1. Put on "Your Thinking Cap" and explain how the provisions of the Sarbanes-Oxley Act might have helped to detect the fraud.

2. What anti-fraud controls might have helped detect the fraud. Why?

3.    Assume you are in Shane O’Hara’s position. What would you do next and why? Consider the following in crafting your response.

• Who are the stakeholders in this case and what are the ethical issues?
• What do you need to say, to whom, and in what sequence?
• What are the reasons and rationalizations you are likely to hear in getting your point across?
• What is your most powerful and persuasive response to these arguments? To whom should you make them? When and in what context?

4.    Is this a situation where you would seriously consider blowing the whistle since you were suspended with pay? Under what conditions would you blow the whistle and what process might you follow?

The nation's retailers lost a staggering amount of money in 2016 due to shoplifting, organized crime, internal theft, and other types of inventory shrink.

Inventory shrink totaled $48.9 billion in 2016, up from $45.2 billion the year before, as budget constraints left retail security budgets flat or declining, according to the annual National Retail Security Survey by the National Retail Federation and the University of Florida. The thefts amounted to 1.44% of sales, up from 1.38%.

According to the study, which was sponsored by The Retail Equation, 48.8% of retailers surveyed reported increases in inventory shrink, and 16.7% said it remained flat. Shoplifting and organized retail crime accounted for 36.5% of shrink, followed by employee theft/internal (30%), administrative paperwork error (21.3%), and vendor fraud or error (5.4%).

Shoplifting continued to account for the greatest losses of overall shrink. Shoplifting averaged $798.48 per incident, up from $377 in 2015. The rise was partially attributed to retailers allocating smaller budgets for loss prevention, leaving them with fewer security staff to fight theft, the report said.

The average loss due to employee theft per incident was put at $1,922.80, up from $1,233.77 in 2015. The average cost of retail robberies dropped to $5,309.72 from $8,170.17 in 2015, but remained at more than double the $2,464.50 seen in 2014.

For the first time in the survey, retailers were asked about return fraud, reporting an average loss of $1,766.27.

The facts of this case are from the Walmart shrinkage fraud discussed in an article in Nation on June 11, 2014.  “Literary license” has been exercised for the purpose of emphasizing important issues related to organizational ethics at Walmart. Any resemblance to actual people and events is coincidental. 

Shane O’Hara always tried to do the right thing. He was in touch with his values and always tried to act in accordance with them, even when the going got tough. But, nothing prepared him for the ordeal he would face as a Walmart veteran and the new store manager in Atomic City, Idaho. 

In 2013, Shane was contacted by Jeffrey Cook, the regional manager, and told he was being transferred to the Atomic City store in order to reduce the troubled store’s high rate of “shrinkage” (i.e. including theft including shoplifting and employee stealing) to levels deemed acceptable by the company’s senior managers for the region. As a result of fierce competition, profit margins in retail can be razor thin, making shrinkage a potent—sometimes critical—factor in profitability. Historically, Walmart had a relatively low rate of about 0.8 percent of sales. The industry average was one percent.