CASE 8.6
MOHAMED SALEM EL-HADAD, INTERNAL AUDITOR
Synopsis
In 1976, Mohamed Salem El-Hadad completed his four-year undergraduate accounting degree
at an Egyptian university. Three years later, after satisfying his compulsory military requirement,
El-Hadad entered the accounting profession. El-Hadad immigrated to the United Arab Emirates in
1981 to take advantage of the booming job market in that small Middle Eastern nation. The young
Egyptian soon landed an auditing position with the Ministry of Education, a UAE government
agency. Ten years later, El-Hadad immigrated again, this time to the United States to accept a
supervisory audit position with the UAE’s Washington, D.C., embassy.
with his family in 1997.
Before leaving the U.S., El-Hadad sued the UAE embassy for wrongful termination,
defamation, and for ruining his accounting career. For more than twelve years, El-Hadad’s lawsuit
worked its way through the U.S. federal court system. Every court that presided over the lawsuit or
an appeal of an earlier verdict regarding the lawsuit ruled in El–Hadad’s favor on all major legal
406
Case 8.6 Mohamed Salem El-Hadad, Internal Auditor
407 Mohamed Salem El-Hadad—Key Facts
1. Mohamed El-Hadad graduated with an accounting degree from an Egyptian university in 1976.
2. In 1981, El-Hadad immigrated to Abu Dhabi, the capital of the United Arab Emirates, to take
advantage of employment opportunities there in the accounting profession.
4. In 1992, the cultural attaché of UAE’s Washington, D.C., embassy encouraged El-Hadad to
apply for a supervisory audit position with that embassy.
6. In April 1993, El-Hadad discovered that his new boss and friend, the embassy cultural attaché,
7. El-Hadad was congratulated for his role in discovering the fraud and received excellent
performance appraisals through late 1995 from the new cultural attaché.
1993.
9. In early 1996, El-Hadad was fired as a result of his alleged role in the embezzlement scheme; a
11. Prior to leaving the United States, El-Hadad filed a lawsuit against the UAE embassy; the
12. El–Hadad’s attorneys established that the evidence linking him to the embezzlement scheme had
been fabricated; the courts upheld each of El–Hadad’s allegations and awarded him damages of
nearly $2 million.
408 Case 8.6 Mohamed Salem El-Hadad, Internal Auditor
Instructional Objectives
1. To introduce students to the whistleblowing phenomenon and its relevance to accountants and
organizations of all types.
Suggestions for Use
Corporate whistleblowing hit the spotlight several years ago as a result of the Enron and
WorldCom fiascoes. You might let your students know that the three “Time People of the Year” for
2002 were corporate whistleblowers, most prominently Cynthia Cooper of WorldCom and Sherron
Watkins of Enron. Years before those individuals became famous, Mohamed El-Hadad, an internal
auditor for the UAE embassy in Washington, D.C., “blew the whistle” on his friend and boss but
with a much different result. This case dramatically demonstrates the negative consequences that
whistleblowers may face.
Suggested Solutions to Case Questions
1. There are literally dozens of federal and state statutes that provide legal protections and legal
recourse to whistleblowers in the United States. The most prominent of these statutes is the
Whistleblower Protection Act of 1989. This federal statute pertains only to individuals who “blow
the whistle” on fraud or other illegal conduct by a federal agency or federal employee. A related
2. “Compliance with applicable laws and regulations” is an internal control objective according to
AU-C Section 315.A44 of the AICPA Professional Standards that apply to non-public companies.
So, “yes,” non-public U.S. companies should have controls in place to ensure that they comply with
statutes, regulations, and other requirements that protect the civil rights of whistleblowers.
Case 8.6 Mohamed Salem El-Hadad, Internal Auditor
409
3. The following list is not intended to be exhaustive.
—Before you bring the given matter to the attention of other parties, gather as much information as
possible regarding the incident or set of circumstances.
4. There is not universal agreement on what constitutes an “ethical dilemma” or a “moral
dilemma,” and, in fact, most of us use those terms interchangeably. Nevertheless, consider the
following definitions or descriptions: