In a hierarchical type of organizational management, the business tasks and operations are

segregated according to the function of each organization department or segment. This ensures that
physical activities are controlled in an unbiased manner. Moreover, top managers are highly encouraged
to uphold their code of ethics for they serve as a benchmark for the employees in the lower level of the
organization. Ethics create strong business relationships that are built mostly on mutual trust and
reputation, therefore its only right for a company to function with integrity to improve ones financial
position.
The principle of segregation of duties, however, is violated in this case. The chief executive
officer whose function is mainly on the executive management of business, such as implementing the
overall organizations mission, vision and goals, influenced the finance department that keeps the
financial records of the company. According to this principle, the different functions such as the custody
of assets, transaction authorization and recording of such transactions must be controlled separately. In
this way, no individual has an access to both financial records and physical operations, therefore fraud is
discouraged.
Therefore, we recommend the strict implementation of the policies of the organization and its
code of ethics. Top managers must not perform undue influence on the other levels of the organization
to promote ones own personal interests. Although it may be beneficial for the organization and its
employees in the short run, there is still a high moral risk where the reputation of the company is at
stake. This creates a domino effect on the employees and customers of the company whose interests
must be prioritized first.