (Learning, 2018).
3. Why do you think the controls you selected as ineffective were ineffective?
All the controls I selected above were ineffective since none of them was used to prevent fraud. For example, the feedback control was ignored since the senior executives knew all that was happening, but they never responded to it. Top-down control, where the high executive is the one who makes decisions, was misused since senior executives were threatening the branch managers who threatened their staff and had to cause fraud to avoid losing their jobs. Concurrent control, usually based on rules, standards, policies, and codes, was not implied as they go against all the financial policies within the organization.
4. Why do you think the business did not have sufficient controls in place?
The Wells Fargo business did not have sufficient controls since the high executives were the ones who wanted to benefit from the fraud. The management that is supposed to implement policies to protect the organization was the one who insisted the employees work beyond the organization's capability. Another reason that Wells Fargo did not have sufficient controls because it did not have a watchdog to check all the organization's accounts and operations.
5. What was management’s role in the failure of the controls?

The management role in the failure of the control was that they were the ones who were supposed to implement the controls, but they refused. Management never consulted their customers on the way they were using to add more sales and customers within the organization. Actually, they prioritized the number of transactions the organization made per day without checking on the ways to achieve that. Perhaps,
that is why some of the senior executives were fined and taken to jail for causing fraud to the customers who lost their money to the organization (Department of Justice, 2020).

References

Peters, J. (2020). How Wells Fargo Became Synonymous With Scandal. Slate Magazine. Retrieved 18 October 2022, from https://slate.com/business/2020/11/wells-fargo-scandal-history-karen- attiah.html.
Learning. (2018). The Control Process | Principles of Management. Courses.lumenlearning.com. Retrieved 18 October 2022, from https://courses.lumenlearning.com/wm- principlesofmanagement/chapter/the-control-process/.
Department of Justice. (2020). Retrieved 18 October 2022, from https://www.justice.gov/opa/pr/wells- fargo-agrees-pay-3-billion-resolve-criminal-and-civil-investigations-sales-practices.

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