What’s the Scenario?
Connor is an accountant working for a large regional marketing firm. Part of his role includes reviewing and approving employee expense claims prior to reimbursement. His company has a clear expenses policy, available on the staff intranet, requiring employees to submit receipts for all claims and obtain line manager approval for claims exceeding £800. The policy strictly prohibits claiming personal expenses as business expenses.
One afternoon, Connor receive an expense claim from Samuel, a Senior Marketing Consultant, claiming reimbursement for £2,000 in travel expenses. Upon reviewing the claim, he notices that some receipts appear unusual. A hotel invoice is dated on the day of a public holiday, despite the trip being described as relating to a two-day client marketing conference. There is also a receipt from an expensive restaurant with no mention of client names or the purpose of the meal.
Connor raises these concerns with Samuel, who responds by insisting that the expenses are work-related. He says the hotel receipt may not match the date of the stay because he had to request a copy of the receipt a few days later, as he threw away the receipt on the day. He says Connor shouldn’t need the client names and purpose of the meal in order to process the claim. Connor believes that as it stands, there is a risk of the expenses policy being breached. Connor asks if Sameul has line manager sign off on this expense claim as he cannot see this in the paperwork.
Samuel says that his manager is away on leave for an extended period, and he needs to be reimbursed urgently for a pressing incoming personal expense. He asks Connor to just “push it through" as he has had similar claims processed in the past without issue. Samuel suggests in any case that Connor can always check with his manager when Samuel’s manager returns from leave.
Samuel also adds that his clients are significant revenue generators for the company, allowing Connor to infer that rejecting the claim could risk the firm’s relationship with the client.
What should Connor do?
Understanding the ethical Issues and supporting guidance
This scenario highlights a potential risk of expense fraud. CIMA members have a duty to uphold professional standards and act in the best interests of their employer organisations. Approving a potentially fraudulent expense claim would be a breach of Connor’s ethical and legal obligations, potentially leading to a range of unwanted consequences, such as monetary loss for the company and disciplinary action for himself.
The firm has an expenses policy in place. Connor can rely on this to ask Samuel to provide additional evidence, such as a travel itinerary or client meeting details, to justify the expenses. The policy also requires line manager approval. While Samuel says his manager is away, it may be that he could contact the next most senior person to approve, prior to returning to Connor. Even if Samuel is a senior colleague, bypassing the expenses policy would be an unwise decision.
The fundamental principle of objectivity in the CIMA Code of Ethics states that you must not “compromise professional or business judgment because of bias, conflict of interest or undue influence of others.” Section 200.8 A8 of the Code calls out pressure “to deviate from a company policy” as an example of an “undue influence threat” that may threaten your compliance with the objectivity principle.
The Conceptual Framework within the CIMA Code of Ethics helps accountants evaluate and address threats to compliance. In this case, we can see that there is a self-interest threat and threat of undue influence. It’s clear Connor has already begun identifying and evaluating the risks by identifying that the claims may fall foul of the company expenses policy. To apply appropriate safeguards, Connor could seek guidance from his own senior colleagues or compliance officers.
Connor could ask Samuel to email his manager and request written confirmation that the expense should be approved. If Samuel is unwilling to do so, then Connor will want to be mindful of not succumbing to undue pressure being applied. While he could consider approving the expense claim, to do so would expose Connor to significant risk of breaching his professional and legal obligations. It may be that Samuel is attempting to take advantage of his line manager’s absence by trying to push through a false or inflated expense, which would constitute expense fraud. Even if the claim is legitimate, allowing an approval outside of the policy and without appropriate documentation would still be in breach of company policy and could set a bad precedent that would expose the organisation to a greater risk of expense fraud moving forward.