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Question: Evaluate the ethics of the practice of


Evaluate the ethics of the practice of whistleblowing from the perspectives of virtue, rights theory, and utilitarianism.



> If my broker has been right in her five previous buy and sell recommendations, should I continue listening to her advice?

> “If stock prices did not follow a random walk, there would be unexploited profit opportunities in the market.” Is this statement true, false, or uncertain? Explain your answer.

> Can we expect the value of the dollar to rise by 2% next week if our expectations are optimal?

> Looking at Figure 1.3, in what years would you have chosen to visit the Grand Canyon in Arizona rather than the Tower of London? Figure 1.3: Index (March 1973 = 100) 150 135 120 105 90 75 1975 1980 1985 1990 1995 2000 2005 2010

> The following table lists foreign exchange rates between U.S. dollars and British pounds (GBP) during April. Which day would have been the best day to convert $200 into British pounds? Which day would have been the worst day? What would be the differe

> What are the objectives of audit risk assessment, and why is it important in assessing the likelihood that fraud may occur? Explain why risk assessment performed during audit planning sets the tone for the entire audit engagement.

> Assume that a CPA serves as an audit client’s business consultant and performs each of the following services for the client. Identify the threats to independence. Do you believe any safeguards can be employed to reduce the threat to an acceptable level?

> Do you believe that the SEC should prohibit auditors from providing all nonaudit services for audit clients? Use ethical reasoning to support your answer.

> Do you believe the internal audit activity should be independent? Explain.

> How might financial incentives in the form of client services unconsciously introduce auditor bias into the independent audit function? Are there any solutions to the conflict?

> Is independence impaired when an auditor is hired, paid, and fired by the same corporate managers whose activities are the subject of the audit? Does it matter that in most companies the audit committee hires, evaluate, fires (if appropriate), and determ

> It has been said that independence is the cornerstone of the accounting profession. Explain what this means. What does it mean to say that auditors have special and critical gatekeeping duties?

> Explain the safeguards that can be used to reduce or eliminate threats to audit independence.

> Is accounting a trustworthy profession? How would you know whether it is or is not?

> On May 20, 2014, the SEC settled an investigation of James T. Adams, the former chief risk officer at Deloitte, for causing violations of the auditor independence rules. It seems that Adams accepted tens of thousands of casino markers while he was the ad

> Hofstede’s Cultural Dimensions in Exhibit 1.2 indicate that China has a score of only 20 in Individualism, while the U.S. score is 91. How might the differences in scores manifest itself when the public interest is threatened by harmful actions taken by

> In August 2008, EY agreed to pay more than $2.9 million to the SEC to settle charges that it violated ethics rules by co-producing a series of audio CDs with a man who was also a director at three of EY’s audit clients. According to the SEC, EY collabora

> According to SOX rules that mandate auditor rotation, the lead audit partner on an engagement is prohibited from providing those services for a client for greater than five consecutive years. The purpose of the rule is to encourage professional skepticis

> In recent years the move by accounting firms to offshore tax and consulting work has grown and expanded into audit work. What are the ethical concerns that might be raised about the practice of electronically transmitting audit information to offshore ce

> Assume you are the senior in charge of the audit of a client in New York who offers you two tickets to the Super Bowl between the New York Giants and the Denver Broncos. The opportunity to see the Manning brothers square off against each other is appeali

> Explain the threats to professional skepticism that might influence audit judgment.

> Assume that the CPA firm of Packers & Vikings audits Chi Bears Systems. The controller of Chi Bears, a CPA, happens to be a tax expert. During the current tax season, Packers & Vikings gets far behind in reviewing processed tax returns. It does not want

> In January 2008, it was discovered that William Borchard, who handled due diligence for clients of PwC interested in mergers and acquisitions, divulged controversial plans to Gregory Raben, an auditor at the firm, and Raben used the information to buy st

> You were engaged to file the 2015 individual and corporate tax returns for a client. The client provided her records and other tax information on March 1, 2016, to help prepare the 2015 tax return. Your client paid you $12,000 in advance to prepare those

> You previously worked for the Department of Revenue, a governmental agency in your town. You cut all ties with the agency after you left two years ago to start your own tax accounting business. One day you receive a call from the agency asking you to con

> You have decided to leave your CPA firm. Using the AICPA rules as a guide, answer the following questions: (1) Can you post some negative comments about your former employer on Twitter? (2) Can you call your former clients and tell them that you are le

> Your best friend is from another country. One day after a particularly stimulating lecture on the meaning of ethics by your instructor, you and your friend disagree about whether culture plays a role in ethical behavior. You state that good ethics are go

> You’re struggling in your new accounting practice to tap into a potential client base. You have tried traditional advertising and marketing tools to no avail. Your friend tells you to use social media as a tool to reach potential customers. You’re not su

> Andy Simmons is a CPA with his own accounting and tax practice. He occasionally does an audit for small business clients. One day an audit client shows Andy a letter from the local Property Tax Assessor’s office. It seems the client inquired about the pr

> What is the problem with an auditor overrelying on management’s representations on the financial statements?

> Can a CPA auditor be independent without being objective? Can a CPA auditor be objective without being independent? Explain.

> What are the dangers of creeping commercialism in the accounting profession?

> In our discussion of the KPMG professional judgment framework, we pointed out that biased judgments can be made because of judgment tendencies. One such tendency that was not included in the framework is self-serving bias. Explain what you think this mea

> 9. The following questions are about corporate governance and executive compensation. (a) How does agency theory address the issue of executive compensation? (b) How might stakeholder theory argue against the current model of executive compensation in th

> Do you believe that employees who observe more occupational fraud in their organizations are more likely to engage in occupational fraud themselves?

> Explain how “group-think” might lead a person to ignore moral and ethical duty in an organization.

> It has been said that recent graduates from a business school majoring in accounting and just entering the profession are especially vulnerable to ethical missteps because they are often naive and may not see the ethical aspects of situations they confro

> Steroid use in baseball is an important societal issue. Many members of society are concerned that their young sons and daughters may be negatively influenced by what apparently has been done at the major league level to gain an advantage and the possibi

> How do employee perceptions of commitment, integrity, and transparency in the workplace contribute toward creating an ethical corporate culture?

> One way of analyzing whether NSA whistleblower Edward Snowden’s actions were justified in leaking classified materials exposing the breadth of the U.S. government’s surveillance activities is by weighing personal morality against the morality that comes

> Is business ethics an oxymoron?

> “Give me the ‘McFacts,’ ma’am, nothing but the McFacts!” So argued the defense attorney for McDonald’s Corporation as she questioned Stella Liebeck, an 81-year-old retired sales clerk, two years after her initial lawsuit against McDonald’s claiming that

> The following relates to the Menendez – Halliburton situation described in the text. (a) How would you characterize Halliburton’s accounting for revenue from ethical and professional perspectives? (b) Once KPMG learned that Menendez had provided a compl

> On October 24, 2013, the Second Circuit Court of Appeals ruled that a tipster who provided information to the SEC about illegal payments to foreign government officials by Stryker Corporation under the Foreign Corrupt Practices Act (FCPA) was not eligibl

> Explain how internal auditors’ sensitivity to ethical dilemmas might be influenced by corporate governance mechanisms.

> Explain how we might evaluate auditors’ whistle-blowing intentions? Why would this be important to do?

> How do the concepts of cognitive dissonance and organizational/ethical dissonance relate to whether an accountant might choose to blow the whistle on corporate wrongdoing?

> Just because a person has a right to blow the whistle, does that mean she has a duty to blow the whistle? How might we make that determination?

> One explanation about rights is that “there is a difference between what we have the right to do and what is the right thing to do.” Explain what you think is meant by this statement. Do you believe that if someone is rude to you, you have a right to be

> It has been argued that an organization that does not support those that whistle blow because of violation of professional standards is indicative of a failure of organizational ethics. Explain what you think this statement means from the perspective of

> The Committee of Sponsoring Organizations (COSO) explains the importance of the control environment to internal controls by stating that it sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for al

> What is the link between the internal control environment and accountability?

> Brief and Motowidlo define prosocial behavior within the organizational setting as “behavior which is (a) performed by a member of an organization, (b) directed toward an individual, group, or organization with whom she interacts while carrying out her o

> The 2011 National Business Ethics Survey defines “active social networkers” as people who spend more than 30 percent of the workday participating on social networking sites. According to the results of the survey, active social networkers air company lin

> Five months before the new 2002 Lexus ES hit showroom floors, the company’s U.S. engineers sent a test report to Toyota City in Japan: The luxury sedan shifted gears so roughly that it was “not acceptable for production.” Days later, another Japanese exe

> The issue of the size of executive compensation packages is explored in the text. The highest paid CEO in 2014 was David Zaslav, the CEO of Discovery Communications, whose total executive compensation package was $156.1, the vast majority of which was fr

> In her book The Seven Signs of Ethical Collapse, Jennings explains: “When an organization collapses ethically, it means that those in the organization have drifted into rationalizations and legalisms, and all for the purpose of getting the results they w

> In teaching about moral development, instructors often point out the threefold nature of morality: It depends on emotional development (in the form of the ability to feel guilt or shame), social development (manifested by the recognition of the group and

> In this chapter, we have discussed the Joe Paterno matter at Penn State. Another situation where a respected individual’s reputation was tarnished by personal decisions is the resignation of David Petraeus, former U.S. military general and head of the Ce

> In the text, we point out that Rest’s model is not linear in nature. An individual who demonstrates adequacy in one component may not necessarily be adequate in another, and moral failure can occur when there is a deficiency in any one component. Give an

> In his research into the components of ethical decision making, Rest raised the following issue: Assuming someone possesses sound moral reasoning skills, “Why would they ever chose the moral alternative, especially if it involves sacrificing some persona

> Using the child abuse scandal at Penn State discussed in Chapter 1, explain the actions that would have been taken by Joe Paterno if he had been reasoning at each stage in Kohlberg’s model and why.

> One reason otherwise good people may do bad things is what psychologists call scripts. This term refers to the procedures that experience tells us to use in specific situations. Unlike other forms of experience, scripts are stored in memory in a mechanic

> In the debate over why good people do bad things, Tenbrunsel suggests that people are often blind to the ethical dimensions of a situation, a concept he refers to as “bounded ethicality.” Craig Johnson addresses moral disengagement by saying: When others

> A major theme of this chapter is that our cognitive processes influence ethical decision making. Use the theme to comment on the following statement, which various religions claim as their own and has been attributed to Lao Tzu and some say the Dalai Lam

> Explain what you think each of the following statements means in the context of moral development. a. How far are you willing to go to do the right thing? b. How much are you willing to give up to do what you believe is right? c. We may say that we would

> The nature of accountants’ work puts them in a special position of trust in relation to their clients, employers, and the general public, who rely on their professional judgment and guidance in making decisions. Explain the link between professional judg

> Windsor and Kavanagh propose in a research study that client management economic pressure is a situation of high moral intensity that sensitizes auditors’ emotions and thus motivates their moral reasoning to make deliberative decisions either to resist o

> Emotional self-awareness refers to understanding your own feelings, what causes them, and how they impact your thoughts and actions. It is widely known that ethical dilemmas involving other employees/managers are inherently emotional. Researchers have fo

> 1. Do you think it is the same to act in your own self-interest as it is to act in a selfish way? Why or why not? 2. Do you think “enlightened self-interest” is a contradiction in terms, or is it a valid basis for all actions? Evaluate whether our laisse

> Explain why the process of ethical decision making depends on a number of moral, social, psychological, and organizational factors.

> On October 15, 2009, in Fort Collins, Colorado, the parents of a six-year-old boy, Falcon Heene, claimed that he had floated away in a homemade helium balloon that was shaped to resemble a silver flying saucer. Some in the media referred to the incident

> In a June 1997 paper published in the Journal of Business Ethics, Sharon Green and James Weber reported the results of a study of moral reasoning of accounting students prior to and after taking an auditing course. The study also compared the results bet

> Identify the ethical issues in each of the following situations and what your ethical obligations are, assuming you are faced with the dilemma. a. A consultant for a CPA firm is ordered by her superior to downgrade the ratings of one company's software p

> Sharon is an intern with a local CPA firm. Prior to returning to school, her supervisor goes on sick leave and asks her to do some complicated reconciliation work for him. She is given what seems to her to be an unrealistic deadline. Sharon looks at the

> According to a survey reported by the Daily Mail in the United Kingdom, one in eight women has bought expensive clothes, worn them on a night out, and then returned them the next day. Nearly half of those who did confess said they were motivated by money

> You are in charge of the checking account for a small business. One morning, your accounting supervisor enters your office and asks you for a check for $150 for expenses that he tells you he incurred entertaining a client last night. He submits receipts

> In this chapter, we discuss the study by Libby and Thorne of the association between auditors’ virtue and professional judgment, done by asking members of the Canadian Institute of Chartered Accountants to rate the importance of a variety of virtues. The

> Michael just graduated with a degree in Accounting from State University. He worked hard in school but could only achieve a 2.95 GPA because he worked 40 hours a week to pay his own way through college. Unfortunately, Michael was unable to get a job beca

> Explain why moral problems may be of greater intensity than nonmoral problems.

> The following two statements about virtue were made by noted philosophers/writers: 1. MacIntyre, in his account of Aristotelian virtue, states that integrity is the one trait of character that encompasses all the others. How does integrity relate to, as

> Do you believe that a person’s stage of moral development and personal moral philosophy play a role in how values and actions are shaped in the workplace? Explain.

> Do you believe that our beliefs trigger our actions, or do we act and then justify our actions by changing our beliefs? Explain.

> We are citizens of the world. The tragedy of our times is that we do not know this. Woodrow T. Wilson (1856–1924), 28th president of the United States At five past midnight on December 3, 1984, 40 tons of the chemical methyl isocynate (MIC), a toxic gas,

> In 2005, Tony Menendez, a former Ernst & Young LLP auditor and Director of Technical Accounting and Research Training for Halliburton, blew the whistle on Halliburton’s accounting practices. The fight cost him nine years of his life. Just a few months la

> On September 25, 2012, Japanese camera and medical equipment maker Olympus Corporation and three of its former executives pleaded guilty to charges related to an accounting scheme and cover-up in one of Japan’s biggest corporate scandals. Olympus admitte

> Bennie Gordon graduated with a Masters in Accounting two years ago and now works as an accounting manager at the division level at Jet Energy Company, a company headquartered in Winston-Salem, North Carolina. Jet Energy is a regulated utility company by

> 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 resembl

> On October 15, 2009, in Fort Collins, Colorado, the parents of a six-year-old boy, Falcon Heene, claimed that he had floated away in a homemade helium balloon that was shaped to resemble a silver flying saucer. Some in the media referred to the incident

> Natalie got the call she had been waiting for over six long months. Her complaint to the human resources department of Franklin Industries had been dismissed. It was HR’s conclusion that she was not retaliated against for reporting an alleged embezzlemen

> United Thermostatic Controls is a publicly owned company that engages in the manufacturing and marketing of residential and commercial thermostats. The thermostats are used to regulate temperature in furnaces and refrigerators. United sells its product p

> Occupational fraud comes in many shapes and sizes. The fraud at Rite-Aid is one such case. On February 10, 2015, the U.S. Attorney’s Office for the Middle District of Pennsylvania announced that a former Rite Aid Vice President, Jay Findling, pleaded gui

> How could a CEO and chairperson of the board of directors of a major company resign in disgrace over a personal relationship with a contractor that led to a sexual harassment charge and involved a conflict of interests, a violation of the code of ethics?

> Reprinted with permission from “The Parable of the Sadhu,” by Bowen H. McCoy, Harvard Business Review. Copyright © Harvard Business Publishing. Last year, as the first participant in the new six-month sabbatical program that Morgan Stanley has adopted, I

> The story of Phar-Mor shows how quickly a company that built its earnings on fraudulent transactions can dissolve like an Alka-Seltzer. One day, Stan Cherelstein, the controller of Phar-Mor, discovered cabinets stuffed with held checks totaling $10 milli

> “I’m sorry, Lucy. That’s the way it is,” Ricardo said. The client wants it that way. “I just don’t know if I can go along with it, Ricardo,” Lucy replied. “I know. I agree with you. But, Juggyfroot is our biggest client, Lucy. They’ve warned us that they

> Milton Manufacturing Company produces a variety of textiles for distribution to wholesale manufacturers of clothing products. The company’s primary operations are located in Long Island City, New York, with branch factories and warehouses in several surr

> The facts of this case are fictional. Any resemblance to real persons, living or dead, is purely coincidental. Kenny is always looking to make contacts in the business world and enhance his networking experiences. He knows how important it is to drive c

> Troy just returned from a business trip for health-care administrators in Orlando. Kristen, a relatively new employee who reports to him, also attended the conference. They both work for Gateway Hospital, a for-profit hospital in the St. Louis area. The

> Assume you are interviewing for a position with an accounting firm and the recruiter asks you the following questions. Craft a response that you would feel comfortable giving for each one. • Describe an experience in the workplace when your attitudes an

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