Ethical Obligations and Decision-Making in Accounting: Text and Cases 4th Edition Solution Manual
Ethical Obligations and Decision-Making in Accounting: Text and Cases 4th Edition Solution Manual makes solving textbook questions easier with expertly crafted solutions.
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Ethical Obligations and Decision Making in Accounting, 4/e 1
Chapter 1 Discussion Questions
Suggested Discussion and Solutions
1. A common ethical dilemma used to distinguish between philosophical reasoning
methods is the following. Imagine that you are standing on a footbridge spanning
some trolley tracks. You see that a runaway trolley is threatening to kill five people.
Standing next to you, in between the oncoming trolley and the five people, is a
railway worker wearing a large backpack. You quickly realize that the only way to
save the people is to push the man off the bridge and onto the tracks below. The
man will die, but the bulk of his body and the pack will stop the trolley from
reaching the others. (You quickly understand that you can’t jump yourself because
you aren’t large enough to stop the trolley, and there’s no time to put on the man’s
backpack.) Legal concerns aside, would it be ethical for you to save the five people
by pushing this stranger to his death? Use the deontological and teleological
methods to reason out what you would do and why.
Is it Ethical to Save Five People at the Expense of One?
Lessons from the Talmud
The Trolley Problem is a thought experiment in ethics, first introduced by Philippa Foot
in 1967. Others have also extensively analyzed the problem including Judith Jarvis
Thomason, Peter Unger, and Frances Kamm as recently as 1996. The authors used these
problems in ethics class to challenge students’ moral intuition.
The choice is between saving five lives at the cost of taking one life. Before we get to the
“answers,” we want to explain how one researcher is using MRI technology to map brain
response while analyzing the dilemma. Joshua Greene at Harvard University was more
concerned to understand why we have the intuitions, so he used functional Magnetic
Resonance Imaging, or fMRI, to examine what happens in people’s brains when they
make these moral judgments.
Greene found that people asked to make a moral judgment about “personal” violations,
like pushing the stranger off the footbridge, showed increased activity in areas of the
brain associated with the emotions. This was not the case with people asked to make
judgments about relatively “impersonal” violations like throwing a switch. Moreover, the
minority of subjects who did consider that it would be right to push the stranger off the
footbridge took longer to reach this judgment than those who said that doing so would be
wrong. Interesting results to say the least.
Many do not believe it to be ethical to intentionally end someone else's life whether it is
to save others or not. Most do not believe it is a moral responsibility to sacrifice one life
in order that others may go on. If you push someone in the way to save others, you may
Chapter 1 Discussion Questions
Suggested Discussion and Solutions
1. A common ethical dilemma used to distinguish between philosophical reasoning
methods is the following. Imagine that you are standing on a footbridge spanning
some trolley tracks. You see that a runaway trolley is threatening to kill five people.
Standing next to you, in between the oncoming trolley and the five people, is a
railway worker wearing a large backpack. You quickly realize that the only way to
save the people is to push the man off the bridge and onto the tracks below. The
man will die, but the bulk of his body and the pack will stop the trolley from
reaching the others. (You quickly understand that you can’t jump yourself because
you aren’t large enough to stop the trolley, and there’s no time to put on the man’s
backpack.) Legal concerns aside, would it be ethical for you to save the five people
by pushing this stranger to his death? Use the deontological and teleological
methods to reason out what you would do and why.
Is it Ethical to Save Five People at the Expense of One?
Lessons from the Talmud
The Trolley Problem is a thought experiment in ethics, first introduced by Philippa Foot
in 1967. Others have also extensively analyzed the problem including Judith Jarvis
Thomason, Peter Unger, and Frances Kamm as recently as 1996. The authors used these
problems in ethics class to challenge students’ moral intuition.
The choice is between saving five lives at the cost of taking one life. Before we get to the
“answers,” we want to explain how one researcher is using MRI technology to map brain
response while analyzing the dilemma. Joshua Greene at Harvard University was more
concerned to understand why we have the intuitions, so he used functional Magnetic
Resonance Imaging, or fMRI, to examine what happens in people’s brains when they
make these moral judgments.
Greene found that people asked to make a moral judgment about “personal” violations,
like pushing the stranger off the footbridge, showed increased activity in areas of the
brain associated with the emotions. This was not the case with people asked to make
judgments about relatively “impersonal” violations like throwing a switch. Moreover, the
minority of subjects who did consider that it would be right to push the stranger off the
footbridge took longer to reach this judgment than those who said that doing so would be
wrong. Interesting results to say the least.
Many do not believe it to be ethical to intentionally end someone else's life whether it is
to save others or not. Most do not believe it is a moral responsibility to sacrifice one life
in order that others may go on. If you push someone in the way to save others, you may
Ethical Obligations and Decision Making in Accounting, 4/e 1
Chapter 1 Discussion Questions
Suggested Discussion and Solutions
1. A common ethical dilemma used to distinguish between philosophical reasoning
methods is the following. Imagine that you are standing on a footbridge spanning
some trolley tracks. You see that a runaway trolley is threatening to kill five people.
Standing next to you, in between the oncoming trolley and the five people, is a
railway worker wearing a large backpack. You quickly realize that the only way to
save the people is to push the man off the bridge and onto the tracks below. The
man will die, but the bulk of his body and the pack will stop the trolley from
reaching the others. (You quickly understand that you can’t jump yourself because
you aren’t large enough to stop the trolley, and there’s no time to put on the man’s
backpack.) Legal concerns aside, would it be ethical for you to save the five people
by pushing this stranger to his death? Use the deontological and teleological
methods to reason out what you would do and why.
Is it Ethical to Save Five People at the Expense of One?
Lessons from the Talmud
The Trolley Problem is a thought experiment in ethics, first introduced by Philippa Foot
in 1967. Others have also extensively analyzed the problem including Judith Jarvis
Thomason, Peter Unger, and Frances Kamm as recently as 1996. The authors used these
problems in ethics class to challenge students’ moral intuition.
The choice is between saving five lives at the cost of taking one life. Before we get to the
“answers,” we want to explain how one researcher is using MRI technology to map brain
response while analyzing the dilemma. Joshua Greene at Harvard University was more
concerned to understand why we have the intuitions, so he used functional Magnetic
Resonance Imaging, or fMRI, to examine what happens in people’s brains when they
make these moral judgments.
Greene found that people asked to make a moral judgment about “personal” violations,
like pushing the stranger off the footbridge, showed increased activity in areas of the
brain associated with the emotions. This was not the case with people asked to make
judgments about relatively “impersonal” violations like throwing a switch. Moreover, the
minority of subjects who did consider that it would be right to push the stranger off the
footbridge took longer to reach this judgment than those who said that doing so would be
wrong. Interesting results to say the least.
Many do not believe it to be ethical to intentionally end someone else's life whether it is
to save others or not. Most do not believe it is a moral responsibility to sacrifice one life
in order that others may go on. If you push someone in the way to save others, you may
Chapter 1 Discussion Questions
Suggested Discussion and Solutions
1. A common ethical dilemma used to distinguish between philosophical reasoning
methods is the following. Imagine that you are standing on a footbridge spanning
some trolley tracks. You see that a runaway trolley is threatening to kill five people.
Standing next to you, in between the oncoming trolley and the five people, is a
railway worker wearing a large backpack. You quickly realize that the only way to
save the people is to push the man off the bridge and onto the tracks below. The
man will die, but the bulk of his body and the pack will stop the trolley from
reaching the others. (You quickly understand that you can’t jump yourself because
you aren’t large enough to stop the trolley, and there’s no time to put on the man’s
backpack.) Legal concerns aside, would it be ethical for you to save the five people
by pushing this stranger to his death? Use the deontological and teleological
methods to reason out what you would do and why.
Is it Ethical to Save Five People at the Expense of One?
Lessons from the Talmud
The Trolley Problem is a thought experiment in ethics, first introduced by Philippa Foot
in 1967. Others have also extensively analyzed the problem including Judith Jarvis
Thomason, Peter Unger, and Frances Kamm as recently as 1996. The authors used these
problems in ethics class to challenge students’ moral intuition.
The choice is between saving five lives at the cost of taking one life. Before we get to the
“answers,” we want to explain how one researcher is using MRI technology to map brain
response while analyzing the dilemma. Joshua Greene at Harvard University was more
concerned to understand why we have the intuitions, so he used functional Magnetic
Resonance Imaging, or fMRI, to examine what happens in people’s brains when they
make these moral judgments.
Greene found that people asked to make a moral judgment about “personal” violations,
like pushing the stranger off the footbridge, showed increased activity in areas of the
brain associated with the emotions. This was not the case with people asked to make
judgments about relatively “impersonal” violations like throwing a switch. Moreover, the
minority of subjects who did consider that it would be right to push the stranger off the
footbridge took longer to reach this judgment than those who said that doing so would be
wrong. Interesting results to say the least.
Many do not believe it to be ethical to intentionally end someone else's life whether it is
to save others or not. Most do not believe it is a moral responsibility to sacrifice one life
in order that others may go on. If you push someone in the way to save others, you may
Ethical Obligations and Decision Making in Accounting, 4/e 2
as well say you killed a man. How could you forgive yourself? The man has a family and
people who love him, so how could you explain your actions to his family?
We have no right to sacrifice the life of one person to save others. There is a saying from
the Talmud, an authoritative record of rabbinic discussions on Jewish law, Jewish ethics,
customs, legends and stories: “Whoever destroys a soul, it is considered as if he
destroyed an entire world. And whoever saves a life, it is considered as if he saved an
entire world.”
We have no right to decide who lives and who dies. Yes, if we can save one person
without harming others we have a moral obligation to do so. However, to save one life
while sacrificing others is an arbitrary act in many ways. What if the one sacrificed is a
humanitarian, well-respected and well-known person who works tirelessly for the poor
and others who can’t help themselves? What if those saved are criminals who committed
murder and escaped from prison. You see the dilemma? Who are we to judge who is a
good person, and be saved, and who is a bad person? We should focus on leading the best
possible life we can; to serve others whether through medicine, the clergy, the law, a
teacher, nurse, or first-responder.
Utilitarianism might be used to rationalize saving the life of five people by sacrificing
one person’s life. We could say that more people benefit than are harmed by taking that
action. This is consistent with act utilitarianism. On the other hand, a rule utilitarianism
approach would posit that certain rules should never be violated in the name of
maximizing net benefits. One rule is that it is wrong to take a life of another. Thus, rule
utilitarianism is a modifying force on the literal application of act utilitarianism.
2. Another ethical dilemma deals with a runaway trolley heading for five railway
workers who will be killed if it proceeds on its present course. The only way to save
these people is to hit a switch that will turn the trolley onto a side track, where it will
run over and kill one worker instead of five. Ignoring legal concerns, would it be
ethically acceptable for you to turn the trolley by hitting the switch in order to save
five people at the expense of one person? Use the deontological and teleological
methods to reason out what you would do and why.
Again, like above in number 1 you should not intentionally take a life, but if your
intentions were to save four people at the sacrifice of one life, and if you were unaware of
the damage it would do to the sole man, then you acted out of goodwill and that is more
admirable. We can envision a cost-benefit analysis of the ethical dilemma that supports
saving four lives at the expense of a fifth person. On the other hand, all of those people
have a right to live and no one has the right to decide who lives and who dies.
3. 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 MacIntrye said, “the wholeness of a human life”?
as well say you killed a man. How could you forgive yourself? The man has a family and
people who love him, so how could you explain your actions to his family?
We have no right to sacrifice the life of one person to save others. There is a saying from
the Talmud, an authoritative record of rabbinic discussions on Jewish law, Jewish ethics,
customs, legends and stories: “Whoever destroys a soul, it is considered as if he
destroyed an entire world. And whoever saves a life, it is considered as if he saved an
entire world.”
We have no right to decide who lives and who dies. Yes, if we can save one person
without harming others we have a moral obligation to do so. However, to save one life
while sacrificing others is an arbitrary act in many ways. What if the one sacrificed is a
humanitarian, well-respected and well-known person who works tirelessly for the poor
and others who can’t help themselves? What if those saved are criminals who committed
murder and escaped from prison. You see the dilemma? Who are we to judge who is a
good person, and be saved, and who is a bad person? We should focus on leading the best
possible life we can; to serve others whether through medicine, the clergy, the law, a
teacher, nurse, or first-responder.
Utilitarianism might be used to rationalize saving the life of five people by sacrificing
one person’s life. We could say that more people benefit than are harmed by taking that
action. This is consistent with act utilitarianism. On the other hand, a rule utilitarianism
approach would posit that certain rules should never be violated in the name of
maximizing net benefits. One rule is that it is wrong to take a life of another. Thus, rule
utilitarianism is a modifying force on the literal application of act utilitarianism.
2. Another ethical dilemma deals with a runaway trolley heading for five railway
workers who will be killed if it proceeds on its present course. The only way to save
these people is to hit a switch that will turn the trolley onto a side track, where it will
run over and kill one worker instead of five. Ignoring legal concerns, would it be
ethically acceptable for you to turn the trolley by hitting the switch in order to save
five people at the expense of one person? Use the deontological and teleological
methods to reason out what you would do and why.
Again, like above in number 1 you should not intentionally take a life, but if your
intentions were to save four people at the sacrifice of one life, and if you were unaware of
the damage it would do to the sole man, then you acted out of goodwill and that is more
admirable. We can envision a cost-benefit analysis of the ethical dilemma that supports
saving four lives at the expense of a fifth person. On the other hand, all of those people
have a right to live and no one has the right to decide who lives and who dies.
3. 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 MacIntrye said, “the wholeness of a human life”?
Ethical Obligations and Decision Making in Accounting, 4/e 2
as well say you killed a man. How could you forgive yourself? The man has a family and
people who love him, so how could you explain your actions to his family?
We have no right to sacrifice the life of one person to save others. There is a saying from
the Talmud, an authoritative record of rabbinic discussions on Jewish law, Jewish ethics,
customs, legends and stories: “Whoever destroys a soul, it is considered as if he
destroyed an entire world. And whoever saves a life, it is considered as if he saved an
entire world.”
We have no right to decide who lives and who dies. Yes, if we can save one person
without harming others we have a moral obligation to do so. However, to save one life
while sacrificing others is an arbitrary act in many ways. What if the one sacrificed is a
humanitarian, well-respected and well-known person who works tirelessly for the poor
and others who can’t help themselves? What if those saved are criminals who committed
murder and escaped from prison. You see the dilemma? Who are we to judge who is a
good person, and be saved, and who is a bad person? We should focus on leading the best
possible life we can; to serve others whether through medicine, the clergy, the law, a
teacher, nurse, or first-responder.
Utilitarianism might be used to rationalize saving the life of five people by sacrificing
one person’s life. We could say that more people benefit than are harmed by taking that
action. This is consistent with act utilitarianism. On the other hand, a rule utilitarianism
approach would posit that certain rules should never be violated in the name of
maximizing net benefits. One rule is that it is wrong to take a life of another. Thus, rule
utilitarianism is a modifying force on the literal application of act utilitarianism.
2. Another ethical dilemma deals with a runaway trolley heading for five railway
workers who will be killed if it proceeds on its present course. The only way to save
these people is to hit a switch that will turn the trolley onto a side track, where it will
run over and kill one worker instead of five. Ignoring legal concerns, would it be
ethically acceptable for you to turn the trolley by hitting the switch in order to save
five people at the expense of one person? Use the deontological and teleological
methods to reason out what you would do and why.
Again, like above in number 1 you should not intentionally take a life, but if your
intentions were to save four people at the sacrifice of one life, and if you were unaware of
the damage it would do to the sole man, then you acted out of goodwill and that is more
admirable. We can envision a cost-benefit analysis of the ethical dilemma that supports
saving four lives at the expense of a fifth person. On the other hand, all of those people
have a right to live and no one has the right to decide who lives and who dies.
3. 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 MacIntrye said, “the wholeness of a human life”?
as well say you killed a man. How could you forgive yourself? The man has a family and
people who love him, so how could you explain your actions to his family?
We have no right to sacrifice the life of one person to save others. There is a saying from
the Talmud, an authoritative record of rabbinic discussions on Jewish law, Jewish ethics,
customs, legends and stories: “Whoever destroys a soul, it is considered as if he
destroyed an entire world. And whoever saves a life, it is considered as if he saved an
entire world.”
We have no right to decide who lives and who dies. Yes, if we can save one person
without harming others we have a moral obligation to do so. However, to save one life
while sacrificing others is an arbitrary act in many ways. What if the one sacrificed is a
humanitarian, well-respected and well-known person who works tirelessly for the poor
and others who can’t help themselves? What if those saved are criminals who committed
murder and escaped from prison. You see the dilemma? Who are we to judge who is a
good person, and be saved, and who is a bad person? We should focus on leading the best
possible life we can; to serve others whether through medicine, the clergy, the law, a
teacher, nurse, or first-responder.
Utilitarianism might be used to rationalize saving the life of five people by sacrificing
one person’s life. We could say that more people benefit than are harmed by taking that
action. This is consistent with act utilitarianism. On the other hand, a rule utilitarianism
approach would posit that certain rules should never be violated in the name of
maximizing net benefits. One rule is that it is wrong to take a life of another. Thus, rule
utilitarianism is a modifying force on the literal application of act utilitarianism.
2. Another ethical dilemma deals with a runaway trolley heading for five railway
workers who will be killed if it proceeds on its present course. The only way to save
these people is to hit a switch that will turn the trolley onto a side track, where it will
run over and kill one worker instead of five. Ignoring legal concerns, would it be
ethically acceptable for you to turn the trolley by hitting the switch in order to save
five people at the expense of one person? Use the deontological and teleological
methods to reason out what you would do and why.
Again, like above in number 1 you should not intentionally take a life, but if your
intentions were to save four people at the sacrifice of one life, and if you were unaware of
the damage it would do to the sole man, then you acted out of goodwill and that is more
admirable. We can envision a cost-benefit analysis of the ethical dilemma that supports
saving four lives at the expense of a fifth person. On the other hand, all of those people
have a right to live and no one has the right to decide who lives and who dies.
3. 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 MacIntrye said, “the wholeness of a human life”?
Ethical Obligations and Decision Making in Accounting, 4/e 3
Integers are whole numbers. This is the base word for integrity. Things with
integrity are the same all the way through, or whole throughout. Thus, integrity
equates with the consistency of one's actions. We must be consistently ethical to
become an ethical person. If we can assume that everyone knows good treatment
of their own interests and everyone knows good choices for their own short run,
integrity might mean applying those same best choices to situations which affect
others or affect the long run of all concerned.
A person of integrity acts with courage, sincerity, and honesty. Integrity
encompasses all the other traits or values of character because it also implies
action. Integrity requires a person to be honest, but to also act on that honesty.
Integrity requires that a person have courage but also to act on that courage.
Integrity requires that people not only have principles and values, they also have
to stand by those principles and values and not bow to pressure thereby foregoing
those principles.
Students often think that integrity is synonymous to honesty. Many dictionaries
even state that honesty is the synonym for integrity and vice versus. Yet, just
because a thief is being honest in one circumstance does not mean that he has
integrity. A thief may admit to stealing only after being caught. We might say it is
an honest act but it lacks integrity because the thief failed to consider the
consequences of his actions on those he stole from or their rights not to be robbed.
Moreover, the thief failed to admit the mistake after being caught; promise not to
do it again; and then act consistently with the integrity standard thereafter. A way
to consider integrity is how consistently honest a person is, not just whether that
person was honest in one circumstance.
2. David Starr Jordan (1851–1931), an educator and writer, said, “Wisdom is
knowing what to do next; virtue is doing it.” Explain the meaning of this
phrase as you see it.
This quote addresses the fact that it is not enough to know what is right or wrong;
one must also act on that knowledge. Knowledge without action would be hollow.
The well-known author Maya Angelou (1928 - 2014) has said that “Courage is
the most important of all the virtues, because without courage you can't practice
any other virtue consistently. You can practice any virtue erratically, but nothing
consistently without courage.”
Ethical dilemmas are situations where deciding what is best requires weighing
ethical arguments between alternatives. Deciding what the best thing to do is
almost always easier than actually doing it. Josephson Institute refers to moral
temptations as a choice which is clear but still unattractive. The ratio of moral
temptation to ethical dilemma might be four to one. Even those of us with the
worst eating and exercise habits seem to know a lot about healthy alternatives.
However, making yourself eat vegetables when you are hungry for chocolate is
difficult and making yourself consistently prefer vegetables to cheeseburgers
Integers are whole numbers. This is the base word for integrity. Things with
integrity are the same all the way through, or whole throughout. Thus, integrity
equates with the consistency of one's actions. We must be consistently ethical to
become an ethical person. If we can assume that everyone knows good treatment
of their own interests and everyone knows good choices for their own short run,
integrity might mean applying those same best choices to situations which affect
others or affect the long run of all concerned.
A person of integrity acts with courage, sincerity, and honesty. Integrity
encompasses all the other traits or values of character because it also implies
action. Integrity requires a person to be honest, but to also act on that honesty.
Integrity requires that a person have courage but also to act on that courage.
Integrity requires that people not only have principles and values, they also have
to stand by those principles and values and not bow to pressure thereby foregoing
those principles.
Students often think that integrity is synonymous to honesty. Many dictionaries
even state that honesty is the synonym for integrity and vice versus. Yet, just
because a thief is being honest in one circumstance does not mean that he has
integrity. A thief may admit to stealing only after being caught. We might say it is
an honest act but it lacks integrity because the thief failed to consider the
consequences of his actions on those he stole from or their rights not to be robbed.
Moreover, the thief failed to admit the mistake after being caught; promise not to
do it again; and then act consistently with the integrity standard thereafter. A way
to consider integrity is how consistently honest a person is, not just whether that
person was honest in one circumstance.
2. David Starr Jordan (1851–1931), an educator and writer, said, “Wisdom is
knowing what to do next; virtue is doing it.” Explain the meaning of this
phrase as you see it.
This quote addresses the fact that it is not enough to know what is right or wrong;
one must also act on that knowledge. Knowledge without action would be hollow.
The well-known author Maya Angelou (1928 - 2014) has said that “Courage is
the most important of all the virtues, because without courage you can't practice
any other virtue consistently. You can practice any virtue erratically, but nothing
consistently without courage.”
Ethical dilemmas are situations where deciding what is best requires weighing
ethical arguments between alternatives. Deciding what the best thing to do is
almost always easier than actually doing it. Josephson Institute refers to moral
temptations as a choice which is clear but still unattractive. The ratio of moral
temptation to ethical dilemma might be four to one. Even those of us with the
worst eating and exercise habits seem to know a lot about healthy alternatives.
However, making yourself eat vegetables when you are hungry for chocolate is
difficult and making yourself consistently prefer vegetables to cheeseburgers
Ethical Obligations and Decision Making in Accounting, 4/e 4
might require something beyond our abilities. Wisdom is mostly knowledge but
virtue is mostly desire, and habit.
4.
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?
Acting selfishly and in your own self-interest are not the same thing. Normally,
acting selfishly is only being concerned with self, not others, and being very short
sighted; it is being concerned with immediate gratification of some sort. Acting in
one’s best interest may also mean acting in the best interest of all involved. For
instance, I can turn up the television loud while I study because that is what I like,
who cares if it is bothering my roommate or anyone else. Or, I have the television
at a moderate volume so as not to disturb my roommate or anyone else. Or, I
could use earphones so my roommate is not disturbed at all. I do this in hopes that
I am not disturbed by loud volumes at 3 am while I’m trying to sleep and my
roommate is coming in from a job. In the former case I am acting selfishly and in
the other I am acting in my self-interest while considering others. In short, acting
in my self-interest may be to act selfishly but only after I have considered how my
actions affect others and weigh it in my decision.
2. Do you think “enlightened self-interest” is a contradiction in terms, or is it a
valid basis for all actions? Evaluate whether our laissez-faire, free-market
economic system does (or should) operate under this philosophy.
“Enlightened self-interest” may seem like a contradiction in terms. Nevertheless,
an individual has to be “enlightened” to consider the long term effects of a choice
upon self, others, and the whole of humanity. For example, an individual may
want the road near his house to be free of litter out of self-interest (resale value,
dislike of clutter and untidiness, etc.), but can extend that desire to wanting all the
roads of a neighborhood or city to be free of litter for the good of the community.
In fact, long term self-interest requires that an individual consider others, since an
individual does not live in a vacuum without interaction with others. A person
who uses enlightened self-interest as a basis for ethical actions hopes others will
consider her interests when making a decision that affects that person. A totally
selfish person will probably face negative consequences from others.
The doctrine of laissez-faire, a free market system is based upon the belief that
economies should not be encumbered by regulation; an economy works best with
enlightened self-interest, competition, and the laws of supply and demand. Adam
Smith used the term “invisible hand” to describe how enlightened self-interest,
competition, and supply and demand worked to self-regulate markets without
needing government intrusion. The 2007-2008 financial crisis has raised questions
as to whether the invisible hand works. There were many cases during the crisis
where enlightened self-interest gave way to greed and egoism. Such cases have
raised cries for new/stricter regulations of the free markets. Although competition
might require something beyond our abilities. Wisdom is mostly knowledge but
virtue is mostly desire, and habit.
4.
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?
Acting selfishly and in your own self-interest are not the same thing. Normally,
acting selfishly is only being concerned with self, not others, and being very short
sighted; it is being concerned with immediate gratification of some sort. Acting in
one’s best interest may also mean acting in the best interest of all involved. For
instance, I can turn up the television loud while I study because that is what I like,
who cares if it is bothering my roommate or anyone else. Or, I have the television
at a moderate volume so as not to disturb my roommate or anyone else. Or, I
could use earphones so my roommate is not disturbed at all. I do this in hopes that
I am not disturbed by loud volumes at 3 am while I’m trying to sleep and my
roommate is coming in from a job. In the former case I am acting selfishly and in
the other I am acting in my self-interest while considering others. In short, acting
in my self-interest may be to act selfishly but only after I have considered how my
actions affect others and weigh it in my decision.
2. Do you think “enlightened self-interest” is a contradiction in terms, or is it a
valid basis for all actions? Evaluate whether our laissez-faire, free-market
economic system does (or should) operate under this philosophy.
“Enlightened self-interest” may seem like a contradiction in terms. Nevertheless,
an individual has to be “enlightened” to consider the long term effects of a choice
upon self, others, and the whole of humanity. For example, an individual may
want the road near his house to be free of litter out of self-interest (resale value,
dislike of clutter and untidiness, etc.), but can extend that desire to wanting all the
roads of a neighborhood or city to be free of litter for the good of the community.
In fact, long term self-interest requires that an individual consider others, since an
individual does not live in a vacuum without interaction with others. A person
who uses enlightened self-interest as a basis for ethical actions hopes others will
consider her interests when making a decision that affects that person. A totally
selfish person will probably face negative consequences from others.
The doctrine of laissez-faire, a free market system is based upon the belief that
economies should not be encumbered by regulation; an economy works best with
enlightened self-interest, competition, and the laws of supply and demand. Adam
Smith used the term “invisible hand” to describe how enlightened self-interest,
competition, and supply and demand worked to self-regulate markets without
needing government intrusion. The 2007-2008 financial crisis has raised questions
as to whether the invisible hand works. There were many cases during the crisis
where enlightened self-interest gave way to greed and egoism. Such cases have
raised cries for new/stricter regulations of the free markets. Although competition
Ethical Obligations and Decision Making in Accounting, 4/e 5
and, sometimes, supply and demand can be regulated, can self-interest, egoism or
greed really be regulated? If those could be regulated, then regulations alone
could create and protect a moral economy.
5. 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 Central Intelligence Agency (CIA). On November 9, 2012, Petraeus
resigned from the CIA after it was announced he had an extramarital affair with a
biographer, Paula Broadwell, who wrote a glowing book about his life. Petraeus
acknowledged that he exercised poor judgment by engaging in the affair. When
Federal Bureau of Investigation (FBI) agents investigated the matter because of
concerns there may have been security leaks, they discovered a substantial number
of classified documents on her computer. Broadwell told investigators that she
ended up with the secret military documents after taking them from a government
building. No security leaks had been found. In accepting Petraeus’s resignation,
President Obama praised Petraeus’s leadership during the Iraq and Afghanistan
wars and said: “By any measure, through his lifetime of service, David Petraeus has
made our country safer and stronger.” Should our evaluation of Petraeus’s lifetime
of hard work and Petraeus’s success in his career be tainted by one act having
nothing to do with job performance?
Although at first glance adultery had nothing to do with Petraeus’ job, an officer in the
military is subject to the Uniform Code of Military Justice (UCMJ). Under article 133 an
officer can be court-martialed for conduct unbecoming to an officer and a gentleman.
Article 134-2 identifies adultery as an act unbecoming to an officer and a gentleman. The
timing of the affair between Broadwell and Petraeus is not known, but many have opined
that had the affair been during his time as general he would have been subject to court-
martial and possibly dishonorably discharged from the Army.
Conduct unbecoming to an officer and a gentleman is premised upon the fact that leaders
cannot be seen as willing to violate their own rules, principles and those of the
organizations they represent.
Under the Six Pillars of Character, Petraeus violated the pillar of trustworthiness. Leaders
cannot enforce rules that they violate, and they cannot maintain trust by showing that
they are willing —as in adultery—to betray others to whom they have promised fidelity.
And when a leader breaks the rules of his own organization, the message sent throughout
the organization is that breaking rules is really OK. Lying is fine. Integrity doesn’t
matter. Once that cultural norm is inflicted on an organization by its leader, the
organization itself will become dysfunctional, untrustworthy and corrupt. A leader must
be trusted to mean what he says, and to act according to the stated rules of the
organization he leads.
A similar situation is the Lance Armstrong affair where he repeatedly lied about not using
performance enhancing drugs. His good reputation was tarnished by this act and a
and, sometimes, supply and demand can be regulated, can self-interest, egoism or
greed really be regulated? If those could be regulated, then regulations alone
could create and protect a moral economy.
5. 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 Central Intelligence Agency (CIA). On November 9, 2012, Petraeus
resigned from the CIA after it was announced he had an extramarital affair with a
biographer, Paula Broadwell, who wrote a glowing book about his life. Petraeus
acknowledged that he exercised poor judgment by engaging in the affair. When
Federal Bureau of Investigation (FBI) agents investigated the matter because of
concerns there may have been security leaks, they discovered a substantial number
of classified documents on her computer. Broadwell told investigators that she
ended up with the secret military documents after taking them from a government
building. No security leaks had been found. In accepting Petraeus’s resignation,
President Obama praised Petraeus’s leadership during the Iraq and Afghanistan
wars and said: “By any measure, through his lifetime of service, David Petraeus has
made our country safer and stronger.” Should our evaluation of Petraeus’s lifetime
of hard work and Petraeus’s success in his career be tainted by one act having
nothing to do with job performance?
Although at first glance adultery had nothing to do with Petraeus’ job, an officer in the
military is subject to the Uniform Code of Military Justice (UCMJ). Under article 133 an
officer can be court-martialed for conduct unbecoming to an officer and a gentleman.
Article 134-2 identifies adultery as an act unbecoming to an officer and a gentleman. The
timing of the affair between Broadwell and Petraeus is not known, but many have opined
that had the affair been during his time as general he would have been subject to court-
martial and possibly dishonorably discharged from the Army.
Conduct unbecoming to an officer and a gentleman is premised upon the fact that leaders
cannot be seen as willing to violate their own rules, principles and those of the
organizations they represent.
Under the Six Pillars of Character, Petraeus violated the pillar of trustworthiness. Leaders
cannot enforce rules that they violate, and they cannot maintain trust by showing that
they are willing —as in adultery—to betray others to whom they have promised fidelity.
And when a leader breaks the rules of his own organization, the message sent throughout
the organization is that breaking rules is really OK. Lying is fine. Integrity doesn’t
matter. Once that cultural norm is inflicted on an organization by its leader, the
organization itself will become dysfunctional, untrustworthy and corrupt. A leader must
be trusted to mean what he says, and to act according to the stated rules of the
organization he leads.
A similar situation is the Lance Armstrong affair where he repeatedly lied about not using
performance enhancing drugs. His good reputation was tarnished by this act and a
Loading page 6...
Ethical Obligations and Decision Making in Accounting, 4/e 6
lifetime of being a role model and doing good works through his Live Strong
organization went down the tubes. The Joe Paterno situation is another such case.
Remind students that it takes a long time to build a reputation for trust but not very long
to lose it.
Update: In April 2015, former CIA director and retired general David Petraeus pleaded
guilty to a misdemeanor charge of handing over classified information to his mistress and
biographer, Paula Broadwell. He was sentenced to two years’ probation and a $100,000
fine. Petraeus had passed on several 5-by-8 inch black notebooks containing classified
information to Broadwell. Despite his conviction, the former general remains a trusted
adviser to the White House on its strategy in Iraq.
Students might enjoy discussing the similarities between Petraeus and Hillary Clinton in
the use of her personal email server for state department business. There is concern about
the proper classification of material sent, both at the time of sending it and in hind sight.
When personal servers are used, the determination of classification can, after the fact,
render top secret information more vulnerable to outside influences and cause more harm
than if the security systems protecting the state department computer systems were at
play. Do the policies and criteria for handling of classified materials need to be changed
in the current environment of communications devices?
6. 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
rude right back?
Having a right to do something allows one to be concerned with one’s self interest only
(egoism). Doing the right thing often requires one to consider others besides and before
one’s self (at a minimum enlightened egoism, but also utilitarianism, deontology, justice,
and virtues). An example is shouting there is a fire in a crowded movie theater. We have
the right to do so but it is not the right thing to do.
Rudeness begets more rudeness and eventually breaks down civility. People start to be
taken for granted and not treated as individuals who should be respected absent some
reason not to do so. Students sometimes treat instructors rudely by continuing to talk after
the instructor attempts to begin her lecture. Ask students how they would feel if you, as
the instructor, engage in a conversation with a student in class while observing a final
oral presentation of another student. Would it disrupt the flow of what that student wants
to say? Will he lose his train of thought?
7. 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 possibility of severe health problems for young children from continued use of
the body mass enhancer now and in the future. Mark McGwire, who broke Roger
Maris’s 60-home-run record, initially denied using steroids. He has never come close
lifetime of being a role model and doing good works through his Live Strong
organization went down the tubes. The Joe Paterno situation is another such case.
Remind students that it takes a long time to build a reputation for trust but not very long
to lose it.
Update: In April 2015, former CIA director and retired general David Petraeus pleaded
guilty to a misdemeanor charge of handing over classified information to his mistress and
biographer, Paula Broadwell. He was sentenced to two years’ probation and a $100,000
fine. Petraeus had passed on several 5-by-8 inch black notebooks containing classified
information to Broadwell. Despite his conviction, the former general remains a trusted
adviser to the White House on its strategy in Iraq.
Students might enjoy discussing the similarities between Petraeus and Hillary Clinton in
the use of her personal email server for state department business. There is concern about
the proper classification of material sent, both at the time of sending it and in hind sight.
When personal servers are used, the determination of classification can, after the fact,
render top secret information more vulnerable to outside influences and cause more harm
than if the security systems protecting the state department computer systems were at
play. Do the policies and criteria for handling of classified materials need to be changed
in the current environment of communications devices?
6. 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
rude right back?
Having a right to do something allows one to be concerned with one’s self interest only
(egoism). Doing the right thing often requires one to consider others besides and before
one’s self (at a minimum enlightened egoism, but also utilitarianism, deontology, justice,
and virtues). An example is shouting there is a fire in a crowded movie theater. We have
the right to do so but it is not the right thing to do.
Rudeness begets more rudeness and eventually breaks down civility. People start to be
taken for granted and not treated as individuals who should be respected absent some
reason not to do so. Students sometimes treat instructors rudely by continuing to talk after
the instructor attempts to begin her lecture. Ask students how they would feel if you, as
the instructor, engage in a conversation with a student in class while observing a final
oral presentation of another student. Would it disrupt the flow of what that student wants
to say? Will he lose his train of thought?
7. 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 possibility of severe health problems for young children from continued use of
the body mass enhancer now and in the future. Mark McGwire, who broke Roger
Maris’s 60-home-run record, initially denied using steroids. He has never come close
Loading page 7...
Ethical Obligations and Decision Making in Accounting, 4/e 7
to the 75 percent positive vote to be in the Hall of Fame. Unfortunately for
McGwire, his approval rating has been declining each year since he received 23.7
percent of the vote in 2010 and only 10 percent of the sportscasters voted in 2015 to
elect him into the Hall. Some believe that Barry Bonds and Roger Clemens, who
were the best at what they did, should be listed in the record books with an asterisk
after their names and an explanation that their records were established at a time
when baseball productivity might have been positively affected by the use of
steroids. Some even believe they should be denied entrance to the baseball Hall of
Fame altogether. The results for Bonds (36.8 percent) and Clemens (37.5 percent) in
their third year of eligibility (2015) were not close to meeting the 75 percent
requirement, and that led some to question whether these superstars would ever be
voted into the Hall. Evaluate whether Bonds and Clemens should be elected to the
Hall of Fame from a situational ethics point of view.
Using steroids is cheating. What theories would support cheating? Virtue ethics
emphasizes that doing the right thing should become a habit. Deontology would
emphasize the duty of doing the right thing. Fairness would emphasize equals competing
against one another on a level playing field. When athletes compete against one other,
each one should have the same advantages and disadvantages. Another concern with
steroids is safety. If competition is pressuring some individuals to do dangerous things,
agreeing about what everyone will not do protects all from that pressure.
Steroids might increase speed and strength if well administered and athletes could make a
case that if every baseball player had access to them competition would be equalized;
similar to giving every one access to good shoes or the weight room. There are two
dangerous issues to consider. A steroid-using batter facing an equally enhanced pitcher
might seem fair, and steroid-using Yankees against steroid-using Red Sox might seem
fair, but faster pitching hit by stronger hitters might create a danger to spectators and
players.
Underneath an almost cult like reverence for athletes is the celebration of sporting,
unearned luck of birth talent, healthy respect for the virtues of diligence, courage,
dedication, discipline, and sometimes teamwork. Baseball is different from some other
sports in that until very recently, it looked like a sport anyone could play. Baseball looks
like a fair game in that short guys, fat guys, skinny guys, and athletic looking guys all got
to play. In ordinary life, we are not all born with talent and not all born with inherited
resources but we all can be diligent, brave, honest, and fair.
Students may argue that cheating has become part of our culture so why should sports be
any different. They may argue this point using ethical relativism. A useful response is
that if everyone were allowed to use steroids, where would it stop? What about 'corked
bats.' What about 'juiced up' baseball balls to allow for more home runs? What about
pitchers throwing 'spit balls'? All of these things have happened over time and steroid use
is just the choice method of cheating in today's sports society, or so the student argument
may go. The problem is ethical relativism allows each person to decide for herself what is
right or wrong, a clear violation of the universality perspective in Rights Theory.
to the 75 percent positive vote to be in the Hall of Fame. Unfortunately for
McGwire, his approval rating has been declining each year since he received 23.7
percent of the vote in 2010 and only 10 percent of the sportscasters voted in 2015 to
elect him into the Hall. Some believe that Barry Bonds and Roger Clemens, who
were the best at what they did, should be listed in the record books with an asterisk
after their names and an explanation that their records were established at a time
when baseball productivity might have been positively affected by the use of
steroids. Some even believe they should be denied entrance to the baseball Hall of
Fame altogether. The results for Bonds (36.8 percent) and Clemens (37.5 percent) in
their third year of eligibility (2015) were not close to meeting the 75 percent
requirement, and that led some to question whether these superstars would ever be
voted into the Hall. Evaluate whether Bonds and Clemens should be elected to the
Hall of Fame from a situational ethics point of view.
Using steroids is cheating. What theories would support cheating? Virtue ethics
emphasizes that doing the right thing should become a habit. Deontology would
emphasize the duty of doing the right thing. Fairness would emphasize equals competing
against one another on a level playing field. When athletes compete against one other,
each one should have the same advantages and disadvantages. Another concern with
steroids is safety. If competition is pressuring some individuals to do dangerous things,
agreeing about what everyone will not do protects all from that pressure.
Steroids might increase speed and strength if well administered and athletes could make a
case that if every baseball player had access to them competition would be equalized;
similar to giving every one access to good shoes or the weight room. There are two
dangerous issues to consider. A steroid-using batter facing an equally enhanced pitcher
might seem fair, and steroid-using Yankees against steroid-using Red Sox might seem
fair, but faster pitching hit by stronger hitters might create a danger to spectators and
players.
Underneath an almost cult like reverence for athletes is the celebration of sporting,
unearned luck of birth talent, healthy respect for the virtues of diligence, courage,
dedication, discipline, and sometimes teamwork. Baseball is different from some other
sports in that until very recently, it looked like a sport anyone could play. Baseball looks
like a fair game in that short guys, fat guys, skinny guys, and athletic looking guys all got
to play. In ordinary life, we are not all born with talent and not all born with inherited
resources but we all can be diligent, brave, honest, and fair.
Students may argue that cheating has become part of our culture so why should sports be
any different. They may argue this point using ethical relativism. A useful response is
that if everyone were allowed to use steroids, where would it stop? What about 'corked
bats.' What about 'juiced up' baseball balls to allow for more home runs? What about
pitchers throwing 'spit balls'? All of these things have happened over time and steroid use
is just the choice method of cheating in today's sports society, or so the student argument
may go. The problem is ethical relativism allows each person to decide for herself what is
right or wrong, a clear violation of the universality perspective in Rights Theory.
Loading page 8...
Ethical Obligations and Decision Making in Accounting, 4/e 8
It is worth mentioning that the players elected to the Hall of Fame in 2015 all had twice
the approval rate as Bonds and Clemens as follows: Randy Johnson (97.3%); Pedro
Martinez (91.1%); John Smoltz (82.9%); and Craig Biggio (82.7%).
8. 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
good ethics, and it doesn’t matter where you live and work. Your friend tells you
that in her country it is common to pay bribes to gain favor with important people.
Comment on both positions from a relativistic ethics point of view. What do you
believe and why?
The basic moral principles of respect, fairness and kindness are timeless and worldwide;
although different circumstances can affect how they are implemented. There have to be
certain ways of treating people that almost always hurt and are almost always wrong; you
might mention a few obvious ones, like robbery, rape, and murder. Likewise, there are
cultural practices of great importance without moral significance. An example is which
side of the road you drive on. Left and right sides might be morally equal, but once
everyone promises to drive on the left side, the wrong side becomes promise-breaking
and deadly. Playing “football” in any country besides the United States implies a promise
not to use one’s hands, and doing so would be considered cheating. Touching the ball and
thereby breaking the rules might ruin the game, but is not often a life and death betrayal.
In many countries, restaurant staffs are not tipped, in other countries, nearly everyone tips
the same percent and in some places how much you tip is influenced by how well you are
treated. A lot, but not all of cultural morality differences are unwritten rules and
expectations that seem fair if applied to and by everyone. Arbitrary choices become
moral obligations when other peoples’ well-being depends on keeping promises to follow
those choices. Some cultural differences in morality have to do with beliefs more than
differences in ethical reasoning. In some places, people are accorded better treatment
according to their sex, age, race, wealth, or status. This mixes personal traits which are
earned with traits that unearned or due to birth. If you believe wealth and power are
earned, then their privileges seem fair, but if you believe children do not choose or earn
their parents, then those very same privileges are unfair and discriminatory.
Hofstede's cultural variables might be discussed here. In countries with a low score on
Individualism, it might be argued that cheating is ethical because it brings benefits to the
entire society or work group. This is the argument sometimes used in some countries
where software piracy is tolerated and even encouraged.
Paying bribes is a way of conducting business in some countries. In others it is
considered unethical. In the U.S., small amounts of bribes that are made to induce a
person to do what they should be doing anyway by virtue of their position is known as a
facilitating (“grease” payment) and legal. On the other hand, bribing someone to do
something they are under no obligation to do is wrong and unethical. It does not mean
one country is good while the other is bad. The key question is should a U.S. company do
business in a country with a culture where grease payments are a way of life and bribery
It is worth mentioning that the players elected to the Hall of Fame in 2015 all had twice
the approval rate as Bonds and Clemens as follows: Randy Johnson (97.3%); Pedro
Martinez (91.1%); John Smoltz (82.9%); and Craig Biggio (82.7%).
8. 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
good ethics, and it doesn’t matter where you live and work. Your friend tells you
that in her country it is common to pay bribes to gain favor with important people.
Comment on both positions from a relativistic ethics point of view. What do you
believe and why?
The basic moral principles of respect, fairness and kindness are timeless and worldwide;
although different circumstances can affect how they are implemented. There have to be
certain ways of treating people that almost always hurt and are almost always wrong; you
might mention a few obvious ones, like robbery, rape, and murder. Likewise, there are
cultural practices of great importance without moral significance. An example is which
side of the road you drive on. Left and right sides might be morally equal, but once
everyone promises to drive on the left side, the wrong side becomes promise-breaking
and deadly. Playing “football” in any country besides the United States implies a promise
not to use one’s hands, and doing so would be considered cheating. Touching the ball and
thereby breaking the rules might ruin the game, but is not often a life and death betrayal.
In many countries, restaurant staffs are not tipped, in other countries, nearly everyone tips
the same percent and in some places how much you tip is influenced by how well you are
treated. A lot, but not all of cultural morality differences are unwritten rules and
expectations that seem fair if applied to and by everyone. Arbitrary choices become
moral obligations when other peoples’ well-being depends on keeping promises to follow
those choices. Some cultural differences in morality have to do with beliefs more than
differences in ethical reasoning. In some places, people are accorded better treatment
according to their sex, age, race, wealth, or status. This mixes personal traits which are
earned with traits that unearned or due to birth. If you believe wealth and power are
earned, then their privileges seem fair, but if you believe children do not choose or earn
their parents, then those very same privileges are unfair and discriminatory.
Hofstede's cultural variables might be discussed here. In countries with a low score on
Individualism, it might be argued that cheating is ethical because it brings benefits to the
entire society or work group. This is the argument sometimes used in some countries
where software piracy is tolerated and even encouraged.
Paying bribes is a way of conducting business in some countries. In others it is
considered unethical. In the U.S., small amounts of bribes that are made to induce a
person to do what they should be doing anyway by virtue of their position is known as a
facilitating (“grease” payment) and legal. On the other hand, bribing someone to do
something they are under no obligation to do is wrong and unethical. It does not mean
one country is good while the other is bad. The key question is should a U.S. company do
business in a country with a culture where grease payments are a way of life and bribery
Loading page 9...
Ethical Obligations and Decision Making in Accounting, 4/e 9
is tolerated. Is it the old adage that “When in Rome, do as the Romans do?” Or, should
U.S. companies apply an American ethical perspective to doing business in other
countries with differing cultures?
9. 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 a member of management who has direct control over an employee’s
standing within the organization? Should cultural considerations in this instance
influence ethical behavior?
Individualism (IDV) focuses on the degree that the society reinforces individual or
collective achievement and interpersonal relationships. In individualist societies (high
IDV), people are supposed to look after themselves and their direct family, while in
collectivist societies (low IDV), people belong to “in-groups” that take care of them in
exchange for loyalty. Imagine, for example, you are the manager of workers from
different cultures and cheating/unethical behavior occurs in the workplace. A workgroup
with collectivist values such as China (low IDV) might be more prone to covering up the
behavior of one member of the group, whereas in the United States (high IDV), there is a
greater likelihood of an individual blowing the whistle.
Culture of upbringing and family background affect an individual’s value system. It is up
to the individual to act upon those values. As discussed in the answer to question 3, an
individual needs integrity, courage, wisdom and virtue to act upon one’s convictions and
values.
10.
1. What is the relationship between the ethical obligation of honesty and truth
telling?
Ask Students to differentiate between telling a lie and breaking a promise. List
some lies no one believes and therefore are not very harmful and list some lies
that people might believe and thus could be hurt by believing them. List some
promises no one believes and some people might believe and could count on, to
their detriment.
Have we sometimes “promised” to tell the truth and other times “almost warned”
people that we weren't going to tell the truth? Telling the truth reveals our respect
for the other person’s decision making ability when he is provided the truth. We
lie to people we think would misuse the truth in unfair or dangerous ways.
Keeping the truth secret or deceiving people is only effective when those people
believe we are providing them with the truth. Lies only work if we lie
infrequently enough, to be believed and relied on when we do lie. There are lies
of commission (lying intentionally) and lies of omission (lying by not telling the
whole truth; the omitted information might influence decision-making). In
accounting, a lie of commission might be lying about the financial position of a
is tolerated. Is it the old adage that “When in Rome, do as the Romans do?” Or, should
U.S. companies apply an American ethical perspective to doing business in other
countries with differing cultures?
9. 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 a member of management who has direct control over an employee’s
standing within the organization? Should cultural considerations in this instance
influence ethical behavior?
Individualism (IDV) focuses on the degree that the society reinforces individual or
collective achievement and interpersonal relationships. In individualist societies (high
IDV), people are supposed to look after themselves and their direct family, while in
collectivist societies (low IDV), people belong to “in-groups” that take care of them in
exchange for loyalty. Imagine, for example, you are the manager of workers from
different cultures and cheating/unethical behavior occurs in the workplace. A workgroup
with collectivist values such as China (low IDV) might be more prone to covering up the
behavior of one member of the group, whereas in the United States (high IDV), there is a
greater likelihood of an individual blowing the whistle.
Culture of upbringing and family background affect an individual’s value system. It is up
to the individual to act upon those values. As discussed in the answer to question 3, an
individual needs integrity, courage, wisdom and virtue to act upon one’s convictions and
values.
10.
1. What is the relationship between the ethical obligation of honesty and truth
telling?
Ask Students to differentiate between telling a lie and breaking a promise. List
some lies no one believes and therefore are not very harmful and list some lies
that people might believe and thus could be hurt by believing them. List some
promises no one believes and some people might believe and could count on, to
their detriment.
Have we sometimes “promised” to tell the truth and other times “almost warned”
people that we weren't going to tell the truth? Telling the truth reveals our respect
for the other person’s decision making ability when he is provided the truth. We
lie to people we think would misuse the truth in unfair or dangerous ways.
Keeping the truth secret or deceiving people is only effective when those people
believe we are providing them with the truth. Lies only work if we lie
infrequently enough, to be believed and relied on when we do lie. There are lies
of commission (lying intentionally) and lies of omission (lying by not telling the
whole truth; the omitted information might influence decision-making). In
accounting, a lie of commission might be lying about the financial position of a
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Ethical Obligations and Decision Making in Accounting, 4/e 10
company by inflating revenues, assets, or capitalizing expenses; all of which are
fraud. A lie of omission might be not fully disclosing information required by
GAAP. Here, it is also unethical because the public has a right to know about all
information that might influence their decision-making.
Honesty is about keeping promises to tell the truth. Accepting our promise to tell
the truth puts someone in a relationship of trust with us. In the terms of Robert
Fulghum in All I Really Need to Know, I Learned in Kindergarten, a promise is
like riding the teeter-totter: Believing promises puts you at risk of a hard fall, but
breaking promises leaves you alone and unable to play.
2. Is it ever proper to not tell someone something that he or she has an
expectation of knowing? If so, describe under what circumstances this might
be the case. How does this square with rights theory?
First, ask students if there is a difference between the expectations of knowing
versus the right to knowing. For example, as college students their parents may
have an expectation of knowing their grades; however, unless the students are
dependents of their parents, the parents do not have a right to know the students’
grades.
The conflict of not telling someone something that he may have a right to know is
a choice between two rights. This situation may cause a person to tell a lie. For
example, assume John works in payroll for PQR Inc. PQR has announced that it
will be laying off 100 people from its workforce. Due to the need to prepare all
the separation paperwork and final payroll for the employees being laid off, John
knows who the 100 employees are. He has sworn to keep the list secret until
management has told each of the employees. One of his co-workers is on the list.
This co-worker comes to John and asks if she is on the list. She is a single mother
and wants to start looking for another job if she needs to do so. How does John
choose between his co-worker and the requirements of his job?
If John decides that his co-worker has the right to know the pending lay-off, he
may be using the virtue of caring or empathy to justify his action. He will have
chosen loyalty to his co-worker over loyalty to his employer. However, since
confidentiality and trustworthiness are important principles for accountants,
choosing loyalty to his co-worker over his employer could limit his career. Also,
using rights theory, why does the co-worker have a right to know the impending
lay-off result but not the other 99 employees? What if another employee has even
more compelling concerns that John is unaware of? This is a good question to
discuss justice. Equals should be treated equally and unequals, unequally. Does
his co-worker have a higher claim (i.e., right) to know the truth than other
workers? If John tells his co-worker because of her personal situation, should he
make an effort to find out about that of other workers? What about a worker with
a sick child or parent and lots of bills to pay? Where do we draw the line?
company by inflating revenues, assets, or capitalizing expenses; all of which are
fraud. A lie of omission might be not fully disclosing information required by
GAAP. Here, it is also unethical because the public has a right to know about all
information that might influence their decision-making.
Honesty is about keeping promises to tell the truth. Accepting our promise to tell
the truth puts someone in a relationship of trust with us. In the terms of Robert
Fulghum in All I Really Need to Know, I Learned in Kindergarten, a promise is
like riding the teeter-totter: Believing promises puts you at risk of a hard fall, but
breaking promises leaves you alone and unable to play.
2. Is it ever proper to not tell someone something that he or she has an
expectation of knowing? If so, describe under what circumstances this might
be the case. How does this square with rights theory?
First, ask students if there is a difference between the expectations of knowing
versus the right to knowing. For example, as college students their parents may
have an expectation of knowing their grades; however, unless the students are
dependents of their parents, the parents do not have a right to know the students’
grades.
The conflict of not telling someone something that he may have a right to know is
a choice between two rights. This situation may cause a person to tell a lie. For
example, assume John works in payroll for PQR Inc. PQR has announced that it
will be laying off 100 people from its workforce. Due to the need to prepare all
the separation paperwork and final payroll for the employees being laid off, John
knows who the 100 employees are. He has sworn to keep the list secret until
management has told each of the employees. One of his co-workers is on the list.
This co-worker comes to John and asks if she is on the list. She is a single mother
and wants to start looking for another job if she needs to do so. How does John
choose between his co-worker and the requirements of his job?
If John decides that his co-worker has the right to know the pending lay-off, he
may be using the virtue of caring or empathy to justify his action. He will have
chosen loyalty to his co-worker over loyalty to his employer. However, since
confidentiality and trustworthiness are important principles for accountants,
choosing loyalty to his co-worker over his employer could limit his career. Also,
using rights theory, why does the co-worker have a right to know the impending
lay-off result but not the other 99 employees? What if another employee has even
more compelling concerns that John is unaware of? This is a good question to
discuss justice. Equals should be treated equally and unequals, unequally. Does
his co-worker have a higher claim (i.e., right) to know the truth than other
workers? If John tells his co-worker because of her personal situation, should he
make an effort to find out about that of other workers? What about a worker with
a sick child or parent and lots of bills to pay? Where do we draw the line?
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Ethical Obligations and Decision Making in Accounting, 4/e 11
11. Is there a difference between cheating on a math test, lying about your age to
purchase a cheaper ticket at a movie theater, and using someone else’s ID to get a
drink at a bar?
All are examples of lying and affect one’s character through honesty and integrity. Many
will use many rationalizations to justify the lying. Some may try to split hairs between
what is wrong and what is more wrong – an ethical relativistic approach that should not
be used. Just imagine a business that decides one improper financial reporting act is not
as bad as another, so the former is allowed.
Virtue ethics would want doing the right thing to become a habit. Deontology would
emphasize the duty of doing the right thing and telling the truth, not just when it is
convenient or does not intervene with personal desires of making a better grade without
studying, paying more for a movie ticket or a minor obtaining an alcoholic beverage.
Ethical behavior requires consistency of action and not a relativistic or situational
perspective.
12. Do you think it is ethical for an employer to use social media information as a factor
when considering whether to hire an employee? What about monitoring social
networking activities of employees while on the job? Be sure to use ethical reasoning
in answering these questions.
Social media is one of the most popular forms of communication, particularly with
Millennials. Anyone can connect with anyone else, or find information about others that
may not otherwise be available. Thus, it should not be surprising if firms use social media
to research potential job candidates. Firms may argue that social media is a public
platform, unless the candidate makes it otherwise, and that it’s their own choice to share
the content that is available to anyone who searches for it.
CareerBuilder found in a 2014 survey that 43% of hiring managers who research
candidates said they had found information on social media that caused the firm not to
hire the candidate. What qualifies as a valid reason to do so?
A platform like LinkedIn allows a firm to fact-check a candidates’ resume or CV. The
firm may find out that a candidate lied on their application about qualifications,
experiences or other information. This information may cause the firm not to hire the
candidate. However, other social media platforms may include pictures, statuses, and
likes about illegal activity, bullying, a criminal past, or posts that include racism, sexism,
homophobia, or an unpopular political position. Much of the former may be considered
speech. However, lying about qualifications and engaging in illegal activity are
acceptable factors that might influence a firm’s hiring decision. Personal opinions and
free speech would be unethical to use in hiring decisions and may send the wrong
message that a future employee should not feel free to speak out if she identifies
wrongdoing.
11. Is there a difference between cheating on a math test, lying about your age to
purchase a cheaper ticket at a movie theater, and using someone else’s ID to get a
drink at a bar?
All are examples of lying and affect one’s character through honesty and integrity. Many
will use many rationalizations to justify the lying. Some may try to split hairs between
what is wrong and what is more wrong – an ethical relativistic approach that should not
be used. Just imagine a business that decides one improper financial reporting act is not
as bad as another, so the former is allowed.
Virtue ethics would want doing the right thing to become a habit. Deontology would
emphasize the duty of doing the right thing and telling the truth, not just when it is
convenient or does not intervene with personal desires of making a better grade without
studying, paying more for a movie ticket or a minor obtaining an alcoholic beverage.
Ethical behavior requires consistency of action and not a relativistic or situational
perspective.
12. Do you think it is ethical for an employer to use social media information as a factor
when considering whether to hire an employee? What about monitoring social
networking activities of employees while on the job? Be sure to use ethical reasoning
in answering these questions.
Social media is one of the most popular forms of communication, particularly with
Millennials. Anyone can connect with anyone else, or find information about others that
may not otherwise be available. Thus, it should not be surprising if firms use social media
to research potential job candidates. Firms may argue that social media is a public
platform, unless the candidate makes it otherwise, and that it’s their own choice to share
the content that is available to anyone who searches for it.
CareerBuilder found in a 2014 survey that 43% of hiring managers who research
candidates said they had found information on social media that caused the firm not to
hire the candidate. What qualifies as a valid reason to do so?
A platform like LinkedIn allows a firm to fact-check a candidates’ resume or CV. The
firm may find out that a candidate lied on their application about qualifications,
experiences or other information. This information may cause the firm not to hire the
candidate. However, other social media platforms may include pictures, statuses, and
likes about illegal activity, bullying, a criminal past, or posts that include racism, sexism,
homophobia, or an unpopular political position. Much of the former may be considered
speech. However, lying about qualifications and engaging in illegal activity are
acceptable factors that might influence a firm’s hiring decision. Personal opinions and
free speech would be unethical to use in hiring decisions and may send the wrong
message that a future employee should not feel free to speak out if she identifies
wrongdoing.
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Ethical Obligations and Decision Making in Accounting, 4/e 12
On the other hand, if the employee is seeking a job with a government entity, the
standards may be stricter because of the need to take care not to express one’s opinion on
controversial matters that may pertain to the work of the agency, albeit not directly
related to a specific matter before the agency. In this case it is important for the
employee’s statements not to appear to reflect the agency’s position on the matter.
The firm would be using rights and utilitarianism theories in using social media to
research candidates. The firm may think that it has a right to know if a job candidate is
lying or engaging in illegal activities. From a utilitarian point of view, the firm wants an
end result of hiring an honest job candidate who is not engaging in illegal activities. For
example, what if the candidate was a child predator like Jared Fogle, the Subway
spokesperson? [On November 19, 2015, Fogle was sentenced to more than 15 years in
federal prison after pleading guilty to charges of child pornography and crossing state
lines to pay for sex with minors.]
We believe candidates should know that in today world one’s prospective employer may
be searching the Internet for character-based information on candidates for positions. It is
the candidate’s personal responsibility to act appropriately and be cautious about what
they say on the Internet. From a rights and virtue perspective, the firm should notify
candidates that it will be researching their backgrounds on social media.
A firm may set policies for appropriate social media activities during the work day and
on using company equipment for personal reasons. The firm wants a full day’s work for
its pay, and may consider using company time for personal social networking and posting
as a form of theft. Setting a company policy on proper use of company computers, email
accounts may include usage of the Internet and appropriate surfing of the net, online
shopping and other personal activities. A bigger challenge for firms is regulating
employees’ usage of a personal smart phone during the work day.
An individual using company time or equipment to access social media for personal
activities is acting out of egoism, or self-interest only. You wouldn’t want a personal
assistant texting or updating her Facebook status while working for you, so why should
you do it when working for others? A firm setting clear guidelines expectations on
personal activities on company time, if any, is employing utilitarian, deontological and
virtues ethics reasoning. The policy might allow for exceptions such as monitoring the
health of a sick child being watched by another.
13. In a 2014 segment of Shark Tank, Trevor Hiltbrand, the founder of nootropic
supplement maker Cerebral Success, sought funding from the "Sharks" to
introduce a line of nootropic shots to be sold on college campuses in Five Hour
Energy-style containers, but encountered some pushback from some of the Sharks
who questioned the ethics of marketing to stressed-out, sleep-deprived college
students anxious to get good grades. Should it matter if Hiltbrand was trying to
capitalize on the need to gain a competitive edge in college by selling something that
may not have received FDA approval?
On the other hand, if the employee is seeking a job with a government entity, the
standards may be stricter because of the need to take care not to express one’s opinion on
controversial matters that may pertain to the work of the agency, albeit not directly
related to a specific matter before the agency. In this case it is important for the
employee’s statements not to appear to reflect the agency’s position on the matter.
The firm would be using rights and utilitarianism theories in using social media to
research candidates. The firm may think that it has a right to know if a job candidate is
lying or engaging in illegal activities. From a utilitarian point of view, the firm wants an
end result of hiring an honest job candidate who is not engaging in illegal activities. For
example, what if the candidate was a child predator like Jared Fogle, the Subway
spokesperson? [On November 19, 2015, Fogle was sentenced to more than 15 years in
federal prison after pleading guilty to charges of child pornography and crossing state
lines to pay for sex with minors.]
We believe candidates should know that in today world one’s prospective employer may
be searching the Internet for character-based information on candidates for positions. It is
the candidate’s personal responsibility to act appropriately and be cautious about what
they say on the Internet. From a rights and virtue perspective, the firm should notify
candidates that it will be researching their backgrounds on social media.
A firm may set policies for appropriate social media activities during the work day and
on using company equipment for personal reasons. The firm wants a full day’s work for
its pay, and may consider using company time for personal social networking and posting
as a form of theft. Setting a company policy on proper use of company computers, email
accounts may include usage of the Internet and appropriate surfing of the net, online
shopping and other personal activities. A bigger challenge for firms is regulating
employees’ usage of a personal smart phone during the work day.
An individual using company time or equipment to access social media for personal
activities is acting out of egoism, or self-interest only. You wouldn’t want a personal
assistant texting or updating her Facebook status while working for you, so why should
you do it when working for others? A firm setting clear guidelines expectations on
personal activities on company time, if any, is employing utilitarian, deontological and
virtues ethics reasoning. The policy might allow for exceptions such as monitoring the
health of a sick child being watched by another.
13. In a 2014 segment of Shark Tank, Trevor Hiltbrand, the founder of nootropic
supplement maker Cerebral Success, sought funding from the "Sharks" to
introduce a line of nootropic shots to be sold on college campuses in Five Hour
Energy-style containers, but encountered some pushback from some of the Sharks
who questioned the ethics of marketing to stressed-out, sleep-deprived college
students anxious to get good grades. Should it matter if Hiltbrand was trying to
capitalize on the need to gain a competitive edge in college by selling something that
may not have received FDA approval?
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Ethical Obligations and Decision Making in Accounting, 4/e 13
Nootropics are an emerging class of drugs that are designed to enhance cognitive
functions. Many supplements may also tout that they increase focus, alertness and well-
being. Many nootropics supplements have had limited studies in humans, and could cause
many side effects.
Many accounting students feel pressure in college to make top grades, particularly so that
they will get the job offer from a top firm. This leads some to cheat or to use illegal drugs
to enhance their focus and cognitive ability. Do you plan to carry over such behavior to
the workplace? A legal supplement claiming to enhance cognitive ability would be an
instant best seller. Many would be willing to use Cerebral Success out of an egoistic and
short term viewpoint. This is when regulators like the FDA step in to protect consumers
from the long-term side effects.
Was Hiltbrand really trying to help others or capitalize on the fears of those who choose
to use a nootropic supplement? This is an interesting question to explore with students.
An interesting side story is a very positive review of Cerebral Success (4 ½ out of 5 stars)
written on a website “Supplement Critique” that purports to have reviews from actual
users of the product. Here is the statement on the website to guide those who might want
to post a review of a product they have used:
Thanks for Visiting SupplementCritique.com!
I started this site because I was tired of the millions of fake review sites out
there. Too many websites post reviews about products (specifically sports and
health supplements), when they haven’t even tried them! We aimed to change
all of that, and our mission is to provide you with unbiased reviews of
supplements in the health niche, from weight loss to male performance
products.
How do we prove that to you? Well, we ACTUALLY physically test many
of the products we are reviewing, so you can be sure you’re getting real,
solid information about how they work.
If you like, you can post your own review, but we do ask that you send us a
picture of you holding a bottle of the product. We want to make sure our
visitors are reading actual results from actual users, not just someone
looking for a backlink to their website.
14. According to Adam Smith’s The Wealth of Nations, when it comes to government
oversight in the free market and regulations, the less intervention, the better. Does
the government play an important role in encouraging businesses to behave in an
ethical manner? Explain the basis for your answer. What role do environmental
laws have in a capitalistic system?
Nootropics are an emerging class of drugs that are designed to enhance cognitive
functions. Many supplements may also tout that they increase focus, alertness and well-
being. Many nootropics supplements have had limited studies in humans, and could cause
many side effects.
Many accounting students feel pressure in college to make top grades, particularly so that
they will get the job offer from a top firm. This leads some to cheat or to use illegal drugs
to enhance their focus and cognitive ability. Do you plan to carry over such behavior to
the workplace? A legal supplement claiming to enhance cognitive ability would be an
instant best seller. Many would be willing to use Cerebral Success out of an egoistic and
short term viewpoint. This is when regulators like the FDA step in to protect consumers
from the long-term side effects.
Was Hiltbrand really trying to help others or capitalize on the fears of those who choose
to use a nootropic supplement? This is an interesting question to explore with students.
An interesting side story is a very positive review of Cerebral Success (4 ½ out of 5 stars)
written on a website “Supplement Critique” that purports to have reviews from actual
users of the product. Here is the statement on the website to guide those who might want
to post a review of a product they have used:
Thanks for Visiting SupplementCritique.com!
I started this site because I was tired of the millions of fake review sites out
there. Too many websites post reviews about products (specifically sports and
health supplements), when they haven’t even tried them! We aimed to change
all of that, and our mission is to provide you with unbiased reviews of
supplements in the health niche, from weight loss to male performance
products.
How do we prove that to you? Well, we ACTUALLY physically test many
of the products we are reviewing, so you can be sure you’re getting real,
solid information about how they work.
If you like, you can post your own review, but we do ask that you send us a
picture of you holding a bottle of the product. We want to make sure our
visitors are reading actual results from actual users, not just someone
looking for a backlink to their website.
14. According to Adam Smith’s The Wealth of Nations, when it comes to government
oversight in the free market and regulations, the less intervention, the better. Does
the government play an important role in encouraging businesses to behave in an
ethical manner? Explain the basis for your answer. What role do environmental
laws have in a capitalistic system?
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Ethical Obligations and Decision Making in Accounting, 4/e 14
The free market assumes that all players will be ethical and act in the best interest of the
market, or community. However, the players are human, tempted by greed, that do not
always act ethically or in the best interest of the markets and community. Then the
government steps in with laws that set a minimum level of ethics and starts regulating the
players. The basis for the government stepping in is utilitarianism and to protect the
rights of the public.
Environmental laws consider sustainability and the ability of future generations to share
in the benefits of a clean/green society. One could say it is motivated by social welfare, a
utilitarian concept. That is, emphasizing the greatest good for future generations.
Besides setting a minimum standard for the environment, these laws also require the
community sometimes to pay more for the environmental friendly alternative than would
be chosen under cost benefit analysis only. These environmental laws require that the
application of utilitarian analysis include the qualitative factors of sustainability and
welfare of future generation, not just cost factors alone.
15. According to the 2011 National Business Ethics Survey conducted by the Ethics
Resource Center, Generational Differences in Workplace Ethics, a relatively high
percentage of Millennials consider certain behaviors in the workplace ethical when
compared with their earlier counterparts. These include:
Use social networking to find out about the company’s competitors (37%),
“Friend” a client or customer on a social network (36%),
Upload personal photos on a company network (26%),
Keep copies of confidential documents (22%),
Work less to compensate for cuts in benefits or pay (18%),
Buy personal items using a company credit card (15%),
Blog or tweet negatively about a company (14%), and
Take a copy of work software home for personal use (13%).
The report further concludes that younger workers are significantly more willing to ignore
the presence of misconduct if they think that behavior will help save jobs.
a. Choose one or more behaviors and explain why Millennials might view the behavior
as ethical.
Many of the behaviors are done out of egoism or the rationalization that “everyone is doing it” or
“I’m doing this so I can do my job better.” For example, “friending” a client or customer on a
social network may seem innocent enough and a way to learn valuable information about these
parties; however, it could be perceived as a way to gain such information prior to striking out on
one’s own and starting a new business. The problem with many of the enumerated behaviors is
the perception that one’s motives may not be in the best interests of the employer.
b. Choose one or more behaviors and explain why you think it is unethical.
Use ethical reasoning to support your points of view.
The free market assumes that all players will be ethical and act in the best interest of the
market, or community. However, the players are human, tempted by greed, that do not
always act ethically or in the best interest of the markets and community. Then the
government steps in with laws that set a minimum level of ethics and starts regulating the
players. The basis for the government stepping in is utilitarianism and to protect the
rights of the public.
Environmental laws consider sustainability and the ability of future generations to share
in the benefits of a clean/green society. One could say it is motivated by social welfare, a
utilitarian concept. That is, emphasizing the greatest good for future generations.
Besides setting a minimum standard for the environment, these laws also require the
community sometimes to pay more for the environmental friendly alternative than would
be chosen under cost benefit analysis only. These environmental laws require that the
application of utilitarian analysis include the qualitative factors of sustainability and
welfare of future generation, not just cost factors alone.
15. According to the 2011 National Business Ethics Survey conducted by the Ethics
Resource Center, Generational Differences in Workplace Ethics, a relatively high
percentage of Millennials consider certain behaviors in the workplace ethical when
compared with their earlier counterparts. These include:
Use social networking to find out about the company’s competitors (37%),
“Friend” a client or customer on a social network (36%),
Upload personal photos on a company network (26%),
Keep copies of confidential documents (22%),
Work less to compensate for cuts in benefits or pay (18%),
Buy personal items using a company credit card (15%),
Blog or tweet negatively about a company (14%), and
Take a copy of work software home for personal use (13%).
The report further concludes that younger workers are significantly more willing to ignore
the presence of misconduct if they think that behavior will help save jobs.
a. Choose one or more behaviors and explain why Millennials might view the behavior
as ethical.
Many of the behaviors are done out of egoism or the rationalization that “everyone is doing it” or
“I’m doing this so I can do my job better.” For example, “friending” a client or customer on a
social network may seem innocent enough and a way to learn valuable information about these
parties; however, it could be perceived as a way to gain such information prior to striking out on
one’s own and starting a new business. The problem with many of the enumerated behaviors is
the perception that one’s motives may not be in the best interests of the employer.
b. Choose one or more behaviors and explain why you think it is unethical.
Use ethical reasoning to support your points of view.
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Ethical Obligations and Decision Making in Accounting, 4/e 15
Have the students discuss which of the above behaviors can be defended by virtue, deontology
and utilitarian (both rule and act) theories. The students might pick to “friend” a client or
customer on a social network as being a good end to help the company. This could lead to a
discussion of professional versus personal social media; i.e., LinkedIn versus Facebook. As more
companies are using social media to reach and stay connected with clients and customers, this
behavior would be ethical if it was part of an employee’s job duties.
16. How should an accounting professional go about determining whether a proposed
action is in the public interest?
Through the Securities and Exchange Act of 1934, the U.S. government effectively
awarded a professional monopoly to CPAs, in return for their commitment to protect the public
interest by acting as independent watchdogs over publicly traded corporations. Auditors serve as
gatekeepers who protect the interests of stakeholders through monitoring activity within the
organization and by providing a financial representation that is unbiased and accurate. The
perspective of the auditor as a gatekeeper is consistent with the opinion of the Advisory Panel on
Auditor Independence that states: In United States v. Arthur Young & Co. [1984] the Supreme
Court of the United States described the independent audit as a “public watchdog” function and
noted that “if investors were to view the auditor as an advocate for the corporate client, the value
of the audit might well be lost”.
The AICPA Code of Professional Conduct has the public interest as its second principle. It
defines the public interest to include “clients, credit grantors, governments, employers, investors,
the business and financial community, and others who rely on the objectivity and integrity of
CPAs to maintain the orderly functioning of commerce.” This principle calls for resolving
conflicts between these stakeholder groups by recognizing the primacy of a CPA’s responsibility
to the public as the way to best serve clients’ and employers’ interests. In discharging their
professional responsibilities, CPAs may encounter conflicting pressures from each of these
groups. According to the public interest principle, when conflicts arise the actions taken to
resolve them should be based on integrity, guided by the precept that when CPAs fulfill their
responsibilities to the public, clients' and employers' interests are best served.
17. Distinguish between ethical rights and obligations from the perspective of accountants
and auditors.
Ethical rights describe how a person is entitled to be treated by another person. Ethical
obligations are the duties to treat others in an ethical manner. Ask students what they think are
their rights. Now which of those rights have an ethical basis? Have the students make a list of
their ethical rights. If a student’s ethical right conflicts with the student’s ethical obligation, what
should a student do?
From the perspective of accountants and auditors, obligations to the public are to act with
integrity, be independent of clients both in fact and appearance, make objective decisions, and
act in a responsible and trustworthy manner. The public has a right to receive accurate and
reliable financial information to make informed decisions. Thus, the rights of stakeholders and
Have the students discuss which of the above behaviors can be defended by virtue, deontology
and utilitarian (both rule and act) theories. The students might pick to “friend” a client or
customer on a social network as being a good end to help the company. This could lead to a
discussion of professional versus personal social media; i.e., LinkedIn versus Facebook. As more
companies are using social media to reach and stay connected with clients and customers, this
behavior would be ethical if it was part of an employee’s job duties.
16. How should an accounting professional go about determining whether a proposed
action is in the public interest?
Through the Securities and Exchange Act of 1934, the U.S. government effectively
awarded a professional monopoly to CPAs, in return for their commitment to protect the public
interest by acting as independent watchdogs over publicly traded corporations. Auditors serve as
gatekeepers who protect the interests of stakeholders through monitoring activity within the
organization and by providing a financial representation that is unbiased and accurate. The
perspective of the auditor as a gatekeeper is consistent with the opinion of the Advisory Panel on
Auditor Independence that states: In United States v. Arthur Young & Co. [1984] the Supreme
Court of the United States described the independent audit as a “public watchdog” function and
noted that “if investors were to view the auditor as an advocate for the corporate client, the value
of the audit might well be lost”.
The AICPA Code of Professional Conduct has the public interest as its second principle. It
defines the public interest to include “clients, credit grantors, governments, employers, investors,
the business and financial community, and others who rely on the objectivity and integrity of
CPAs to maintain the orderly functioning of commerce.” This principle calls for resolving
conflicts between these stakeholder groups by recognizing the primacy of a CPA’s responsibility
to the public as the way to best serve clients’ and employers’ interests. In discharging their
professional responsibilities, CPAs may encounter conflicting pressures from each of these
groups. According to the public interest principle, when conflicts arise the actions taken to
resolve them should be based on integrity, guided by the precept that when CPAs fulfill their
responsibilities to the public, clients' and employers' interests are best served.
17. Distinguish between ethical rights and obligations from the perspective of accountants
and auditors.
Ethical rights describe how a person is entitled to be treated by another person. Ethical
obligations are the duties to treat others in an ethical manner. Ask students what they think are
their rights. Now which of those rights have an ethical basis? Have the students make a list of
their ethical rights. If a student’s ethical right conflicts with the student’s ethical obligation, what
should a student do?
From the perspective of accountants and auditors, obligations to the public are to act with
integrity, be independent of clients both in fact and appearance, make objective decisions, and
act in a responsible and trustworthy manner. The public has a right to receive accurate and
reliable financial information to make informed decisions. Thus, the rights of stakeholders and
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Ethical Obligations and Decision Making in Accounting, 4/e 16
the obligations of accountants and auditors to those stakeholders are the flip sides of the same
issue.
18. Using the concept of justice, evaluate how an auditor would assess the equality of
interests in the financial reporting process.
Justice as fairness is the basis of the objectivity principle in the AICPA Code that establishes a
standard of providing unbiased financial information. In our discussion of ethical behavior in this
and the following chapters, questions of fairness will be tied to making objective judgments.
Auditors should render objective judgments about the fair presentation of financial results. In this
regard, auditors should act as impartial arbiters of the truth, just as judges who make decisions in
court cases should. The ethical principle of objectivity requires that such judgments be made
impartially, unaffected by pressures that may exist to do otherwise. An objective auditor with
knowledge about the failure to allow for the uncollectible receivables would not stand idly by
and allow the financial statements to be materially misleading.
When we look at the traditional notion of justice as treating equals, equally, we can say that
investors and creditors have a greater demand and need for accurate and reliable information
than other users because they represent the public interest. Thus, the conceptual framework for
financial reporting is geared toward the decision making needs of investors and creditors as the
providers of financing while the needs of other users are of secondary concern.
19. Why is it important for a CPA to promote professional services in an ethical manner?
Do you believe it would be ethical for a CPA to advertise professional services using
testimonials and endorsements? Why or why not?
Professionalism and work ethic are important qualities of accounting professionals.
Professionalism is generally defined as the strict adherence to courtesy, honesty, and
responsibility when dealing with individuals or other companies in business and clients in public
accounting. For CPAs, this means to act in accordance with personal and professional values
such as trustworthiness, integrity, transparency, and the pursuit of excellence. A strong work
ethic includes completing assignments in a timely manner, diligently, and with the highest
quality possible. Ethics and professionalism in accounting also means to always place the public
interest ahead of one's self-interests, the interests of an employer, and the client's interests. The
public expects accounting and auditing professionals to be selfless in the pursuit of the public
good.
Potential clients rely on the ethics and trustworthiness of accounting professionals. Clients make
decisions whether to engage with potential accountants and auditors, at least in part, based on
their advertising of professional services. Clients must be able to rely on the accuracy on the
form and content of such communication including testimonials on behalf of accounting
professionals.
In advertising professional services, a CPA must be honest and non-misleading. In using
testimonials and endorsements, how does a potential client know if these are honest and non-
misleading? Were the testimonials and endorsements paid or exaggerated? Would that affect
the obligations of accountants and auditors to those stakeholders are the flip sides of the same
issue.
18. Using the concept of justice, evaluate how an auditor would assess the equality of
interests in the financial reporting process.
Justice as fairness is the basis of the objectivity principle in the AICPA Code that establishes a
standard of providing unbiased financial information. In our discussion of ethical behavior in this
and the following chapters, questions of fairness will be tied to making objective judgments.
Auditors should render objective judgments about the fair presentation of financial results. In this
regard, auditors should act as impartial arbiters of the truth, just as judges who make decisions in
court cases should. The ethical principle of objectivity requires that such judgments be made
impartially, unaffected by pressures that may exist to do otherwise. An objective auditor with
knowledge about the failure to allow for the uncollectible receivables would not stand idly by
and allow the financial statements to be materially misleading.
When we look at the traditional notion of justice as treating equals, equally, we can say that
investors and creditors have a greater demand and need for accurate and reliable information
than other users because they represent the public interest. Thus, the conceptual framework for
financial reporting is geared toward the decision making needs of investors and creditors as the
providers of financing while the needs of other users are of secondary concern.
19. Why is it important for a CPA to promote professional services in an ethical manner?
Do you believe it would be ethical for a CPA to advertise professional services using
testimonials and endorsements? Why or why not?
Professionalism and work ethic are important qualities of accounting professionals.
Professionalism is generally defined as the strict adherence to courtesy, honesty, and
responsibility when dealing with individuals or other companies in business and clients in public
accounting. For CPAs, this means to act in accordance with personal and professional values
such as trustworthiness, integrity, transparency, and the pursuit of excellence. A strong work
ethic includes completing assignments in a timely manner, diligently, and with the highest
quality possible. Ethics and professionalism in accounting also means to always place the public
interest ahead of one's self-interests, the interests of an employer, and the client's interests. The
public expects accounting and auditing professionals to be selfless in the pursuit of the public
good.
Potential clients rely on the ethics and trustworthiness of accounting professionals. Clients make
decisions whether to engage with potential accountants and auditors, at least in part, based on
their advertising of professional services. Clients must be able to rely on the accuracy on the
form and content of such communication including testimonials on behalf of accounting
professionals.
In advertising professional services, a CPA must be honest and non-misleading. In using
testimonials and endorsements, how does a potential client know if these are honest and non-
misleading? Were the testimonials and endorsements paid or exaggerated? Would that affect
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Ethical Obligations and Decision Making in Accounting, 4/e 17
one’s opinion? What if the testimonials and endorsements are from paid actors, and not actual
clients? As a profession that values objectivity and skepticism, objectivity and skepticism should
be employed in determining how potential customers will react to advertising.
20. Do you think it would be ethical for a CPA to have someone else do for her that which
she is prohibited from doing by the AICPA Code of Professional Conduct? Why or why
not? Do you think a CPA can justify allowing the unethical behavior of a supervisor by
claiming, “It’s not my job to police the behavior of others?”
It would be unethical for a CPA to employ (whether paid or not) someone to perform an act that
the CPA is prohibited from doing? It is using a proxy to do something that she knows is wrong.
Having someone else do the wrong act does not change the wrongness of the act. The AICPA
Code of Professional Conduct clearly holds CPAs to the standard of care that she should not
permit others to do for her what she is prohibited from doing under the Code. To do so is an
unprofessional act in violation of the Code.
If the CPA knows all the facts and determines that the supervisor is allowing or performing an
unethical act, the CPA should try to stop that behavior. It may be impossible to change the
behavior, but the CPA should question whether she wants to work for and with a supervisor and
company that condones unethical behavior. Knowing that something is wrong obligates the
ethical person to do something about. This applies in particular in accounting because of the
public interest obligation.
21. Assume in the DigitPrint case that the venture capitalists do not provide additional
financing to the company, even though the accrued expense adjustments have not been
made. The company hires an audit firm to conduct an audit of its financial statements to
take to a local bank for a loan. The auditors become aware of the unrecorded $1 million in
accrued expenses. Liza Doolittle pressures them to delay recording the expenses until after
the loan is secured. The auditors do not know whether Henry Higgins is aware of all the
facts. Identify the stakeholders in this case. What alternatives are available to the auditors?
Use the AICPA Code of Professional Conduct and Josephson’s Six Pillars of Character to
evaluate the ethics of the alternative courses of action.
The stakeholders in the DigitPrint case are the stockholders and employees of the company, the
local bank, suppliers and customers of the company. The auditors may try to get Doolittle and
Higgins to record the expenses; tell the board of directors of the situation; issue a qualified or
adverse opinion if the expenses are not recorded; or they could do as Doolittle is pressuring them
to do. Caving into the pressure from Doolittle would be unethical and would violate the AICPA
principles of integrity, independence, responsibility, public interest and due care. Using these
principles and the Six Pillars of Character, the auditors should meet with the board of directors to
try and get support for the recording of the expenses. If that fails, then the auditors should issue a
qualified or adverse opinion. This would be in keeping of the AICPA principles. Under the Six
Pillars of Character, the auditors would be displaying trustworthiness, responsibility, fairness,
and citizenship.
one’s opinion? What if the testimonials and endorsements are from paid actors, and not actual
clients? As a profession that values objectivity and skepticism, objectivity and skepticism should
be employed in determining how potential customers will react to advertising.
20. Do you think it would be ethical for a CPA to have someone else do for her that which
she is prohibited from doing by the AICPA Code of Professional Conduct? Why or why
not? Do you think a CPA can justify allowing the unethical behavior of a supervisor by
claiming, “It’s not my job to police the behavior of others?”
It would be unethical for a CPA to employ (whether paid or not) someone to perform an act that
the CPA is prohibited from doing? It is using a proxy to do something that she knows is wrong.
Having someone else do the wrong act does not change the wrongness of the act. The AICPA
Code of Professional Conduct clearly holds CPAs to the standard of care that she should not
permit others to do for her what she is prohibited from doing under the Code. To do so is an
unprofessional act in violation of the Code.
If the CPA knows all the facts and determines that the supervisor is allowing or performing an
unethical act, the CPA should try to stop that behavior. It may be impossible to change the
behavior, but the CPA should question whether she wants to work for and with a supervisor and
company that condones unethical behavior. Knowing that something is wrong obligates the
ethical person to do something about. This applies in particular in accounting because of the
public interest obligation.
21. Assume in the DigitPrint case that the venture capitalists do not provide additional
financing to the company, even though the accrued expense adjustments have not been
made. The company hires an audit firm to conduct an audit of its financial statements to
take to a local bank for a loan. The auditors become aware of the unrecorded $1 million in
accrued expenses. Liza Doolittle pressures them to delay recording the expenses until after
the loan is secured. The auditors do not know whether Henry Higgins is aware of all the
facts. Identify the stakeholders in this case. What alternatives are available to the auditors?
Use the AICPA Code of Professional Conduct and Josephson’s Six Pillars of Character to
evaluate the ethics of the alternative courses of action.
The stakeholders in the DigitPrint case are the stockholders and employees of the company, the
local bank, suppliers and customers of the company. The auditors may try to get Doolittle and
Higgins to record the expenses; tell the board of directors of the situation; issue a qualified or
adverse opinion if the expenses are not recorded; or they could do as Doolittle is pressuring them
to do. Caving into the pressure from Doolittle would be unethical and would violate the AICPA
principles of integrity, independence, responsibility, public interest and due care. Using these
principles and the Six Pillars of Character, the auditors should meet with the board of directors to
try and get support for the recording of the expenses. If that fails, then the auditors should issue a
qualified or adverse opinion. This would be in keeping of the AICPA principles. Under the Six
Pillars of Character, the auditors would be displaying trustworthiness, responsibility, fairness,
and citizenship.
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Ethical Obligations and Decision Making in Accounting, 4/e 18
22. In the discussion of loyalty in this chapter, a statement is made that “your ethical
obligation is to report what you have observed to your supervisor and let her take the
appropriate action.” We point out that you may want to take your concerns to others. The
IMA Statement of Ethical Professional Practice includes a confidentiality standard that
requires members to “keep information confidential except when disclosure is authorized
or legally required.”
23. Do you think there are any circumstances when you should go outside the company to
report financial wrongdoing? If so, to what person/organization would you go? Why? If
not, why would you not take the information outside the company?
Questions 22 and 23 were inadvertently separated in production of the book so we answer them
together.
Whistle blowing has had a bad name since before Rolf chose his duty to Nazi youth over his
affection for the Von Trapp family in the “Sound of Music.” Telling on someone to prevent
serious harm to someone else is usually called tattling. Tattling often has the bad reputation due
to its mean-spirited motivation. Telling to get someone out of trouble is usually the right thing to
do. The difference in the two situations noted turns on motives for action. Whistle-blowing could
stop something harmful which is about to happen or will continue happening. It does matter
whether whistle-blowing can change the future and it does matter how important those changes
are in the lives of those in peril. What matters is if the person tells to right a wrong and protect
others; if so, it is an ethical action and warranted.
Whistle-blowing is different for accountants because it violates client trust and break promises
the profession has made on behalf of each of its members. Accountants, as professionals, have
access to truth and knowledge because we as a profession promise that clients can absolutely
count on the accountants not to violate that trust by sharing secrets. If the profession did not
promise confidentiality and our promise was in doubt, clients might purposefully keep secrets
from their accountants because of fear of disclosure.
While there are situations where professional accountants have to go outside their chain of
command, the profession’s reputation for reliability is damaged whenever that promise of
confidentiality is broken. Whistleblowing for a professional accountant is promise breaking. The
best justification for breaking promises is what we call an emergency: time sensitive, future
changing, no one else can do it and it has to be done in some situations. It is easier to imagine
corporations in its personnel, operations and marketing departments doing dangerous and
harmful things that must be stopped in a hurry than in the finance or accounting departments.
There are circumstances in accounting where future harm to people who deserve our protection
(i.e., shareholders or the public) is so great that professional duty is superseded by duty to protect
the public interest. In some of these circumstances, individual accountants are the only one
person who can prevent or reduce that harm by acting. Accountants can’t always trust their
supervisors to do the right thing and follow up on what needs to be investigated.
22. In the discussion of loyalty in this chapter, a statement is made that “your ethical
obligation is to report what you have observed to your supervisor and let her take the
appropriate action.” We point out that you may want to take your concerns to others. The
IMA Statement of Ethical Professional Practice includes a confidentiality standard that
requires members to “keep information confidential except when disclosure is authorized
or legally required.”
23. Do you think there are any circumstances when you should go outside the company to
report financial wrongdoing? If so, to what person/organization would you go? Why? If
not, why would you not take the information outside the company?
Questions 22 and 23 were inadvertently separated in production of the book so we answer them
together.
Whistle blowing has had a bad name since before Rolf chose his duty to Nazi youth over his
affection for the Von Trapp family in the “Sound of Music.” Telling on someone to prevent
serious harm to someone else is usually called tattling. Tattling often has the bad reputation due
to its mean-spirited motivation. Telling to get someone out of trouble is usually the right thing to
do. The difference in the two situations noted turns on motives for action. Whistle-blowing could
stop something harmful which is about to happen or will continue happening. It does matter
whether whistle-blowing can change the future and it does matter how important those changes
are in the lives of those in peril. What matters is if the person tells to right a wrong and protect
others; if so, it is an ethical action and warranted.
Whistle-blowing is different for accountants because it violates client trust and break promises
the profession has made on behalf of each of its members. Accountants, as professionals, have
access to truth and knowledge because we as a profession promise that clients can absolutely
count on the accountants not to violate that trust by sharing secrets. If the profession did not
promise confidentiality and our promise was in doubt, clients might purposefully keep secrets
from their accountants because of fear of disclosure.
While there are situations where professional accountants have to go outside their chain of
command, the profession’s reputation for reliability is damaged whenever that promise of
confidentiality is broken. Whistleblowing for a professional accountant is promise breaking. The
best justification for breaking promises is what we call an emergency: time sensitive, future
changing, no one else can do it and it has to be done in some situations. It is easier to imagine
corporations in its personnel, operations and marketing departments doing dangerous and
harmful things that must be stopped in a hurry than in the finance or accounting departments.
There are circumstances in accounting where future harm to people who deserve our protection
(i.e., shareholders or the public) is so great that professional duty is superseded by duty to protect
the public interest. In some of these circumstances, individual accountants are the only one
person who can prevent or reduce that harm by acting. Accountants can’t always trust their
supervisors to do the right thing and follow up on what needs to be investigated.
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Ethical Obligations and Decision Making in Accounting, 4/e 19
There are times that accountants are expected to report wrongdoing to the authorities as part of
their ethical obligation, such as under the Dodd-Frank Financial Reform Act that will be
discussed in Chapter 3. This would be the case if every effort has been made using internal
means to correct for fraudulent financial statements to no avail. It may also be the case to prevent
serious harm to others. Finally, it may be required by state law as well.
24. Assume that a corporate officer or other executive asks you, as the accountant for the
company, to omit or leave out certain financial figures from the balance sheet that may
paint the business in a bad light to the public and investors. Because the request does not
involve a direct manipulation of numbers or records, would you agree to go along with the
request? What ethical considerations exist for you in deciding on a course of action?
Would the omission of the information be misleading to investors and the public? If so, then the
SEC would consider that information material and then should be disclosed. Many may consider
the omission of information as a form of a lie. One may mislead by stating a lie or by keeping
quiet about some information. Many religions consider one a sin of commission and one a sin of
omission; since both are sins, they are both wrong. Omitting information goes to honesty,
integrity and trustworthiness under the Six Pillars of Characters. Those values are also important
using virtue or deontology reasoning.
What if a client asks you to leave out information about a multi-billion-dollar lawsuit for product
tampering because it won’t be resolved for at least years? Would you omit it because its effects
are not in the short-term – i.e., within one year? The omission of the information (in the accounts
or notes as required) – is misleading to investors and creditors who have a right to know that the
company may have a very significant legal liability in two or more years. How will the company
meet this obligation? Should it set aside the funds in a reserve account? These are all legitimate
questions for users to ask, but they can’t if the information is omitted.
25. Sir Walter Scott (1771–1832), the Scottish novelist and poet, wrote: “Oh what a tangled
web we weave, when first we practice to deceive.” Comment on what you think Scott meant
by this phrase.
Lies often require stories which seem simple, but if examined, may call for further lies. In some
cases, merely remembering a lie is more difficult than remembering the truth. Fiction is filled
with stories of one lie leading to others. You might collect a list of those famous stories. This
question provides an opportunity to remind students of the ethical slippery slope and once a lie is
told, the person who tells it begins the slide and it is much more difficult to climb back up and
regain the moral high ground. The concept of an 'ethical slippery slope' is one that defines
behavior when a decision-maker first decides to deceive others by consciously covering up or
lying about past behavior. This begins the slide down the proverbial ethical slippery slope where
it becomes more difficult to reverse course because the decision maker is committed to the
deceitful action; then since most people don't want others (i.e., superiors) to know about the
initial, wrongful action over time cover up or lying slowly become untangled and the truth
emerges.
There are times that accountants are expected to report wrongdoing to the authorities as part of
their ethical obligation, such as under the Dodd-Frank Financial Reform Act that will be
discussed in Chapter 3. This would be the case if every effort has been made using internal
means to correct for fraudulent financial statements to no avail. It may also be the case to prevent
serious harm to others. Finally, it may be required by state law as well.
24. Assume that a corporate officer or other executive asks you, as the accountant for the
company, to omit or leave out certain financial figures from the balance sheet that may
paint the business in a bad light to the public and investors. Because the request does not
involve a direct manipulation of numbers or records, would you agree to go along with the
request? What ethical considerations exist for you in deciding on a course of action?
Would the omission of the information be misleading to investors and the public? If so, then the
SEC would consider that information material and then should be disclosed. Many may consider
the omission of information as a form of a lie. One may mislead by stating a lie or by keeping
quiet about some information. Many religions consider one a sin of commission and one a sin of
omission; since both are sins, they are both wrong. Omitting information goes to honesty,
integrity and trustworthiness under the Six Pillars of Characters. Those values are also important
using virtue or deontology reasoning.
What if a client asks you to leave out information about a multi-billion-dollar lawsuit for product
tampering because it won’t be resolved for at least years? Would you omit it because its effects
are not in the short-term – i.e., within one year? The omission of the information (in the accounts
or notes as required) – is misleading to investors and creditors who have a right to know that the
company may have a very significant legal liability in two or more years. How will the company
meet this obligation? Should it set aside the funds in a reserve account? These are all legitimate
questions for users to ask, but they can’t if the information is omitted.
25. Sir Walter Scott (1771–1832), the Scottish novelist and poet, wrote: “Oh what a tangled
web we weave, when first we practice to deceive.” Comment on what you think Scott meant
by this phrase.
Lies often require stories which seem simple, but if examined, may call for further lies. In some
cases, merely remembering a lie is more difficult than remembering the truth. Fiction is filled
with stories of one lie leading to others. You might collect a list of those famous stories. This
question provides an opportunity to remind students of the ethical slippery slope and once a lie is
told, the person who tells it begins the slide and it is much more difficult to climb back up and
regain the moral high ground. The concept of an 'ethical slippery slope' is one that defines
behavior when a decision-maker first decides to deceive others by consciously covering up or
lying about past behavior. This begins the slide down the proverbial ethical slippery slope where
it becomes more difficult to reverse course because the decision maker is committed to the
deceitful action; then since most people don't want others (i.e., superiors) to know about the
initial, wrongful action over time cover up or lying slowly become untangled and the truth
emerges.
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Ethical Obligations and Decision Making in Accounting, 4/e 20
Betty Vinson was a victim of the ethical slippery slope. Once she agreed to go along with
financial wrongdoing and enter false data into WorldCom’s accounting system, it became very
difficult for her to change direction as future requests were made for her to do the same.
26. 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 and beliefs were
ethically challenged? Use a personal example if you have not experienced a
workplace dilemma.
What are the most important values that would drive your behavior as a new staff
accountant in a CPA firm?
Describe your ethical expectations of the culture in an accounting firm?
What would you do if your position on an accounting issue differs from that of firm
management?
Selected points:
I, as many students and recent grads, have been challenged ethically in being asked by a
friend to share homework, tell what was on a test, or covering up who did what on a
group project in order to get the best grade. These are conflicts of loyalty to a friend
versus having integrity, and a short-term payoff versus long-term habits. I have tried to
choose having the long-term habit of integrity and honesty.
While some compromises are required in a workplace setting, an employee should
understand that compromising ethics is not one allowed. As a new employee, I would not
go against my ethical values. I would need to make sure that I knew all the facts so that I
am judging or acting based on partial information.
Most Americans tell white lies, often in the rationalization of being tactful. I cannot
promise to never lie for you but I prefer to tell the truth as much as possible. For instance,
if I answer a call from a client wishing to speak to you, and you tell me to say that you
are gone for the day. I would probably tell the client that you unavailable to take the call
at present and ask to take a message.
A corporation may be considered a legal person, but it is collectively made up of
individual employees. Many of those individuals may act ethically or unethically in any
given situation. As an individual I am responsible to act ethically. An ethical corporation
may not be able to guarantee that all of its employees will act ethically all the time, but it
is required to have ethical policies and procedures in place so the actions of the
corporation are ethical. I expect the CPA firm to have a culture of respect, honesty,
integrity, and responsibility and realize it will demand the same of me.
When differences on ethical issues with a supervisor arise at work, it’s best to consult
with a mentor or trusted advisor. It’s always best to voice your values to others first in
order to anticipate the reasons and rationalizations of others/superiors who are trying to
get you to compromise your values.
Betty Vinson was a victim of the ethical slippery slope. Once she agreed to go along with
financial wrongdoing and enter false data into WorldCom’s accounting system, it became very
difficult for her to change direction as future requests were made for her to do the same.
26. 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 and beliefs were
ethically challenged? Use a personal example if you have not experienced a
workplace dilemma.
What are the most important values that would drive your behavior as a new staff
accountant in a CPA firm?
Describe your ethical expectations of the culture in an accounting firm?
What would you do if your position on an accounting issue differs from that of firm
management?
Selected points:
I, as many students and recent grads, have been challenged ethically in being asked by a
friend to share homework, tell what was on a test, or covering up who did what on a
group project in order to get the best grade. These are conflicts of loyalty to a friend
versus having integrity, and a short-term payoff versus long-term habits. I have tried to
choose having the long-term habit of integrity and honesty.
While some compromises are required in a workplace setting, an employee should
understand that compromising ethics is not one allowed. As a new employee, I would not
go against my ethical values. I would need to make sure that I knew all the facts so that I
am judging or acting based on partial information.
Most Americans tell white lies, often in the rationalization of being tactful. I cannot
promise to never lie for you but I prefer to tell the truth as much as possible. For instance,
if I answer a call from a client wishing to speak to you, and you tell me to say that you
are gone for the day. I would probably tell the client that you unavailable to take the call
at present and ask to take a message.
A corporation may be considered a legal person, but it is collectively made up of
individual employees. Many of those individuals may act ethically or unethically in any
given situation. As an individual I am responsible to act ethically. An ethical corporation
may not be able to guarantee that all of its employees will act ethically all the time, but it
is required to have ethical policies and procedures in place so the actions of the
corporation are ethical. I expect the CPA firm to have a culture of respect, honesty,
integrity, and responsibility and realize it will demand the same of me.
When differences on ethical issues with a supervisor arise at work, it’s best to consult
with a mentor or trusted advisor. It’s always best to voice your values to others first in
order to anticipate the reasons and rationalizations of others/superiors who are trying to
get you to compromise your values.
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Ethical Obligations and Decision Making in Accounting, 4/e 21
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Ethical Obligations and Decision Making in Accounting, 4/e 1
Chapter 1 Cases
Suggested Discussion and Solution Guide
NOTE: Cases 1-2, 1-7, and 1-9 are treated as Giving Voice to
Values (GVV) cases in the Test Bank for Chapter 2. The
GVV approach that is described in Chapter 2 enables
students to gain experience voicing values in the face of
conflicting pressures and reasons and rationalizations to
deviate from taking appropriate action. Faculty can assign
the case in Chapter 1 or delay it until Chapter 2, if they plan
to use it for GVV testing purposes in Chapter 2.
Chapter 1 Cases
Suggested Discussion and Solution Guide
NOTE: Cases 1-2, 1-7, and 1-9 are treated as Giving Voice to
Values (GVV) cases in the Test Bank for Chapter 2. The
GVV approach that is described in Chapter 2 enables
students to gain experience voicing values in the face of
conflicting pressures and reasons and rationalizations to
deviate from taking appropriate action. Faculty can assign
the case in Chapter 1 or delay it until Chapter 2, if they plan
to use it for GVV testing purposes in Chapter 2.
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Ethical Obligations and Decision Making in Accounting, 4/e 1
Chapter 1 Cases
Case 1-1 Harvard Cheating Scandal
Yes. Cheating occurs at the prestigious Harvard University. In 2012, Harvard forced dozens of
students to leave in its largest cheating scandal in memory, but the institution would not address
assertions that the blame rested partly with a professor and his teaching assistants. The issue is
whether cheating is truly cheating when students collaborate with each other to find the right
answer—in a take-home final exam.
Harvard released the results of its investigation into the controversy, in which 125
undergraduates were alleged to have cheated on an exam in May 2012. The university said that
more than half of the students were forced to withdraw, a penalty that typically lasts from two to
four semesters. Many returned by 2015. Of the remaining cases, about half were put on
disciplinary probation—a strong warning that becomes part of a student’s official record. The
rest of the students avoided punishment.
In previous years, students thought of Government 1310 as an easy class with optional
attendance and frequent collaboration. But students who took it in spring 2012 said that it had
suddenly become quite difficult, with tests that were hard to comprehend, so they sought help
from the graduate teaching assistants who ran the class discussion groups, graded assignments,
and advised them on interpreting exam questions.
Administrators said that on final-exam questions, some students supplied identical answers (right
down to typographical errors in some cases), indicating that they had written them together or
plagiarized them. But some students claimed that the similarities in their answers were due to
sharing notes or sitting in on sessions with the same teaching assistants. The instructions on the
take-home exam explicitly prohibited collaboration, but many students said they did not think
that included talking with teaching assistants.
The first page of the exam contained these instructions: “The exam is completely open book,
open note, open Internet, etc. However, in all other regards, this should fall under similar
guidelines that apply to in-class exams. More specifically, students may not discuss the exam
with others—this includes resident tutors, writing centers, etc.”
Students complained about confusing questions on the final exam. Due to “some good questions”
from students, the instructor clarified three exam questions by email before the due date of the
exams.
Students claim to have believed that collaboration was allowed in the course. The course’s
instructor and the teaching assistants sometimes encouraged collaboration, in fact. The teaching
assistants—graduate students who graded the exams and ran weekly discussion sessions—varied
widely in how they prepared students for the exams, so it was common for students in different
sections to share lecture notes and reading materials. During the final exam, some teaching
Chapter 1 Cases
Case 1-1 Harvard Cheating Scandal
Yes. Cheating occurs at the prestigious Harvard University. In 2012, Harvard forced dozens of
students to leave in its largest cheating scandal in memory, but the institution would not address
assertions that the blame rested partly with a professor and his teaching assistants. The issue is
whether cheating is truly cheating when students collaborate with each other to find the right
answer—in a take-home final exam.
Harvard released the results of its investigation into the controversy, in which 125
undergraduates were alleged to have cheated on an exam in May 2012. The university said that
more than half of the students were forced to withdraw, a penalty that typically lasts from two to
four semesters. Many returned by 2015. Of the remaining cases, about half were put on
disciplinary probation—a strong warning that becomes part of a student’s official record. The
rest of the students avoided punishment.
In previous years, students thought of Government 1310 as an easy class with optional
attendance and frequent collaboration. But students who took it in spring 2012 said that it had
suddenly become quite difficult, with tests that were hard to comprehend, so they sought help
from the graduate teaching assistants who ran the class discussion groups, graded assignments,
and advised them on interpreting exam questions.
Administrators said that on final-exam questions, some students supplied identical answers (right
down to typographical errors in some cases), indicating that they had written them together or
plagiarized them. But some students claimed that the similarities in their answers were due to
sharing notes or sitting in on sessions with the same teaching assistants. The instructions on the
take-home exam explicitly prohibited collaboration, but many students said they did not think
that included talking with teaching assistants.
The first page of the exam contained these instructions: “The exam is completely open book,
open note, open Internet, etc. However, in all other regards, this should fall under similar
guidelines that apply to in-class exams. More specifically, students may not discuss the exam
with others—this includes resident tutors, writing centers, etc.”
Students complained about confusing questions on the final exam. Due to “some good questions”
from students, the instructor clarified three exam questions by email before the due date of the
exams.
Students claim to have believed that collaboration was allowed in the course. The course’s
instructor and the teaching assistants sometimes encouraged collaboration, in fact. The teaching
assistants—graduate students who graded the exams and ran weekly discussion sessions—varied
widely in how they prepared students for the exams, so it was common for students in different
sections to share lecture notes and reading materials. During the final exam, some teaching
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Ethical Obligations and Decision Making in Accounting, 4/e 2
assistants even worked with students to define unfamiliar terms and help them figure out exactly
what certain test questions were asking.
Some have questioned whether it is the test’s design, rather than the students’ conduct, that
should be criticized. Others place the blame on the teaching assistants who opened the door to
collaboration outside of class by their own behavior in helping students to understand the
questions better.
An interesting part of the scandal is that, in March 2013, administrators searched e-mail accounts
of some junior faculty members, looking for the source of leaks to the news media about the
cheating investigation, prompting much of the faculty to protest what it called a breach of trust.
Harvard adopted an honor code on May 6, 2014. The goal is to establish a culture of academic
integrity at the university.
Answer the following questions about the Harvard cheating scandal.
1. Using Josephson’s Six Pillars of Character, which of the character traits (virtues)
apply to the Harvard cheating scandal and how do they apply with respect to the
actions of each of the stakeholders in this case?
The stakeholders in this case are the students in the class who did cheat, the students in
the class who did not cheat, the professor, the teaching assistants, other students at the
university, alumni of the university, parent of students and future employers of the
students.
The students who did not cheat displayed trustworthiness, including honesty, integrity
and reliability, respect, responsibility and fairness. The students who did cheat acted out
of self-interest. The professor and teaching assistant did not seem to communicate clearly
or possibly consistently to all students which may be viewed as a lack of caring or
fairness. The other stakeholders are the innocent bystanders in the scandal including the
university community at large that want the reputation of Harvard to be upheld.
2. Who is at fault for the cheating scandal? Is it the students, the teaching assistants,
the professor, or the institution? Use ethical reasoning to support your answer.
The Harvard cheating scandal is not black or white from an ethical perspective. One way
to evaluate it is by examining the behavior and actions of the stakeholders. The instructor
is partly to blame because unclear questions had to be clarified and that would have
promoted collaboration to better understand just what the instructor’s intentions were.
For the instructor, the students’ collaborative work does make it difficult to assess
individual performance—because many people’s answers sounded similar, instructors
could not determine who really understood the work and who was merely free-riding. As
a professor, this is why a group project may require oral presentations so individual effort
can be assessed and graded.
assistants even worked with students to define unfamiliar terms and help them figure out exactly
what certain test questions were asking.
Some have questioned whether it is the test’s design, rather than the students’ conduct, that
should be criticized. Others place the blame on the teaching assistants who opened the door to
collaboration outside of class by their own behavior in helping students to understand the
questions better.
An interesting part of the scandal is that, in March 2013, administrators searched e-mail accounts
of some junior faculty members, looking for the source of leaks to the news media about the
cheating investigation, prompting much of the faculty to protest what it called a breach of trust.
Harvard adopted an honor code on May 6, 2014. The goal is to establish a culture of academic
integrity at the university.
Answer the following questions about the Harvard cheating scandal.
1. Using Josephson’s Six Pillars of Character, which of the character traits (virtues)
apply to the Harvard cheating scandal and how do they apply with respect to the
actions of each of the stakeholders in this case?
The stakeholders in this case are the students in the class who did cheat, the students in
the class who did not cheat, the professor, the teaching assistants, other students at the
university, alumni of the university, parent of students and future employers of the
students.
The students who did not cheat displayed trustworthiness, including honesty, integrity
and reliability, respect, responsibility and fairness. The students who did cheat acted out
of self-interest. The professor and teaching assistant did not seem to communicate clearly
or possibly consistently to all students which may be viewed as a lack of caring or
fairness. The other stakeholders are the innocent bystanders in the scandal including the
university community at large that want the reputation of Harvard to be upheld.
2. Who is at fault for the cheating scandal? Is it the students, the teaching assistants,
the professor, or the institution? Use ethical reasoning to support your answer.
The Harvard cheating scandal is not black or white from an ethical perspective. One way
to evaluate it is by examining the behavior and actions of the stakeholders. The instructor
is partly to blame because unclear questions had to be clarified and that would have
promoted collaboration to better understand just what the instructor’s intentions were.
For the instructor, the students’ collaborative work does make it difficult to assess
individual performance—because many people’s answers sounded similar, instructors
could not determine who really understood the work and who was merely free-riding. As
a professor, this is why a group project may require oral presentations so individual effort
can be assessed and graded.
Loading page 25...
Ethical Obligations and Decision Making in Accounting, 4/e 3
Ironically, the motto of Harvard, the oldest education institution in the U.S. and founded
in 1636, is “Veritas,” which means truth in Latin. The truth is Harvard relied too heavily
on students being honest – honoring its honor code – in a time when student cheating is
rampant. An interesting perspective on the Harvard cheating scandal and cheating in
college in general is a Time article “Harvard Cheating Scandal: Is Academic Dishonesty
on the Rise?” by Erika Christakis and Nicholas A. Christakis, Sept. 04, 2012,
http://ideas.time.com/2012/09/04/harvard-cheating-scandal-is-academic-dishonesty-on-
the-rise/.
3. Do you think Harvard had a right to search the e-mail accounts of junior faculty,
looking for the source of leaks to the news media? Explain.
Harvard had a right to set policies on using university owned computers and university
provided email accounts. Most organizations with a computer and email usage policies
state whether the organization reserves the right to monitor email usage and to review
Internet history on computers. If Harvard did not have such a policy, then such a search
seems to be vendetta search against the leak. Had Harvard or any of the faculty
previously spoken to the press? Could the leak have come from a student? Did Harvard
search the email accounts of the students at Harvard?
On March 9, 2013, the Boston Globe reported that Harvard administrators secretly accessed the
email accounts of 16 resident deans in an attempt to determine who leaked communication
regarding the Government 1310 cheating scandal that made its way to the media.
The searches, reported on the basis of interviews with “several Harvard officials,” were for the
origin of the leak of an internal email sent on August 16, 2012 by Secretary of the Administrative
Board John “Jay” L. Ellison. That internal email, in which Ellison advised his colleagues about
how to counsel athletes and other students implicated in the scandal, had been forwarded by a
resident dean to one of his students.
Administrators informed the resident dean who had forwarded Ellison’s email of the search
shortly after it occurred, but did not tell the other resident deans until after being approached by
the Globe. The Globe article noted that administrators searched one of two Harvard email
accounts belonging to resident deans—the account for administrative matters, rather than for
personal ones. Also, Harvard information technology employees were told to look only for
certain email subject lines and not to read the contents of messages themselves, the Globe
reported. (Source: http://www.thecrimson.com/article/2013/3/9/cheating-leak-email-search/).
4. What is meant by the culture of an organization? Can an honor code establish a
culture of academic integrity in an institution such as Harvard University?
Every organization creates its own culture and normal operating procedures. The culture
is highly influenced by the top officers and what is rewarded in the organization. A
university is based on a principle of shared governance with administrators and faculty.
Under shared governance, a task force or committee composed of administrators, faculty
and students would have held many discussions of what an honor code does, what it
Ironically, the motto of Harvard, the oldest education institution in the U.S. and founded
in 1636, is “Veritas,” which means truth in Latin. The truth is Harvard relied too heavily
on students being honest – honoring its honor code – in a time when student cheating is
rampant. An interesting perspective on the Harvard cheating scandal and cheating in
college in general is a Time article “Harvard Cheating Scandal: Is Academic Dishonesty
on the Rise?” by Erika Christakis and Nicholas A. Christakis, Sept. 04, 2012,
http://ideas.time.com/2012/09/04/harvard-cheating-scandal-is-academic-dishonesty-on-
the-rise/.
3. Do you think Harvard had a right to search the e-mail accounts of junior faculty,
looking for the source of leaks to the news media? Explain.
Harvard had a right to set policies on using university owned computers and university
provided email accounts. Most organizations with a computer and email usage policies
state whether the organization reserves the right to monitor email usage and to review
Internet history on computers. If Harvard did not have such a policy, then such a search
seems to be vendetta search against the leak. Had Harvard or any of the faculty
previously spoken to the press? Could the leak have come from a student? Did Harvard
search the email accounts of the students at Harvard?
On March 9, 2013, the Boston Globe reported that Harvard administrators secretly accessed the
email accounts of 16 resident deans in an attempt to determine who leaked communication
regarding the Government 1310 cheating scandal that made its way to the media.
The searches, reported on the basis of interviews with “several Harvard officials,” were for the
origin of the leak of an internal email sent on August 16, 2012 by Secretary of the Administrative
Board John “Jay” L. Ellison. That internal email, in which Ellison advised his colleagues about
how to counsel athletes and other students implicated in the scandal, had been forwarded by a
resident dean to one of his students.
Administrators informed the resident dean who had forwarded Ellison’s email of the search
shortly after it occurred, but did not tell the other resident deans until after being approached by
the Globe. The Globe article noted that administrators searched one of two Harvard email
accounts belonging to resident deans—the account for administrative matters, rather than for
personal ones. Also, Harvard information technology employees were told to look only for
certain email subject lines and not to read the contents of messages themselves, the Globe
reported. (Source: http://www.thecrimson.com/article/2013/3/9/cheating-leak-email-search/).
4. What is meant by the culture of an organization? Can an honor code establish a
culture of academic integrity in an institution such as Harvard University?
Every organization creates its own culture and normal operating procedures. The culture
is highly influenced by the top officers and what is rewarded in the organization. A
university is based on a principle of shared governance with administrators and faculty.
Under shared governance, a task force or committee composed of administrators, faculty
and students would have held many discussions of what an honor code does, what it
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Ethical Obligations and Decision Making in Accounting, 4/e 4
should say, and the policies and procedures for when the honor code is not followed.
Those discussions should encourage all to follow the prescribed standards and it brings
the buy in of all and starts to change the culture. No honor code, policy or laws can
eliminate all cheating but it can set the expectations.
Video Links:
http://www.youtube.com/watch?v=1PBsVH68Iig
http://www.youtube.com/watch?v=XF91EwL-qEQ
http://www.youtube.com/watch?v=TUfbrj28r4c
http://www.youtube.com/watch?v=bH4k9DTdLkA
should say, and the policies and procedures for when the honor code is not followed.
Those discussions should encourage all to follow the prescribed standards and it brings
the buy in of all and starts to change the culture. No honor code, policy or laws can
eliminate all cheating but it can set the expectations.
Video Links:
http://www.youtube.com/watch?v=1PBsVH68Iig
http://www.youtube.com/watch?v=XF91EwL-qEQ
http://www.youtube.com/watch?v=TUfbrj28r4c
http://www.youtube.com/watch?v=bH4k9DTdLkA
Loading page 27...
Ethical Obligations and Decision Making in Accounting, 4/e 1
Case 1-2 Giles and Regas
This case is treated as GVV in the Test Bank IM in Chapter
2. Faculty can assign the case in Chapter 1 or delay it until
Chapter 2, if they plan to use it for GVV testing purposes in
Chapter 2.
Ed Giles and Susan Regas have never been happier than during the past four months since they
have been seeing each other. Giles is a 35-year-old CPA and a partner in the medium-sized
accounting firm of Saduga & Mihca. Regas is a 25-year-old senior accountant in the same firm.
Although it is acceptable for peers to date, the firm does not permit two members of different
ranks within the firm to do so. A partner should not date a senior in the firm any more than a
senior should date a junior staff accountant. If such dating eventually leads to marriage, then one
of the two must resign because of the conflicts of interest. Both Giles and Regas know the firm’s
policy on dating, and they have tried to be discreet about their relationship because they don’t
want to raise any suspicions.
While most of the staff seem to know about Giles and Regas, it is not common knowledge
among the partners that the two of them are dating. Perhaps that is why Regas was assigned to
work on the audit of CAA Industries for a second year, even though Giles is the supervising
partner on the engagement.
As the audit progresses, it becomes clear to the junior staff members that Giles and Regas are
spending personal time together during the workday. On one occasion, they were observed
leaving for lunch together. Regas did not return to the client’s office until three hours later. On
another occasion, Regas seemed distracted from her work, and later that day, she received a
dozen roses from Giles. A friend of Regas’s who knew about the relationship, Ruth Revilo,
became concerned when she happened to see the flowers and a card that accompanied them. The
card was signed, “Love, Poochie.” Regas had once told Revilo that it was the nickname that
Regas gave to Giles.
Revilo pulls Regas aside at the end of the day and says, “We have to talk.”
“What is it?” Regas asks.
“I know the flowers are from Giles,” Revilo says. “Are you crazy?”
“It’s none of your business,” Regas responds.
Revilo goes on to explain that others on the audit engagement team are aware of the relationship
between the two. Revilo cautions Regas about jeopardizing her future with the firm by getting
involved in a serious dating relationship with someone of a higher rank. Regas does not respond
to this comment. Instead, she admits to being distracted lately because of an argument that she
had with Giles. It all started when Regas had suggested to Giles that it might be best if they did
Case 1-2 Giles and Regas
This case is treated as GVV in the Test Bank IM in Chapter
2. Faculty can assign the case in Chapter 1 or delay it until
Chapter 2, if they plan to use it for GVV testing purposes in
Chapter 2.
Ed Giles and Susan Regas have never been happier than during the past four months since they
have been seeing each other. Giles is a 35-year-old CPA and a partner in the medium-sized
accounting firm of Saduga & Mihca. Regas is a 25-year-old senior accountant in the same firm.
Although it is acceptable for peers to date, the firm does not permit two members of different
ranks within the firm to do so. A partner should not date a senior in the firm any more than a
senior should date a junior staff accountant. If such dating eventually leads to marriage, then one
of the two must resign because of the conflicts of interest. Both Giles and Regas know the firm’s
policy on dating, and they have tried to be discreet about their relationship because they don’t
want to raise any suspicions.
While most of the staff seem to know about Giles and Regas, it is not common knowledge
among the partners that the two of them are dating. Perhaps that is why Regas was assigned to
work on the audit of CAA Industries for a second year, even though Giles is the supervising
partner on the engagement.
As the audit progresses, it becomes clear to the junior staff members that Giles and Regas are
spending personal time together during the workday. On one occasion, they were observed
leaving for lunch together. Regas did not return to the client’s office until three hours later. On
another occasion, Regas seemed distracted from her work, and later that day, she received a
dozen roses from Giles. A friend of Regas’s who knew about the relationship, Ruth Revilo,
became concerned when she happened to see the flowers and a card that accompanied them. The
card was signed, “Love, Poochie.” Regas had once told Revilo that it was the nickname that
Regas gave to Giles.
Revilo pulls Regas aside at the end of the day and says, “We have to talk.”
“What is it?” Regas asks.
“I know the flowers are from Giles,” Revilo says. “Are you crazy?”
“It’s none of your business,” Regas responds.
Revilo goes on to explain that others on the audit engagement team are aware of the relationship
between the two. Revilo cautions Regas about jeopardizing her future with the firm by getting
involved in a serious dating relationship with someone of a higher rank. Regas does not respond
to this comment. Instead, she admits to being distracted lately because of an argument that she
had with Giles. It all started when Regas had suggested to Giles that it might be best if they did
Loading page 28...
Ethical Obligations and Decision Making in Accounting, 4/e 2
not go out during the workweek because she was having a hard time getting to work on time.
Giles was upset at the suggestion and called her ungrateful. He said, “I’ve put everything on the
line for you. There’s no turning back for me.” She points out to Revilo that the flowers are
Giles’s way of saying he is sorry for some of the comments he had made about her.
Regas promises to talk to Giles and thanks Revilo for her concern. That same day, Regas
telephones Giles and tells him she wants to put aside her personal relationship with him until the
CAA audit is complete in two weeks. She suggests that, at the end of the two-week period, they
get together and thoroughly examine the possible implications of their continued relationship.
Giles reluctantly agrees, but he conditions his acceptance on having a “farewell” dinner at their
favorite restaurant. Regas agrees to the dinner.
Giles and Regas have dinner that Saturday night. As luck would have it, the controller of CAA
Industries, Mark Sax, is at the restaurant with his wife. Sax is startled when he sees Giles and
Regas together. He wonders about the possible seriousness of their relationship, while reflecting
on the recent progress billings of the accounting firm. Sax believes that the number of hours
billed is out of line with work of a similar nature and the fee estimate. He had planned to discuss
the matter with Herb Morris, the managing partner of the firm. He decides to call Morris on
Monday morning.
“Herb, you son of a gun, it’s Mark Sax.”
“Mark. How goes the audit?”
“That’s why I’m calling,” Sax responds. “Can we meet to discuss a few items?”
“Sure,” Morris replies. “Just name the time and place.”
“How about first thing tomorrow morning?” asks Sax.
“I’ll be in your office at 8:00 a.m.,” says Morris.
“Better make it at 7:00 a.m., Herb, before your auditors arrive.”
Sax and Morris meet to discuss Sax’s concerns about seeing Giles and Regas at the restaurant
and the possibility that their relationship is negatively affecting audit efficiency. Morris asks
whether any other incidents have occurred to make him suspicious about the billings. Sax says
that he is only aware of this one instance, although he sensed some apprehension on the part of
Regas last week when they discussed why it was taking so long to get the audit recommendations
for adjusting entries. Morris listens attentively until Sax finishes and then asks him to be patient
while he sets up a meeting to discuss the situation with Giles. Morris promises to get back to Sax
by the end of the week.
Teaching Notes for the Case
not go out during the workweek because she was having a hard time getting to work on time.
Giles was upset at the suggestion and called her ungrateful. He said, “I’ve put everything on the
line for you. There’s no turning back for me.” She points out to Revilo that the flowers are
Giles’s way of saying he is sorry for some of the comments he had made about her.
Regas promises to talk to Giles and thanks Revilo for her concern. That same day, Regas
telephones Giles and tells him she wants to put aside her personal relationship with him until the
CAA audit is complete in two weeks. She suggests that, at the end of the two-week period, they
get together and thoroughly examine the possible implications of their continued relationship.
Giles reluctantly agrees, but he conditions his acceptance on having a “farewell” dinner at their
favorite restaurant. Regas agrees to the dinner.
Giles and Regas have dinner that Saturday night. As luck would have it, the controller of CAA
Industries, Mark Sax, is at the restaurant with his wife. Sax is startled when he sees Giles and
Regas together. He wonders about the possible seriousness of their relationship, while reflecting
on the recent progress billings of the accounting firm. Sax believes that the number of hours
billed is out of line with work of a similar nature and the fee estimate. He had planned to discuss
the matter with Herb Morris, the managing partner of the firm. He decides to call Morris on
Monday morning.
“Herb, you son of a gun, it’s Mark Sax.”
“Mark. How goes the audit?”
“That’s why I’m calling,” Sax responds. “Can we meet to discuss a few items?”
“Sure,” Morris replies. “Just name the time and place.”
“How about first thing tomorrow morning?” asks Sax.
“I’ll be in your office at 8:00 a.m.,” says Morris.
“Better make it at 7:00 a.m., Herb, before your auditors arrive.”
Sax and Morris meet to discuss Sax’s concerns about seeing Giles and Regas at the restaurant
and the possibility that their relationship is negatively affecting audit efficiency. Morris asks
whether any other incidents have occurred to make him suspicious about the billings. Sax says
that he is only aware of this one instance, although he sensed some apprehension on the part of
Regas last week when they discussed why it was taking so long to get the audit recommendations
for adjusting entries. Morris listens attentively until Sax finishes and then asks him to be patient
while he sets up a meeting to discuss the situation with Giles. Morris promises to get back to Sax
by the end of the week.
Teaching Notes for the Case
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Ethical Obligations and Decision Making in Accounting, 4/e 3
The objective of this case is to make students aware of the potential dangers of getting involved
in a dating relationship with someone of higher rank in the firm. A strong possibility exists that
the staff member of lower rank will have his or her progress in the firm at least temporarily
slowed by becoming involved with someone of higher rank. Additionally, the more senior staff
member now has a conflict of interest, such as exists for Ed Giles in the case. The ethical issues
pertain to fairness in the treatment of employees and whether the firm can meet its obligations to
a client when staff members on the audit are involved in a dating relationship.
Ethical and Professional Issues
Giles and Regas have put themselves in a position where their work product may suffer as a
result of their relationship. It appears that this already has occurred since Mark Sax, the
controller of CAA Industries, has expressed his concerns to Herb Morris, the managing partner
of the local office of the firm that the delay in audit completion and high level of billings may be
due to distractions resulting from the relationship. The reliability of Giles and Regas seems to be
questioned by Sax.
An important ethical concern is the conflict of interest that Giles may have if, for example, he
determines that Regas is not adequately carrying out her responsibilities. Giles could have a
difficult time dealing with this situation in the same way that he would handle a situation that
involved a staff member with whom his relationship is solely professional. Moreover, the audit
manager is in a sensitive position because he or she may know of the relationship and hesitate to
treat Regas the same way other staff members are treated because Giles is the manager's
superior. A conflict of interest tends to cloud one's judgment as to what is the right thing to do. It
makes it more difficult for a supervisor to be impartial. Even the appearance of a conflict can
harm the image of the professional.
It has been said that the best way to handle a conflict of interest is not to become involved in one
in the first place. This is why the codes of conduct of professional accounting associations
preclude members from engaging in activities that can create such a conflict. The Principle of
Objectivity in the AICPA Code requires that:
A member should maintain objectivity and be free of conflicts of interest in discharging
professional responsibilities.
The ethical standard of Integrity in IMA Code states that:
Management accountants have a responsibility to avoid actual or apparent conflicts of interest
and advise all appropriate parties of any potential conflict.
The firm's policy on dating seems to be appropriate. It is designed to avoid compromising client
relations and audit efficiency. The profession sets high standards of conduct to guide its
members in relationships with clients, suppliers, customers and others who can influence the
decision-making process. These same high standards should be aspired to by all CPAs in dealing
with members of their organization and other professionals.
The objective of this case is to make students aware of the potential dangers of getting involved
in a dating relationship with someone of higher rank in the firm. A strong possibility exists that
the staff member of lower rank will have his or her progress in the firm at least temporarily
slowed by becoming involved with someone of higher rank. Additionally, the more senior staff
member now has a conflict of interest, such as exists for Ed Giles in the case. The ethical issues
pertain to fairness in the treatment of employees and whether the firm can meet its obligations to
a client when staff members on the audit are involved in a dating relationship.
Ethical and Professional Issues
Giles and Regas have put themselves in a position where their work product may suffer as a
result of their relationship. It appears that this already has occurred since Mark Sax, the
controller of CAA Industries, has expressed his concerns to Herb Morris, the managing partner
of the local office of the firm that the delay in audit completion and high level of billings may be
due to distractions resulting from the relationship. The reliability of Giles and Regas seems to be
questioned by Sax.
An important ethical concern is the conflict of interest that Giles may have if, for example, he
determines that Regas is not adequately carrying out her responsibilities. Giles could have a
difficult time dealing with this situation in the same way that he would handle a situation that
involved a staff member with whom his relationship is solely professional. Moreover, the audit
manager is in a sensitive position because he or she may know of the relationship and hesitate to
treat Regas the same way other staff members are treated because Giles is the manager's
superior. A conflict of interest tends to cloud one's judgment as to what is the right thing to do. It
makes it more difficult for a supervisor to be impartial. Even the appearance of a conflict can
harm the image of the professional.
It has been said that the best way to handle a conflict of interest is not to become involved in one
in the first place. This is why the codes of conduct of professional accounting associations
preclude members from engaging in activities that can create such a conflict. The Principle of
Objectivity in the AICPA Code requires that:
A member should maintain objectivity and be free of conflicts of interest in discharging
professional responsibilities.
The ethical standard of Integrity in IMA Code states that:
Management accountants have a responsibility to avoid actual or apparent conflicts of interest
and advise all appropriate parties of any potential conflict.
The firm's policy on dating seems to be appropriate. It is designed to avoid compromising client
relations and audit efficiency. The profession sets high standards of conduct to guide its
members in relationships with clients, suppliers, customers and others who can influence the
decision-making process. These same high standards should be aspired to by all CPAs in dealing
with members of their organization and other professionals.
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Ethical Obligations and Decision Making in Accounting, 4/e 4
Giles and Regas are not acting in a professional manner. They seem to know this because in the
last sentence of the first paragraph it states that they "have tried to be discreet about their
relationship because they don't want to create any suspicions." If they truly felt comfortable with
their relationship, then they would have nothing to hide. However, their actions violate firm
policy and this is undoubtedly why they are being discreet.
It appears from the facts of the case that Giles is more responsible than Regas for the tension on
the CAA Industries audit. To begin with, he never should have allowed Regas to serve as the
senior on the audit since he is the supervising partner on the engagement. Perhaps he allowed her
to work on the audit because to do otherwise might have aroused suspicions about a possible
relationship between the two of them. Giles also seems to have created stress for Regas by his
inappropriate comment: "There's no turning back for me." This type of comment can only add to
the pressure Regas feels, given that her work is scrutinized by Giles. The result may be to
negatively affect audit efficiency.
Although Regas' involvement in the relationship should not be dismissed, she does seem to
recognize the dangers and ultimately makes a decision to put aside their relationship in the
interests of completing the audit. Rather than simply honoring her request not to date for two
weeks, Giles conditions his agreement on a "farewell" dinner. This is not a very caring and
considerate thing to do and it demonstrates selfishness on the part of Giles. In fact, the dinner is
the event that brings matters out in the open because Mark Sax now suspects that their
relationship may be affecting completion of the audit. The direct involvement of the client puts
the firm in a very difficult position, one that Herb Morris will have to deal with at the meeting
with Giles.
Ethical Analysis
The decision to be made by Herb Morris can be analyzed using ethical reasoning. The
stakeholders affected by Morris' decision include: Giles and Regas; the accounting firm; other
staff members of the firm and its partners; CAA Industries and other clients that might be
affected by the decision; and Mark Sax.
Utilitarian Theory: From a utilitarian perspective, Morris should weigh the consequences of
alternative courses of action. The alternatives and an evaluation of the potential benefits and
harms of each course of action follow.
Permit Giles and Regas to complete the audit, but ask one of them to resign thereafter. It is not
practical to remove Giles or Regas from an audit that should be completed in about two weeks.
The decision already has been made to put aside their relationship until the CAA audit is
completed. This seems to be the best option from both the accounting firm's position and that of
the client. All stakeholders seem to benefit from allowing Giles and Regas to fulfill their audit
responsibilities under act utilitarianism.
The second part of this option is more troubling in that it is difficult to determine who should be
asked to resign. It is an issue of fairness and due care. On the surface it may appear that Regas
should be asked to resign because of Giles' position in the firm. However, this may not be in the
Giles and Regas are not acting in a professional manner. They seem to know this because in the
last sentence of the first paragraph it states that they "have tried to be discreet about their
relationship because they don't want to create any suspicions." If they truly felt comfortable with
their relationship, then they would have nothing to hide. However, their actions violate firm
policy and this is undoubtedly why they are being discreet.
It appears from the facts of the case that Giles is more responsible than Regas for the tension on
the CAA Industries audit. To begin with, he never should have allowed Regas to serve as the
senior on the audit since he is the supervising partner on the engagement. Perhaps he allowed her
to work on the audit because to do otherwise might have aroused suspicions about a possible
relationship between the two of them. Giles also seems to have created stress for Regas by his
inappropriate comment: "There's no turning back for me." This type of comment can only add to
the pressure Regas feels, given that her work is scrutinized by Giles. The result may be to
negatively affect audit efficiency.
Although Regas' involvement in the relationship should not be dismissed, she does seem to
recognize the dangers and ultimately makes a decision to put aside their relationship in the
interests of completing the audit. Rather than simply honoring her request not to date for two
weeks, Giles conditions his agreement on a "farewell" dinner. This is not a very caring and
considerate thing to do and it demonstrates selfishness on the part of Giles. In fact, the dinner is
the event that brings matters out in the open because Mark Sax now suspects that their
relationship may be affecting completion of the audit. The direct involvement of the client puts
the firm in a very difficult position, one that Herb Morris will have to deal with at the meeting
with Giles.
Ethical Analysis
The decision to be made by Herb Morris can be analyzed using ethical reasoning. The
stakeholders affected by Morris' decision include: Giles and Regas; the accounting firm; other
staff members of the firm and its partners; CAA Industries and other clients that might be
affected by the decision; and Mark Sax.
Utilitarian Theory: From a utilitarian perspective, Morris should weigh the consequences of
alternative courses of action. The alternatives and an evaluation of the potential benefits and
harms of each course of action follow.
Permit Giles and Regas to complete the audit, but ask one of them to resign thereafter. It is not
practical to remove Giles or Regas from an audit that should be completed in about two weeks.
The decision already has been made to put aside their relationship until the CAA audit is
completed. This seems to be the best option from both the accounting firm's position and that of
the client. All stakeholders seem to benefit from allowing Giles and Regas to fulfill their audit
responsibilities under act utilitarianism.
The second part of this option is more troubling in that it is difficult to determine who should be
asked to resign. It is an issue of fairness and due care. On the surface it may appear that Regas
should be asked to resign because of Giles' position in the firm. However, this may not be in the
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Accounting