The chief executive of a clothes manufacture charged with committing financial fraud was dismayed that the controller and other employees had committed fraud. He said the company could have taken steps to improve the situation if senior management had known the poor financial results. Financial analysists who follow the company had noted, however that the company had marked down its clothing line in sales to retail stores such as May Department Stores and Federated Department Stores.

After the company cut prices 20 percent across the board, retail executive show who were customers of the company wondered how the company could continue to be profitable. One analysist wondered how top management could not have known about the company's financial difficulties in view of the 20 percent mark down..

For your information, top management is located in New York City, and the fraud occurred at the financial offices in Wilkes-Barre, Pennsylvania. The line of reporting is as follows: The controller reports to the chief financial officer, and the chief financial officer reports to the executive of the company. Both the controller and the chief financial officer work in Wilkens-Barre. The chief financial officer reportedly has considerable autonomy.

Write a short report indicating whether you think top management of the company is responsible for the fraud and state why (or why not).