Running Head: THEORETICAL MODEL f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f 1
Milestone Two
ACC696
SNHU
THEORETICAL MODEL f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f 2
a. Violation of ethical models
In the case of the Wells Fargo scandal, a number of ethical models were violated, such as the
utilitarian ethical model and virtue ethics theory. According to the utilitarian ethical model, an
action can be considered to be ethical if it maximizes the benefits for others or minimizes the harm
that is caused to others (Quinton, 1973). Instead of focusing on self-interest, the ethical model urges
individuals to take into consideration the interests of others as they could be impacted by one’s
actions (Quinton, 1973). In the Wells Fargo context, utilitarianism was violated, and the
employees created millions of fake customer accounts in order to meet the sales goals. Instead of
ethically and rationally dealing with the pressure that the top management was creating to achieve
the business target, the employees resorted to malpractices so that they could fulfill unrealistic
expectations. Due to their unethical actions, the customers on whose behalf fake accounts were
created were at the receiving end. They were unnecessarily charged fees for the services that they
had not used or opted for. f f
The virtue ethics theory states that an action is right if a virtuous individual would carry it out
under similar circumstances. It primarily lays emphasis on moral virtue and the strength f one’s
character. The role of virtue is of paramount importance in integrating the best practices in a
professional setting (Berg, 2020). In the case of Wells Fargo, the employees and the management
failed to show a strength of character as the employees resorted to unethical practices to meet the
sales goal and the top executives of the organization intimidated their subordinates to achieve the
unrealistic sales targets. Both of them failed to carry out their duties in a virtuous manner, and they
failed to strive towards the common good, due to which the major accounting issue arose (Akrivou
& Fernández, 2021).
THEORETICAL MODEL f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f 3
b. Application of ethical models for better decisions and outcomes
In order to prevent the major accounting scandal from taking place, the proper application of
the ethical model would have played a key role since it would have helped to produce better
decisions and outcomes. The duty-based ethical model, which is also known as the deontological
ethical approach, could have been adopted. It emphasizes the personal will as well as the intentions
of an individual while making ethical decisions (Brown University. A Framework for Making
Ethical Decisions | Science and Technology Studies, 2021). Instead of focusing on the
consequences, it would have enabled the organization, including the top executives and the staff
members, to focus on their intentions while performing their duties. By adopting the ethical model,
the management would have realized that its intentions were self-centered, and the staff would have
realized that its actions were unprofessional and could harm the customers of the business. The
duty-based ethical model by Kant could have encouraged them to act in a more responsible and
accountable manner while progressing toward the business goals and objectives. f
The utilitarian ethical model could have been adopted in the context of Wells Fargo so that the
management and staff of the organization would focus on maximizing the benefits of others instead
of focusing on their self-interest. By adhering to the ethical model, the possibility of violating it
could have been averted, and responsible and ethical decisions could have been taken instead of
merely focusing on achieving the sales target. It would have guided the organization, including the
top executives and their subordinates, to make ethical decisions, specifically the decisions that
could have consequences for a large number of people (Berg, 2020).
IV External Influences and International Accounting Standards
a. Impact of regulatory activities on the ethics of the case
THEORETICAL MODEL f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f 4
Regulatory activities play a critical role in molding the ethical approach that is adopted by
organizations while carrying out their business activities and functions. The regulations, rules, and
legislation serve as key instruments that organizations must adhere to so that they sustainably
conduct their business activities in an ethical and responsible manner. Organizations have a
responsibility to adhere to appropriate regulations that have been introduced at the industrial level.
The regulatory activities influence the policies that are adopted by companies to support ethical
practices and behaviour (Hodges & Steinholtz, 2017). In the case of Wells Fargo, there were
violations of rules, regulations and laws relating to accounting, internal accounting controls and
auditing functions (Fargo, 2019, p .9). Due to the breach of regulations, malpractice by employees
was going on for a considerable time within the organization without the knowledge of the
customers. As the workforce of the organization did not stick to the appropriate regulations while
performing their respective roles and responsibilities, the unethical practice escalated, and millions
of fake savings and checking were created on behalf of the customer and clients of the company
(Kelly, 2022).
b. Impact of international accounting standards on the ethics of the case
International accounting standards have the potential to significantly influence the ethical
practices that are adopted by business entities while achieving business goals and objectives. The
‘International Ethics Standards Board for Accountants’ (IESBA) is a global body that is
responsible for developing and promoting ethical standards that professional accountants, as well
as auditors, need to adhere to. The fundamental objective is to promote good ethical practice in the
organizational landscape by integrating ethics. The auditor that was responsible for carrying out the
auditing of Wells Fargo when the malpractice was going on was KPMG. KPMG failed to prevent
or disclose the fraud activities that were going on in Wells Fargo. Due to the inability of the auditor
THEORETICAL MODEL f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f 5
to adhere to international accounting standards to ensure the integrity and authenticity of the
financial activities of the bank, several lawmakers raised questions relating to KPMG’s quality of
audit (Lynch, 2017). The lack of compliance with international accounting standards contributed to
the escalation of the situation, which affected hundreds and thousands of customers of the Wells
Fargo organization. As international accounting standards were disregarded, the ethical dimension
was adversely affected in the case of the Wells Fargo organization.
c. Impact of emerging technologies on the ethics of the case
In the digitalized era of the 21st century, new and emerging kinds of technologies can play an
instrumental role in influencing the ethical approach that is adopted by business entities while
working towards their business goals and objectives. As new technologies are entering the modern
business landscape, they are raising serious ethical questions relating to diverse areas such as
security, privacy, the confidentiality of users, transparency, accountability, etc. Brey has stated that
emerging technologies give rise to a host of ethical challenges due to the high degree of uncertainty
and unpredictability.
Several emerging technologies are in their nascent stage, such as Artificial Intelligence (AI),
Machine Learning (ML), etc. However, they have shown the promise to revolutionize different
kinds of work environments such as education, healthcare, retail, manufacturing, etc. In spite of
being full of promise and potential, they also increase the level of risk that may arise for business
organizations as well as customers, among other stakeholders. Some of the critical ethical issues
that have the potential to diminish the effectiveness of emerging technologies for business are
related to the issues of autonomy, justice, responsibility and accountability, well-being, etc.
(Hodges & Steinholtz, 2017). In order to address these ethical issues, business entities need to act in
THEORETICAL MODEL f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f 6
a responsible manner while integrating emerging technologies into their business processes so that
ethical behavior can be given high priority. However, in the case of Wells Fargo, the managers
abused emerging technology and, instead of focusing on ethics, created fake customer accounts to
achieve their sales targets. The autonomy of the customers was lost as they did not have a say when
fake accounts were created on their behalf by the employees to achieve sales targets. Due to the
existence of gaps in ethical practices, the organization was able to leverage emerging technologies
and carry on with its unethical business practices until they were discovered.
THEORETICAL MODEL f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f 7
References
Akrivou, K., & Fernández González, M. J. (2021). Beyond personalist virtue ethics: transcendental
anthropology and its implications for interpersonal communication. Frontiers in
Communication: Organisational Psychology, 6.
Brown University. A Framework for Making Ethical Decisions | Science and Technology Studies.
(2021). Retrieved October 7, 2022, from https://www.brown.edu/academics/science-and-
technology-studies/framework-making-ethical-decisions
Berg, H. (2020). Virtue ethics and integration in evidence-based practice in psychology. Frontiers
in Psychology, 11, 258.
Fargo, W. (2019) Our code of ethics and business conduct: Living our vision, values & goals.
Hodges, C., & Steinholtz, R. (2017). Ethical business practice and regulation: a behavioural and
values-based approach to compliance and enforcement (Vol. 6). Bloomsbury Publishing.
Kelly, J. (2022, April 14). Wells Fargo forced to pay $3 billion for the bank's fake account scandal.
Forbes. Retrieved October 7, 2022, from
https://www.forbes.com/sites/jackkelly/2020/02/24/wells-fargo-forced-to-pay-3-billion-
for-the-banks-fake-account-scandal/
Lynch, S. N. (2017, April 25). Lawmakers question quality of KPMG's Wells Fargo Audits.
Reuters. Retrieved October 7, 2022, from https://www.reuters.com/article/wells-fargo-
kpmg-idUSL1N1HX1YX
THEORETICAL MODEL f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f 8
Mitra, R. (2019). Utilitarianism: An Ethical Decision Making Approach.
10.13140/RG.2.2.30208.99843.
Quinton, A. (1973). Utilitarian ethics. Springer.
