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Question: What would you advise that corporations do


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?


> In June 2012, Jerry Sandusky was convicted of sexually abusing ten boys while he was an assistant football coach at Pennsylvani State University. His abuse of children went back almost fourteen years and was known by his superior, Joe Paterno, the head f

> In 1984, when he was eighteen years old, Cesar Correia murdered his father, killing him with a baseball bat. Cesar then dumped the body in the Assiniboine River. The body was eventually found, and Cesar confessed to the crime. He pleaded guilty to mansla

> Alex McAdams, the recently retired CEO of Athletic Shoes, was honored to be asked to join the Board of Consolidated Mines International Inc. Alex continues to sit on the Board of Athletic Shoes, as well as the Board of Pharma-Advantage, another publicly

> Adverse selection occurs when one party has an information advantage over the other party. In the case of insurance, people taking out insurance know more about their health and lifestyle than the insurance company. Therefore, in order to reduce informat

> Throughout 2009, the world was plagued with the H1N1 swine flu epidemic. The H1N1 influenza virus, which began in Mexico, spread rapidly. In June, the World Health Organization (WHO) declared it to be a global pandemic. Those who caught the virus suffere

> On October 1, 2012, IKEA apologized for removing women from the photographs in the IKEA catalogs that were shipped to Saudi Arabia. IKEA is a Swedish company that was founded in 1943. It is now the world’s largest furniture retailer with stores in over f

> Eric Hebborn (1934–1996) was an English painter and art forger. Hebborn attended the Royal Academy of Arts and then the British School at Rome, two of the most prestigious fine arts schools at the time. Underappreciated as an artist, he turned his hand t

> In the airline industry, passenger load capacity is the proportion of seats filled on each flight. The objective is to have all air- planes at full-load capacity on all flights. In October 2000, Jeffrey Lafond, a former Air Canada employee, joined WestJe

> On September 5, 2007, Steve Jobs, the CEO of Apple Inc., announced that the spectacularly successful iPhone would be reduced in price by $200 from $599, its introductory price of roughly two months earlier.1 Needless to say, he received hundreds of email

> Deutsche Bank (DB) is the largest bank in Germany and world’s sixth-largest investment bank.1 Unfortunately, the bank suffered from lackluster leadership, a poor organizational culture, and a complicated governance structure that result

> In 2006, Mercedes-Benz introduced Blue- TEC, an advanced system to trap and neutralize harmful emissions and particulates that allowed Mercedes to market “clean diesel” cars. VW and Audi made agreements to share the technology to enable all three compani

> In January 2002, the Boston Globe began a series of articles reporting that Fr. John Geoghan had been transferred from one parish to another in the Archdiocese of Boston, even though senior church officials knew that he was a pedophile. There was outrage

> On a fateful day in 2001, a GM engineer realized during preproduction testing of the Saturn Ion that there was a defect that caused the small car’s engine to stall with- out warning.1 This switch was approved in 2002 by an engineer, Raymond DiGeorgio, wh

> Should executives and directors be sent to jail for the acts of their corporation's employees?

> Why didn’t some corporations protect women employees from sexual abuse before 2017–2019?

> How can corporations ensure that their employees behave ethically?

> Why is it important for the clients of professional accountants to be ethical?

> Why might ethical corporate behavior lead to higher profitability?

> On any given day, a bank may have either a surplus or a deficiency of cash. When this occurs, banks tend to lend to and borrow from other banks at a negotiated rate of interest. These interbank loans could be as short as one day and as long as several mo

> What could professional accountants have done to prevent the development of the credibility gap and the expectations gap?

> Why are we more concerned now than our parents were about fair treatment of employees?

> Why have concerns over pollution become so important for management and directors?

> Should organizations that have a risk-taking culture, such as the one developed by Stan O’Neil at Merrill Lynch, enjoy the gains and suffer the losses, without recourse to government bailouts?

> Should the CEOs who refused to have their firms invest in mortgage-backed securities in the early years because the risks were too great receive bonuses in the latter years because their firms did not incur any mortgage-backed security losses? How would

> Should CEOs who made large bonuses by having their firms invest in mortgage-backed securities in the early years have to repay those bonuses in the later years when the firm records losses on those same securities?

> The government bailout of the financial community included taking an equity interest in publicly traded companies such as American International Group (AIG). Is it right for the government to become an investor in publicly traded companies?

> How much should the exiting CEOs of Fannie Mae and Freddie Mac have received when they were replaced in September 2008?

> Identify and explain five examples where executives or directors faced moral hazards and did not deal with them ethically.

> How could ethical considerations improve unbridled self-interest in ethical decision making?

> Wal-Mart has a brand image that triggers strong reactions in North America, particularly from people whose businesses have been damaged by the company’s over- powering competition with low prices and vast selection and by those who value the small-busine

> How could increased regulation improve the exercise of unbridled self-interest in decision making?

> 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

> 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 professional accountant, and you discovered your superior was inflating his or her expense reports, what would you do?

> 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?

2.99

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