Business and Professional Ethics for Directors, Executives and Accountants

by Brooks, Leonard J.

• ISBN13: 9780324200669
• ISBN10: 0324200668
• Format: Paperback
• Copyright: 2003-09-03
• Publisher: South-Western College Pub

Summary

Business and Professional Ethics for Accountants points students in the right direction! This text focuses on practical development of the skills needed to deal with ethical issues specific to accounting. Interesting, real-world situations provide students with an understanding of appropriate values, ethical pitfalls, applicable codes of conduct, and sound ethical reasons where codes do not apply.

Table of Contents

Overview of the Book
Preface
PART I The Ethics Environment	1	(126)
CHAPTER 1 Ethics Expectations	2	(53)
Purpose of the Chapter	2	(1)
The Ethics Environment for Business: The Battle for Credibility, Reputation, and Competitive Advantage	2	(8)
Environmental Concerns	4	(1)
Moral Sensitivity	5	(1)
Bad Judgments and Activist Stakeholders	5	(2)
Economic and Competitive Pressures	7	(1)
Financial Scandals: the Expectations Gap and the Credibility Gap	7	(1)
Governance Failures and Risk Assessment	8	(1)
Increased Accountability Desired	9	(1)
Synergy Among Factors and Institutional Reinforcement	9	(1)
Outcomes	10	(1)
New Expectations for Business	10	(3)
New Mandate for Business	10	(2)
New Governance and Accountability Frameworks	12	(1)
Reinforced Fiduciary Role for Professional Accountants	12	(1)
Responses and Developments	13	(9)
Emerging Governance and Stakeholder Accountability Models	13	(3)
Management Based on Values, Reputation, and Risks	16	(3)
Accountability	19	(1)
Developments in Business Ethics	20	(2)
Concepts and Terms	20	(1)
Approaches to Ethical Decision Making Through Stakeholder Impact Analysis	21	(1)
The Ethics Environment for Professional Accountants	22	(2)
Role and Conduct	22	(1)
Governance	23	(1)
Services Offered	24	(1)
Questions for Discussion	24	(1)
Cases	25	(1)
References	25	(14)
Martha Stewart's Lost Reputation	26	(4)
Bhopal-Union Carbide	30	(2)
The Betaseron® Decision (A)	32	(2)
Texaco: The Ecuador Issue	34	(3)
Where Were the Accountants?	37	(1)
To Resign or Serve?	38	(1)
Readings
LYNN SHARP PAINS: Managing for Organizational Integrity	39	(9)
ANDREW SINGER: Whistle-Blower: Patriot or Bounty Hunter?	48	(6)
L.J. BROOKS: Law Case Summary: Caremark National Inc.	54	(1)
CHAPTER 2 Governance, Accounting, and Auditing, Post-Enron	55	(72)
Purpose of the Chapter	55	(1)
Governance and Accountability Reform	55	(1)
Overview and Timeline of Events and Developments	55	(1)
The Enron Debacle: A Discussion Covering the Powers Report Summary, Senate Subcommittee Summary, and Key Subcommittee Submissions	56	(30)
Background	56	(2)
What Happened? Who Was to Blame?	58	(3)
The Powers Report	58	(2)
The Senate Subcommittee Report	60	(1)
Failure of the Directors to Oversee or Govern Enron Adequately	61	(5)
What are Directors Expected to Do?	61	(2)
How Was Enron's Board Organized, and How Did It Function?	63	(3)
Enron's Questionable Transactions	66	(12)
Chewco Transactions	66	(2)
LJM Partnerships and the Raptors: LJM1	68	(3)
LJM Partnerships and the Raptors: LJM2	71	(1)
LJM2 and the Raptors	72	(6)
Enron Culture, Conflicts of Interest, and Whistle-Blowers	78	(3)
Arthur Andersen s Role	81	(1)
Enron's Governance and Control System Was Short-Circuited	82	(1)
Banks Who Were Willing Accomplices in Enron "Prepays"	83	(1)
Enron's Tax Avoidance	84	(1)
The Aftermath	85	(1)
Downloadable Enron Case Source Document Files	86	(1)
Arthur Andersen's Troubles: A Review and Analysis	86	(9)
Changing Personalities and Culture	87	(3)
Arthur Andersen's Internal Control Flaw	90	(1)
Arthur Andersen's Apparent Enron Mistakes	90	(1)
Why Did Arthur Andersen Make These Apparent Mistakes?	91	(1)
Shredding Enron Audit Documents: Obstruction of Justice	92	(2)
Lingering Questions	94	(1)
Emerging Research	95	(1)
Governance and Accounting Changes up to WorldCom	95	(7)
WorldCom: The Catalyst	97	(1)
WorldCom Lights the Fire	97	(1)
WorldCom's Accounting Manipulations	97	(3)
WorldCom's Other Revelations	100	(1)
Why Did They Do It?	100	(1)
An Expert's Insights	101	(1)
The Continuing Saga	101	(1)
The Catalyzed Outcome-The Sarbanes-Oxley Act of 2002	102	(5)
Sarbanes-Oxley Act (SOX): Future Governance for Corporations and the Accounting Profession	102	(1)
New SOX Corporate Governance Framework	103	(2)
New SOX Framework for the US. Accounting Profession	105	(1)
New SOX Frameworks for Other Matters	106	(1)
Implementation by the SEC	106	(1)
Impact on Governance, Accountability and Reporting, and Management Practice	107	(1)
Impact on the Accounting Profession and Auditing Practice	107	(1)
Impact on Business Ethics Trends	108	(1)
Questions for Discussion	109	(1)
Cases	109	(1)
Principal References	110	(18)
The Enron Debacle	110	(1)
Arthur Andersen's Troubles	111	(1)
WorldCom: The Catalyst	111	(1)
Sunbeam Corporation and Chainsaw Al	112	(7)
Waste Management, Inc.	119	(8)
PART II Ethical Governance and Accountability	127	(182)
CHAPTER 3 Corporate Ethical Governance and Accountability	128	(75)
Purpose of the Chapter	128	(1)
The Emerging, Governance and Accountability Framework	129	(7)
New Expectations New Framework	129	(1)
Accountability to Shareholders or Stakeholders?	130	(1)
Governance for Broad Stakeholder Accountability	131	(4)
Governance Process Based on Stakeholder Interests	131	(2)
Identifying Organizational Values--The Foundation of Behavior	133	(2)
Guidance Mechanisms-Code of Conduct and Ethical Culture	135	(1)
Threats to Good Governance and Accountability	136	(9)
Misunderstanding Objectives and Fiduciary Duty	136	(1)
Failure to Identify and Manage Ethics Risks	137	(2)
Conflict of Interests	139	(6)
Management to Avoid and Minimize Consequences	141	(2)
Agency Theory, Ethics, and Sears	143	(1)
Chinese Walls/Firewalls	143	(1)
Forensic Experts and Evidence: The 20/60/20 Rule	144	(1)
The GONE Theory: Identifying Potentially Harmful Situations and Likely Perpetrators	144	(1)
Duty Depends Upon a Person's Role	145	(1)
Corporate Governance and Accountability	145	(15)
Developing, Implementing, and Managing an Ethics Culture	145	(5)
Corporate Codes of Conduct	150	(10)
Purpose, Focus, and Orientation	150	(4)
Code Content and Scope	154	(3)
Effective Implementation	157	(3)
Public Accountability Benchmarks	160	(1)
Conclusion	160	(2)
Questions for Discussion	162	(1)
Cases	162	(1)
References	163	(32)
Ford/Firestone Tire Recall	164	(10)
Conflicts of Interest on Wall Street	174	(3)
RT Capital	177	(4)
Bankers Trust: Learning from Derivatives	181	(3)
Barings Bank: Rogue Trader	184	(3)
Philip Services Corp...Into the Dumper	187	(5)
Dow Corning Silicone Breast Implants	192	(2)
Playing God	194	(1)
Readings
E.E. MURPHY. Creating Ethical Corporate Cultures	195	(8)
CHAPTER 4 Professional Accounting in the Public Interest, Post-Enron Purpose of the Chapter	203	(106)
Stakeholder Expectations Accountability and Governance Framework Rededication of the Role of a Professional Accountant	204	(8)
Public Expectations of All Professionals	205	(2)
Public Expectations of a Professional Accountant	207	(1)
Dominance of Ethical Values Rather than Accounting or Audit Techniques	207	(2)
Priority of Duty, Loyalty, and Trust in a Fiduciary	209	(3)
Confidentiality: Strict or Assisted	212	(1)
Implications for Services Offered	212	(4)
Assurance and Other Services	212	(1)
New SEC Independence Rules	213	(2)
Critical Value Added by a Professional Accountant	215	(1)
Standards Expected for Behavior	215	(1)
Judgment and Values	216	(2)
Importance To Value Added	216	(1)
Development of Judgment and Values	216	(2)
Sources of Ethical Guidance	218	(1)
Professional Codes of Conduct	219	(14)
Purpose and Framework	219	(1)
Fundamental Principles and Standards	219	(3)
Rules: General and Specific	222	(1)
Discipline	222	(2)
Interpretations of Rules	224	(1)
Motivation for Changes in Professional Codes	224	(2)
Current Codes of Professional Conduct	226	(4)
International Comparison of Professional Codes	230	(1)
Shortfalls with and in Professional Codes	231	(1)
Issues Not Usually Resolved in Corporate Codes of Conduct	232	(1)
Conflicts of Interest and Global Independence Standards	233	(13)
A Global Perspective from the IFAC Code	234	(4)
Types of Conflicts of Interest	238	(1)
Spheres of Activity Affected	238	(1)
Conflicts of Interest Affecting Services Offered	239	(4)
Conflicts of Interest Involving Improper Use of Influence	243	(1)
Conflicts of Interest Involving Use or Misuse of Information (Confidentiality)	244	(2)
Laws and Jurisprudence	246	(2)
When Codes and Laws Don't Help	248	(1)
Broadening Role for Professional Accountants	248	(1)
Conclusion	249	(1)
Questions for Discussion	250	(1)
Cases	251	(2)
References	253	(21)
Allan Eagleson: The Eagle Has Landed	254	(2)
The Lang Michener Affair	256	(3)
Dilemma of an Accountant	259	(3)
Societal Concerns	262	(1)
Management Choice	263	(1)
Maple Leaf Gardens Shenanigans	263	(2)
To Qualify or Not?	265	(3)
Economic Realities or GAAP	268	(1)
Multidisciplinary Practice-Ethical Challenges	268	(1)
Team Player Problems	269	(1)
Locker Room Talk	270	(1)
Minimal Disclosure	270	(1)
Opinion Shopping	271	(1)
Lowballing a Fee Quotation	272	(1)
Tax Return Complications	273	(1)
Risk Management of Taxes Payable-Is it Ethical?	274	(1)
Readings
THE AICPA AT 100: Public Trust and Professional Pride	274	(7)
APPENDIX A: international Comparison of Main Aspects of Professional Codes of Conduct	281	(13)
G.D. ANDERSON: The Anderson Committee: Restructuring Professional Standards	294	(1)
THE LIABILITY CRISIS IN THE UNITED STATES: Impact on the Accounting Profession, a Statement of Position	295	(4)
TOM LYNCH: Ethics in Taxation Practice	299	(3)
APPENDIX B: Trends in the Legal Liability of Accountants and Auditors and Legal Defenses Available	302	(7)
PART III Significant Issues Facing Business and the Accounting Profession	309
CHAPTER 5 Approaches to Ethical Decision Making	310	(42)
Purpose of the Chapter	310	(1)
Introduction	310	(1)
Stakeholder Impact Analysis	310	(3)
Overview	310	(2)
Fundamental Interests of Stakeholders	312	(1)
Measurement of Quantifiable Impacts:	313	(4)
Profit	313	(1)
Items not included in Profit:	313	(1)
Measurable Directly
Not Measurable Directly
Bringing the Future to the Present	314	(1)
Dealing with Uncertain Outcomes	314	(1)
Identifying Stakeholders and Ranking Their Interests	315	(2)
Summary	317	(1)
Assessment of Non-quantifiable Impacts:	317	(1)
Fairness among Stakeholders	317	(1)
Rights of Stakeholders	317	(1)
Comprehensive Decision Making Approaches	318	(4)
5-question Approach	318	(1)
Moral Standards Approach	319	(1)
Pastin's Approach	320	(2)
Extending and Blending the Approaches	322	(1)
Commons Problems	322	(1)
Developing a More Ethical Action	322	(1)
Common Ethical Decision Making Pitfalls	323	(1)
Summary of Steps for an Ethical Decision	324	(1)
Conclusion	324	(1)
Illustrative Applications of Stakeholder Impact Analysis	325	(1)
Bribery or Opportunity in China Case	327	(3)
Proposed Audit Adjustment Case	330	(5)
When Does an "Aggressive Accounting" Choice Become Fraudulent?	335
Questions for Discussion	325	(1)
Cases	326	(1)
References	326	(16)
Smokers are Good for the Economy-Really	336	(1)
Ford Pinto	337	(2)
Kardell Paper Co.	339	(3)
Readings
L.J. BROOKS: Cost-Benefit Analysis	342	(6)
GRAHAM TUCKER: Ethical Analysis for Environmental Problem Solving	348	(4)
CHAPTER 6 Managing Ethics Risks and Opportunities	352
Purpose of the Chapter	352	(1)
Ethics Risk and Opportunity Management	352	(6)
Limited Perspectives	352	(3)
Over-reliance on External Auditors - New Fraud Standards	355	(1)
Ethics Risks	356	(1)
Ethics Risk and Opportunity Identification and Assessment	356	(2)
Reporting and Action	358	(1)
Ethics Strategies and Tactics for Effective Stakeholder Relations	358	(1)
Workplace Ethics - A Significant Ethical Problem Area	359	(5)
Employee Rights	360	(1)
Privacy and Dignity	360	(2)
Fair Treatment	362	(1)
Healthy and Safe Work Environment	362	(1)
Ability to Exercise One's Conscience	363	(1)
Trust and Its Importance	363	(1)
Conclusion	364	(1)
International Operations - A Significant Ethical Problem Area	364	(3)
Impacts on Local Economies and Their Cultures	364	(1)
Conflicts Between Domestic and Foreign Cultures	364	(2)
Bribery, Facilitating Payments	366	(1)
Apparent Cultural Conflicts with Banning Gifts, Bribes, or Facilitating Payments	366	(1)
Moral Imagination	367	(1)
Guidelines for Ethical Practice	367	(1)
Conclusion	367	(1)
Social Accountability and Audit	367	(4)
Organizational Objectives for CSR	368	(1)
Measurement of Corporate Ethical Performance	368	(1)
Reporting of CSR	369	(1)
Audit or Verification of CSR Reports	370	(1)
Conclusion	371	(1)
Crisis Management - A Significant Ethical Problem Area	371	(3)
Conclusion	374	(1)
Questions for Discussion	375	(1)
Cases	375	(1)
References	376	(15)
Cases on Workplace Ethics	377	(5)
Texaco's Jelly Beans	377	(4)
Downsize or Bonus Allocation Decisions	381	(1)
Cases on International Operations	382	(1)
Jail and a German Sub-contractor	382	(1)
AIDS Medication in South Africa	383	(1)
Cases on Crisis Management	383	(8)
The Exxon Valdez	383	(4)
The Brent Spar Decommissioning Disaster	387	(2)
Crises at Wind River Energy Inc.	389
Readings
ROTH, NL. ET AL: Can't We All Just Get Along: Cultural Variables in Codes of Ethics	391	(5)
DONALDSON, T.: Values in Tension: Ethics Away from Home	396	(8)
MITROFF, I.I. ET AL: Effective Crisis Management	404	(9)
Appendices:
A. Corporate Ethical Performance Indicators Used in the Corporate Ethics Monitor	413	(3)
B. Ethics Audit Program Annual Audit Questions	416