Management Accounting Case Book

Trust May Breed Trouble: Fraud Opportunities and Ethics at Saintly Church

Cecily Raiborn, Ph.D., CMA, CPA, CFEMcCoy Endowed Chair in AccountingTexas State University

Janet B. Butler, Ph.D., CGMA, CITPProfessor of AccountingTexas State University

Nathan H. Cannon, Ph.D., CPAAssistant Professor of AccountingTexas State University

Randall F. Young, Ph.D.Assistant Professor of AccountingTexas State University

INTRODUCTION

Light twinkled through the stained glass windows as Pastor Peter Lang walked through Saintly Church. He had just met with Sandy Withers, a CMA^® (Certified Management Accountant) and two-year member of the church’s governing board. Lang and Withers had been discussing the fact that the church was perennially short of funds—although what church wasn’t these days?—and the possibility of instituting some new internal controls for oversight.

As a board member, Withers was part of the group responsible for managing Saintly Church’s overall business and nonbusiness affairs. Such responsibility included implementing policies regarding church administrative policies and procedures. Although the church had grown significantly over the past 20 years, board members had made few of the administrative policy changes suggested by advisers and the church’s denomination headquarters.¹ The church was primarily operating under a system of trust. The following passage illustrates the majority viewpoint of the board: “Trust is the emotional glue that binds a team together and produces ...