If you were a professional accountant, and you discovered your superior was inflating his or her expense reports, what would you do?
> What were the three most important ethical failures that contributed to the subprime lending fiasco?
> Does the Dodd-Frank Act go far enough, or are some important issues not addressed?
> Should members and executives in investment firms be forced to be members of a profession with entrance exams and with adherence to a professional code such as is the case for professional accountants or lawyers?
> Given that the marketplace for securities is global, and that the risks involved can affect people worldwide, should there be a global regulatory regime to protect investors? If so, should it be based on the regulations of one country? Should enforcement
> The global economic crisis was caused by the meltdown in the U.S. housing market. Should the U.S. government bear some of the responsibility of bailing out the economies of all countries that were harmed by this crisis?
> Are the criticisms that mark-to-market (M2M) accounting rules contributed to the economic crisis valid?
> How much and in which ways did unbridled self-interest contribute to the subprime lending crisis?
> What would you list as the five most important ethical guidelines for dealing with North American employees?
> Do professional accountants have the expertise to audit corporate social performance reports?
> Bernie Madoff perpetrated the world’s largest Ponzi scheme,1 in which investors were initially estimated to have lost up to $65 billion. Essentially, investors were promised—and some received—returns
> Why should a corporation make use of a comprehensive framework for considering, managing and reporting corporate social performance? How should they do so?
> Descriptive commentary about corporate social performance is sometimes included in annual reports. Is this indicative of good performance, or is it just window dressing? How can the credibility of such commentary be enhanced?
> How could a corporation utilize stakeholder analysis to formulate strategies?
> Corporate reporting to stakeholders other than shareholders has exploded. Why is this? Can stakeholders really make good use of all the information now available?
> How will the U.S. external auditor’s mindset change in order to discharge the duties contemplated by SAS 99 on finding fraud?
> If a corporation’s governance process does not involve ethics risk management, what unfortunate consequences might befall a corporation?
> Why should ethical decision making be incorporated into crisis management?
> If a company is to be sentenced for paying bribes 10 years ago, should the company be banned from all government contracts for 10 years, just made to pay a fine, or both? Consider the impacts on all stakeholder groups, including current and past sharehol
> What would you advise that corporations do to recognize the new worldwide reach of antibribery enforcement related to the FCPA and the U.K. Bribery Act?
> How would you advise your company’s personnel to act with regard to expectations of guanxi in China?
> This case presents, with additional information, the WorldCom saga included in this chapter. Questions specific to WorldCom activities are located at the end of the case. WorldCom Lights the Fire WorldCom, Inc., the second-largest U.S. telecommunications
> The #MeToo Movement has finally succeeded in getting women’s allegations of sexual abuse to be taken seriously by management and boards of directors. Why did it take so long for this tipping point to be reached?
> What should a North American company do in a foreign country where women are regarded as secondary to men and are not allowed to negotiate contracts or undertake senior corporate positions?
> Should a North American corporation operating abroad respect each foreign culture encountered, or insist that all employees and agents follow only one corporate culture?
> Is trust really important—can’t employees work effectively for someone they are afraid of or at least where there is some “creative tension”?
> In what ways do ethics risk and opportunity management, as described in this chapter, go beyond the scope of traditional risk management?
> Why is maintaining the confidentiality of client or employer matters essential to the effectiveness of the audit or accountant relationship?
> Which would you chose as the key idea for ethical behavior in the accounting profession: “Protect the public interest” or “Protect the credibility of the profession”? Why?
> When should an accountant place his or her duty to the public ahead of his or her duty to a client or employer?
> Why are most of the ethical decisions accountants face complex rather than straightforward?
> What is meant by the term "fiduciary relationship"?
> Once the largest professional services firm in the world and arguably the most respected, Arthur Andersen LLP (AA) has disappeared. The Big 5 accounting firms are now the Big 4. Why did this happen? How did it happen? What are the lessons to be learned?
> Answer the seven questions in the opening section of this chapter.
> Why do codes of conduct or existing jurisprudence not provide sufficient guidance for accountants in ethical matters?
> Many professional accountants know of questionable transactions but fail to speak out against them. Can this lack of moral courage be corrected? How?
> Transfer pricing can be used to shift profits to jurisdictions with low or no tax to reduce the taxes payable for multinational companies. If such profit shifting is legal, is it ethical? Was Apple well-advised to shift $30 billion in profits to its Iris
> An engineer employed by a large multidisciplinary accounting firm has spotted a condition in a client’s plant that is seriously jeopardizing the safety of the client’s workers. The engineer believes that the professional engineering code requires that t
> Are the governing partners of accounting firms subject to a “due diligence” requirement similar to that for corporation executives in building an ethical culture? Can a firm and/or its governors be sanctioned for the misdeeds of its members?
> What should an auditor do if he or she believes that the ethical culture of a client is unsatisfactory?
> How can a professional accountant develop moral courage?
> Is having an ethical culture important to having an effective system of internal control? Why or why not?
> Why should codes focus on principles rather than specific detailed rules?
> An understanding of the nature of Enron’s questionable transactions is fundamental to understanding why Enron failed. What follows is an abbreviated overview of the essence of the major important transactions with the SPEs, including Ch
> Was the "expectations gap" that triggered the Treadway and Macdonald commissions, the fault of the users of financial statements, the management who prepared them, the auditors, or the standard setters who decided what the disclosure standards should be?
> Are one or more of the fundamental principles found in codes of conduct more important than the rest? Why?
> What is the most important contribution of a professional code of conduct or corporate code of conduct?
> Why does the IFAC Code consider the appearance of a conflict of interests to be as important as a real but non-apparent influence that might sway the independence of mind of a professional accountant?
> If an auditor’s fee is paid from the client company, isn’t there a conflict of interests that may lead to a lack of objectivity? Why doesn’t it?
> Can a professional accountant serve two clients whose interest’s conflict? Explain.
> If you were a management accountant, would you buy a product from a supplier for personal use at 25% off list?
> How can a professional accountant develop professional skepticism?
> If you were an auditor, would you buy a new car at a dealership you audited for 17% off list price?
> The Prairieland Bank was a medium- sized mid-western financial institution. The management had a good reputation for backing successful deals, but the CEO (and significant shareholder) had recently moved to San Francisco to be “close to the big-bank cent
> If the provision of management advisory services can create conflicts of interest, why are audit firms still offering them?
> An auditor naturally wishes his or her activity to be as profitable as possible, but when, if ever, should the drive for profit be tempered?
> Which type of conflict of interest should be of greater concern to a professional accountant: actual or apparent?
> Independence, as defined on p. 432, seems very straightforward. Why did the IFAC-IESBA 2018 International Code of Conduct for Professional Accountants allocate roughly 50% of its space to cover the International Independence Standards that make up Parts
> Why do more professional accountants not report ethical wrongdoing? Consider their awareness and understanding of ethical issues as well as their motivation and courage for doing so.
> Where on the Kohlberg framework would you place your own usual motivation for making decisions?
> Why did the SEC ban certain non-audit services from being offered to SEC-registrant audit clients even though it has been possible to effectively manage such conflict of interest situations?
> What is the difference between exercising “due care” and “exercising professional skepticism”?
> How do the NOCLAR Standards change the traditional practice of maintaining confidentiality of audit or client information? Why?
> What is the difference between an honest financial statement and one with integrity?
> Sam, I’m really in trouble. I’ve always wanted to be an accountant. But here I am just about to apply to the accounting firms for a job after graduation from the university, and I’m not sure I want to be an accountant after all.” “Why, Norm? In all those
> What is the role of an ethical culture and who is responsible for it?
> How can a company control and manage conflicts of interest?
> Can an apparent conflict of interest where there are adequate safeguards to prevent harm be as important to an executive or a company as one where safeguards are not adequate?
> When should an employee satisfy his or her self-interest rather than the interest of his or her employer?
> What should an employee consider when considering whether to give or receive a gift?
> Explain why corporations are legally responsible to shareholders but are strategically responsible to other stakeholders as well.
> What is the role of a board of directors from an ethical governance standpoint?
> Do professional accountants have the expertise to audit corporate social performance reports?
> Should professional accountants push for the development of a comprehensive framework for the reporting of corporate social performance? Why?
> Descriptive commentary about corporate social performance is sometimes included in annual reports. Is this indicative of good performance, or is it just window dressing? How can the credibility of such commentary be enhanced?
> On April 13, 2006, Bausch & Lomb (B&L) CEO Ron Zarrella indicated that B&L would not be recalling their soft contact lens cleaner Renu with MoistureLoc. Drugstores in the United States were, however, removing the product from their shelves due to a conce
> In Canada, selling body parts, such as organs, sperm and eggs, is illegal. Selling blood is not. Canadian Blood Services, which manages the blood supply for Canadians, neither pays for nor sells blood. It is freely available to whoever needs it. A simila
> If Lynn Stout is correct, that the drive for shareholder value is a myth, why do so many companies continue to use it as a goal?
> Why is it suspected that corporate psychopaths gravitate to certain industries, and what should corporations within those industries do about it?
> If you were asked to evaluate the quality of an organization’s ethical leadership, what would the five most important aspects be that you would wish to evaluate, and how would you do so?
> Why should an effective whistle-blower mechanism be considered a “failsafe mechanism” in SOX Section 404 compliance programs?
> Is the SOX-driven effort being made to check on the effectiveness of internal control systems worth the cost? Why and why not?
> Other than a code of conduct, what aspects of a corporate culture are most important and why?
> How can a corporation integrate ethical behavior into their reward and remuneration schemes?
> How could you monitor compliance with a code of conduct in a corporation?
> Why should codes focus on principles rather than specific detailed rules?
> Are one or more of the fundamental principles found in codes of conduct more important than the rest? Why?
> Mega Brands has been selling Magnetix toys for many years. It also sells Mega Bloks, construction toys based on Spider-Man, Pirates of the Caribbean, as well as other products in over 100 countries. In 2006, Mega Brands had over $547 million in revenue,
> What is the most important contribution of a corporate code of conduct?
> Must a company be incorporated as a benefit corporation in order to legally consider actions other than those in pursuit of profit?
> From a virtue ethics perspective, why would it be logical to put in place a manufacturing process beyond legal requirements?
> How can a decision to down-size be made as ethically as possible by treating everyone equally?
> How would you convince a CEO not to treat the environment as a cost-free commons?
> Under what circumstances would it be best to use each of the following frameworks: the philosophical set of consequentialism, deontology, and virtue ethics; the modified 5-question; the modified moral standards; and the modified Pastin approach?
> Is the modified 5-question approach to ethical decision making superior to the modified moral standards or modified Pastin approach?
> If a framework for ethical decision making is to be employed, why is it essential to incorporate all four considerations of well-offness, fairness, individual rights and duties, and virtues expected?
> Is it wise for a decision maker to take into account more than profit when making decisions that have a significant social impact? Why?
> Before the recent financial scandals and governance reforms, few corporate leaders were selected for their “virtues” other than their ability to make profits. Has this changed, and if so, why?
> On July 23, 1993, the U.S. Food and Drug Administration (FDA) approved interferon beta-1b (brand name Betaseron), making it the first treatment for multiple sclerosis to get FDA approval in twenty-five years. Betaseron was developed by Berlex Laboratorie
> Give an example of behavior that might be unethical even though ‘‘everyone is doing it.”
> List the companies that have faced ethical tragedies due to the following failings in their ethical culture: a. Lack of ethical leadership b. Lack of clarity about important values c. Lack of ethical awareness and expectations by employees d. Lack of mon
