Chapter 1
1. Why have concerns over pollution become so important for management and directors?
2. Why are we more concerned now than our parents were about fair treatment of employees?
3. What could professional accountants have done to prevent the development of the credibility gap and the expectations gap?
4. Why might ethical corporate behavior lead to higher profitability?
5. Why is it important for the clients of professional accountants to be ethical?
6. How can corporations ensure that their employees behave ethically?
7. Should executives and directors be sent to jail for the acts of their corporation's employees?
8. Why are the expectations of a corporation's stakeholders important to the reputation of the corporation and to its profitability?
9. How can a corporation show respect for its stakeholders?
10. How can conflicts between the interests of stakeholders be resolved by a corporation's management?
11. Why are philosophical approaches to ethical decision making relevant to modern corporations and professional accountants?
12. What are the common elements of the three practical approaches to ethical decision making that are briefly outlined in this chapter?
13. Is a professional accountant a business person pursuing profit or a fiduciary that is to act in the public interest?
14. Why is it important for a professional accountant to understand the ethical trends discussed in this chapter?
15. Why should a professional accountant be aware of the Ethics Code of the International Federation of Accountants?
16. Why is an ethical corporate culture important?
Chapter 2
1. Do you think that the events recorded in this chapter are isolated instances of business malfeasance, or are they systemic throughout the business world?
2. The events recorded in this chapter have given rise to legislative reforms concerning how business executives, directors, and accountants are to behave. There is a recurring pattern of questionable actions followed by more stringent legislation, regulation, and enforcement. Is this a case of too little legislation being enacted too late to prevent additional business fiascos?
3. Is there anything else that can be done to curtail this sort of egregious business behavior other than legislation?
4. Many cases of financial malfeasance involve misrepresentation to mislead boards of directors and/or investors. Identify the instances of misrepresentation in the Enron, Arthur Andersen, and WorldCom cases discussed in this chapter. Who was to benefit, and who was being misled?
5. Use the Jennings "Seven Signs" framework to analyze the Enron and WorldCom cases in this chapter.
6. Rank the worst three villains in the film Wall Street: Money Never Sleeps (2010). Explain your ranking.
7. In each case discussed at some length in this chapter-Enron, Arthur Andersen, WorldCom, and Bernie Madoff-the problems were known to whistleblowers. Should those whistleblowers each have made more effort to be heard? How?
8. The lack of corporate accountability and an increased awareness of inquiries and other questionable practices by corporations led to the Occupy Movement Identify and comment on additional recent instances that have led to concerns over the legitimacy of corporate activities.
9. It seems likely that the top executives of the major banks involved in the manipulation of the LIBOR rate were aware of the manipulations and of the massive profits and losses caused by those manipulations. Why did they thing that such manipulations could continue to be undetected and/or unpunished?
10. The new antibribery prosecution regime involves serious charges and penalties for bribery in foreign countries during past times when many people were bribing in the normal course of international business and penalties were not levied. Is it unreasonable to levy extremely high fines at the beginning of the new regime and/or not to limit the period over which bribery can trigger those fines? Why and why not?
11. At GM and Takata, whose improper actions finally came to light, a whistle-blower raised objections to the actions before or very early in the production process. Why were their concerns ignored and risks taken? In VW's case, why didn't a whistle-blower come forward? What aspects of governance were lacking in each company?
12. The CEOs of Valeant Pharmaceuticals and Turing Pharmaceuticals took the view that they could jack up the price of their drugs by huge percentages because they could, and they failed to consider seriously enough whether they should. Whose fault was this? In a well-functioning corporate governance system, what measures should be in place to control such actions?
13. What are the reactions and outcomes that can be attributed to the leaked Panama papers
Chapter 3
1. How would you respond when someone makes a decision that adversely affects you while saying, 'It's nothing personal, it's just business"? Is business impersonal?
2. Is someone who makes an ethical decision based on enlightened self-interest worthy of more or less praise than someone who makes a similar decision based solely on economic considerations?
3. Since happiness is extremely subjectioe. how would you objectively measure and assess happiness? Do you agree with J. S. Mill that aritlunetic can be used to calculate happineu? Is money a good proxy for happiness?
4. Is there any categorical imperative that you can think of that would have universal application? Isn't there an exception to every rule?
5. Assume that Firm A is a publidy traded company that puts its financial statements on the Web. This information can be accessed and read by anyone, even those who do not own shares of Firm A. This a free-rider situation, where an investor can use Firm A as a means to making m investment decision about another company. Is this ethical? Does free riding treat another individual as a means and not also as an end?
6. How does a business executive demonstrate virtue when dealing with a disgruntled shareholder at the annual meeting?
7. Commuters who have MOM than one passenger in the car are permitted to drive in a special lane on the highway while all the other motorists have to contend with stop¬and-go traffic. What does this have to do with ethics? Assess this situation using oath of the following ethical theories: utilitarianism, &ontology, justice, fairness, and virtue ethics.
Chapter 4
1. Why should directors, executives, and accountants understand consequentialism, deontology, and virtue ethics?
2. 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?
3. Is it wise for a decision maker to take into account more than profit when making decisions that have a significant social impact? Why?
4. 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?
5. Is the modified 5-question approach to ethical decision making superior to the modified versions of the moral standards or Pastin approach?
6. Under what circumstances would it be best to use each of the following frameworks: (1) the philosophical set of consequentialism, deontology, and virtue ethics; (2) the modified 5-question approach; (3) the modified moral standards approach; and (4) the modified Pastin approach?
7. How would you convince a CEO not to treat the environment as a cost-free commons?
8. How can a decision to downsize be made as ethically as possible by treating everyone equally?
9. From a virtue ethics perspective, why would it be logical to put in place a manufacturing process beyond legal requirements?
10. 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 monitoring of ethicality of actions
e. Unethical reward systems
f. Unreasonable pressures for unrealistic performance
11. Give an example of behavior that might be unethical even though "everyone is doing it."
Chapter 5
1. Must a company be incorporated as a benefit corporation in order to legally consider actions other than those in pursuit of profit?
2. 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?
3. What is the role of a board of directors from an ethical governance standpoint?
4. Explain why corporations are legally responsible to shareholders but are strategically responsible to other stakeholders as well.
5. What should an employee consider when considering whether to give or receive a gift?
6. When should an employee satisfy his or her self-interest rather than the interest of his or her employer?
7. 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?
8. How can a company control and manage conflicts of interest?
9. What is the role of an ethical culture, and who is responsible for it?
10. What is the most important contribution of a corporate code of conduct?
11. Are one or more of the fundamental principles found in codes of conduct more important than the rest? Why?
12. Why should codes focus on principles rather than specific detailed rules?
13. How could you monitor compliance with a code of conduct in a corporation?
14. How can a corporation integrate ethical behavior into its reward and remuneration schemes?
15. Other than a code of conduct, what aspects of a corporate culture are most important and why?
16. Is the SOX-driven effort being made to check on the effectiveness of internal control systems worth the cost? Why and why not?
17. Why should an effective whistleblower mechanism be considered a "failsafe mechanism" in SOX Section 404 compliance programs?
18. 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?
19. Why is it suspected that corporate psychopaths gravitate to certain industries, and what should corporations within those industries do about it?
20. 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?
21. Should professional accountants push for the development of a comprehensive framework for the reporting of corporate social performance? Why?
22. Do professional accountants have the expertise to audit corporate social performance reports?
Chapter 6
1. Answer the seven questions in the opening section of this chapter.
2. What is meant by the term "fiduciary relationship"?
3. Why are most of the ethical decisions that accountants face complex rather than straightforward?
4. When should an accountant place his or her duty to the public ahead of his or her duty to a client or employer?
5. Which would you choose as the key idea for ethical behavior in the accounting profession: "Protect the public interest" or "Protect the credibility of the profession"? Why?
6. Why is maintaining the confidentiality of client or employer matters essential to the effectiveness of the audit or accountant relationship?
7. What is the difference between exercising "due care" and "exercising professional skepticism"?
8. Why did the SEC ban certain nonaudit services from being offered to SEC registrant audit clients even though it has been possible to effectively manage such conflict of interest situations?
9. Where on the Kohlberg framework would you place your own usual motivation for making decisions?
10. 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.
11. Which type of conflict of interest should be of greater concern to a professional accountant actual or apparent?
12. 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?
13. If the provision of management advisory services can create conflicts of interest, why are audit firms still offering them?
14. If you were an auditor, would you buy a new car at a dealership you audited for 17% off list price?
15. If you were a management accountant, would you buy a product from a supplier for personal use at 25% off list?
16. If you were a professional accountant and you discovered your superior was inflating his or her expense reports, what would you do?
17. Can a professional accountant serve two clients whose interests conflict? Explain.
18. If an auditor's fee is paid from the client company, is there not a conflict of interests that may lead to a lack of objectivity? Why doesn't it?
19. Why does the IFAC Code consider the appearance of a conflict of interests to be as important as a real but nonapparent influence that might sway the independence of mind of a professional accountant?
20. What is the most important contribution of a professional or corporate code of conduct?
21. Are one or more of the fundamental principles found in codes of conduct more important than the rest? Why?
22. Was the "expectations gap" that triggered the Treadway and Macdonald commis-sions the fault of the users of financial statements, the management who prepared them, the auditors, or the standard setters who decided what the disclosure stan-dards should be?
23. Why should codes focus on principles rather than specific detailed rules?
24. Is having an ethical culture important to having an effective system of internal control? Why or why not?
25. What should an auditor do if he or she believes that the ethical culture of a client is unsatisfactory?
26. 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?
27. 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 this condition be reported to the authorities, but professional accounting codes do not. How should the head of the firm resolve this issue?
28. 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 Irish subsidiary, where it paid no corporate income taxes on those profits? Why or why not?
29. Many professional accountants know of questionable transactions but fail to speak out against them. Can this lack of moral courage be corrected? How?
30. Why do codes of conduct or existing jurisprudence not provide sufficient guidance for accountants in ethical matters?
Chapter 7
1. In what ways do ethics risk and opportunity management, as described in this chapter, go beyond the scope of traditional risk management?
2. If a corporation's governance process does not involve ethics risk management, what unfortunate consequences might befall that corporation?
3. How will the U.S. external auditor's mindset change in order to discharge the duties contemplated by SAS 99 on finding fraud?
4. How could a corporation utilize stakeholder analysis to formulate strategies?
5. Descriptive commentary about corporate social responsibility 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?
6. Why should a corporation make use of a comprehensive framework for considering, managing, and reporting corporate social responsibility performance? How should they do so?
7. Do professional accountants have the expertise to audit corporate social performance reports?
8. What would you list as the five most important ethical guidelines for dealing with North American employees?
9. Is trust really important-can't employees work effectively for someone they are afraid of or at least where there is some "creative tension"?
10. Should a North American corporation operating abroad respect each foreign culture encountered or insist that all employees and agents follow only one corporate culture?
11. 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?
12. How would you advise your company's personnel to act with regard to expectations of guanxi in China?
13. 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?
14. Why should ethical decision making be incorporated into crisis management?
Chapter 8
1. How much and in which ways did unbridled self-interest contribute to the subprime lending crisis?
2. How could increased regulation improve the exercise of unbridled self-interest in decision making?
3. How could ethical considerations improve unbridled self-interest in ethical decision making?
4. Identify and explain five examples where executives or directors faced moral hazards and did not deal with them ethically.
5. How much should the exiting CEOs of Fannie Mae and Freddie Mac have received when they were replaced in September 2008?
6. The government bailout of the financial community included taking an equity interest in publicly traded companies such as MG. Is it right for the government to become an investor in publicly traded companies?
7. 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?
8. 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 you determine the size of these bonuses?
9. 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?
10. Are the criticisms that M2M accounting rules contributed to the economic crisis valid?
11. 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?
12. 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 be global or by country?
13. 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?
14. Does the Dodd-Frank Act go far enough, or are some important issues not addressed?
15. What were the three most important ethical failures that contributed to the subprime lending fiasco?