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Howard joined a publicly listed company recently as a senior internal audit manager.


One day, Howard received an anonymous letter alleging a possible fraud in the company.  Following his diligent investigation, there was evidence showing some wrongdoings of Mr Szeto, the Purchasing Director and a close relative of the Managing Director.  The malpractices included operating bogus companies to supply materials to the listed company, accepting secret commissions in awarding contracts to selected suppliers and claiming private expenses through the company's accounts.


He presented his findings to the Managing Director and expected appreciation for his work and management’s follow-up on the misconduct and malpractices committed by Mr Szeto.  However, the response of the Managing Director was totally unexpected.


The Managing Director "accused" Howard of being over-zealous in the case.  He said that Mr Szeto was a respected senior member of staff in the company.  The evidence was also questioned in minute detail and the variations were described as minor.  Finally, the Managing Director advised Howard to stay away from the case.


How should Howard react?

Case Analysis

It is evident that Howard had received an unsatisfactory answer from the Managing Director.  Assuming his findings were accurate, he should present a report to the other directors of the company, setting out the details of his findings of the wrongdoings of Mr Szeto, the Purchasing Manager.


Mr Szeto might have committed offences under Section 9(3) of the Prevention of Bribery Ordnance (POBO) for using false procurement documents to deceive the company and claiming private expenses through company’s accounts. He might have also breached Section 9 of the POBO for accepting secret commissions from suppliers without the approval from the company. 


If the board did not take appropriate action to follow up on the case, Howard should consider reporting the matter to the appropriate authorities after seeking legal advice.  While maintaining confidentiality of company matters was an important consideration, Howard had to weigh this consideration against the public interest in disclosing such matters to the appropriate authorities.


Howard might consider resigning from the company in the worst case scenario that he no longer had confidence in the integrity of those charged with governance of the company.

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