Assignment Question
MN7262 Accountability, Representation and Control
Wells Fargo Bank
The largest US bank by market capitalization, Wells Fargo has recently been embroiled in
scandal, over creating millions of fake customer accounts without customers’ knowledge or
consent. The high-profile case of Wells Fargo raises many questions about accountability,
representation and control in organizations, and more specifically about accounting.
Obtain Wells Fargo’s Annual Reports from the past 3 years (2013-2015) and use them as a
resource for answering the three questions below. In your response, you can consider the guiding
questions and instructions included for each question.
In your opening discussion, briefly comment on the major changes in the financial position of the
bank, its financial performance, and other dimensions of performance. In the narrative parts of
the report, try to detect the role of cross-selling in the bank’s strategy to deliver performance.
1) Representation
What kind of picture did the Annual Reports provide about Wells Fargo, and for whom?
• To develop your response, consider how accounting representations relate to reality, the
financial statements, and the Annual Report as a whole.
• Why was the bank engaging in these fraudulent activities? Consider the specific strategy
of cross-selling, and the environment of performance expectations and pressures faced by
a public corporation, as experienced by Wells Fargo. Discuss how these expectations are
translated into accounting representations.
2) Accountability
Discuss the role of accounting as an accountability system at Wells Fargo, as an example of
a large public corporation.
• What can we say about discipline and self-discipline in the management accounting
system of the bank (e.g. the role of cross-selling targets)?
• When the scandal broke, there was a controversy about who should be blamed. Wells
Fargo blamed the employees who created the accounts and had fired thousands of people
over several years. Was the fraud only the low-level sales employees’ fault? How was
this controversy resolved? Why do you think it is not clear who should be held
accountable when something goes wrong at an organization?
• Discuss the relevance and problems of corporate governance, and try to identify some of
these problems at Wells Fargo.
3) Control
What are the limitations of accounting (e.g. budgetary) controls, and how might they have
played a role in the fraud at Wells Fargo?
• Try to find out as much as you can about the control system, especially about sales
incentives and how lower-level employees were controlled. You will find the critical
literature on control useful to develop your response.
• What are some challenges of internal controls and especially Enterprise Risk
Management systems, which might have affected the bank? In your response you can
draw on descriptions of risk management and risk factors at the bank.