Posted: January 8th, 2016
Barings Bank Case In 1995, the oldest English merchant bank, Barings Bank, had to be closed down after becoming technically bankrupt. This historic event allegedly resulted from the activities of just one employee, Nick Leeson, who came to be called a “rogue trader.” The high-profile case of Barings raises many questions about accountability, representation and control in organizations, and more specifically about accounting.
How did this fraud happen? Analyse the case focusing on the role of representation, accountability and control through accounting. In your essay, address the following sub-questions:
a) How and why might accounting representations have enabled this fraud? In your discussion, provide a critique of the claim that accounting mirrors and objectively represents economic reality.
b) What were the accountability relationships in place at the bank, how and why might have these enabled Leeson to commit fraud? In your discussion, provide a critique of accounting as a neutral, technical system for accountability.
c) How was traders’ labour controlled, and how might have control contributed to Nick Leeson’s fraudulent actions? In your discussion, provide a critique of the statement that accounting merely helps coordinate the organization’s activities.
d) In sum, was the collapse of Barings simply the fault of a single fraudulent individual? Explain.
e) Thinking about solutions, discuss Power’s argument on internal control and risk management.
You can use the documentary film, containing interviews, as a resource to familiarize yourself with the case: https://www.youtube.com/watch?v=xfdtK-B_c7c Gather further information about the case from reputable news sources.
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