Ethical Obligations

Business

Quiz 1 :

Ethical Reasoning: Implications for Accounting

Quiz 1 :

Ethical Reasoning: Implications for Accounting

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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?
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Culture is framework that is set by a particular society in which the behavior of its members is regulated by the beliefs, values and customs set by the society from which they belong. Beliefs and values guides the behavior of an individual.
Individualism (IDV) focus on the efforts put by the society on the interpersonal relationships and on individual or collective achievement while taking decision. High IDV indicates individualistic society in which the individuals are intended to look after themselves and their immediate family.
Low IDV indicates collective society and people belongs to a group and decisions are taken on collective basis. Group or society is treated as the basic unit of moral concern and individual is expected to serve the group from which it belongs
As the IDV of country 'C' is low then it indicates that 'C' has a communist society so the member in the management who has a direct control on the behavior of its employees who has taken an action which is harmful for the general public, will try to cover up his/her action in order to protect the reputation of their society.
The IDV of country 'U' is high which indicates that they are individualistic society that shows that any action taken by any of the employee will not be tolerated and they will be answerable to the management.
Hence the employee who has taken action that is harmful for the society will have to give reason for the particular action to the member of the management.

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Better Boston Beans Better Boston Beans is a coffee shop located in the Faneuil Hall Marketplace near the waterfront and Government Center in Boston. It specializes in exotic blends of coffee, including Sumatra Dark Roast Black, India Mysore "Gold Nuggets," and Guatemala Antigua. It also serves a number of blended coffees, including Reggae Blend, Jamaican Blue Mountain Blend, and Marrakesh Blend. For those with more pedestrian tastes, the shop serves French Vanilla, Hazelnut, and Hawaiian Macadamia Nut varieties. The coffee of the day varies, but the most popular is Colombia Supremo. The coffee shop also serves a variety of cold-blended coffees. Cyndie Rosen has worked for Better Boston Beans for six months. She took the job right out of college because she wasn't sure whether she wanted to go to graduate school before beginning a career in financial services. Cyndie hoped that by taking a year off before starting her career or going on to graduate school, she would experience "the real world" and find out firsthand what it is like to work a 40 -hour week. (She did not have a full-time job during her college years because her parents paid for the tuition and books.) Because Cyndie is the "new kid on the block," she is often asked to work the late shift, from 4 p.m. to midnight. She works with one other person, Jeffrey Levy, who is the assistant shift supervisor. Jeffrey has been with Boston Beans for three years but recently was demoted from shift supervisor. Jeffrey reports to Sarah Hoffman, the new shift supervisor. Sarah reports to David Cohen, the owner of the store. For the past two weeks, Jeffrey has been leaving before 11 p.m., after most of the stores in the Marketplace close, and he has asked Cyndie to close up by herself. Cyndie feels that this is wrong and it is starting to concern her, but she hasn't spoken to Jeffrey or anyone else. Basically, she is afraid to lose her job. Her parents have told her that financially she is on her own. They were disappointed that Cyndie did not go to graduate school or interview for a professional position after graduating from college. Something happened that is stressing Cyndie out and she doesn't know what to do about it. At 11 p.m. one night, 10 Japanese tourists came into the store for coffee. Cyndie was alone and had to rush around and make five different cold-blended drinks and five different hot-blended coffees. While she was working, one of the Japanese tourists, who spoke English very well, approached her and said that he was shocked that such a famous American coffee shop would only have one worker in the store at any time during the workday. Cyndie didn't want to ignore the man's comments, so she answered that her coworker had to go home early because he was sick. That seemed to satisfy the tourist. It took Cyndie almost 20 minutes to make all the drinks and also field two phone calls that came in during that time. After she closed for the night, she reflected on the experience. Cyndie realized that it could get worse before it gets better because Jeffrey was now making it a habit to leave work early. At this point, Cyndie realizes that she either has to approach Jeffrey about her concerns or speak to Sarah. She feels much more comfortable talking to Sarah because, in Cyndie's own words, "Levy gives me the creeps." Questions 1.Do you think it was right for Cyndie to tell the Japanese tourist that "her coworker had to go home early because he was sick?" 2.Cyndie decided to speak with Jeffrey. From an ethical perspective, do you think Cyndie made the right decision as opposed to speaking directly with either Sarah Hoffman or David Cohen? Would you have done the same thing? Why or why not? 3.During their discussion, Jeffrey tells Cyndie that he has an alcohol problem. Lately, it's gotten to him really bad. That's why he's left early-to get a drink and calm his nerves. Jeffrey also explains that this is the real reason he was demoted. He had been warned that if one more incident occurred, David would fire him. He pleaded with Cyndie to work with him through these hard times. How would you react to Jeffrey's request if you were Cyndie? Would your answer change if Jeffrey was a close personal friend instead of someone who gave you the creeps? Why or why not? 4.Assume that Cyndie keeps quiet. The following week, another incident occurs. Cyndie gets into a shouting match with a customer who became tired of waiting for his coffee after 10 minutes. Cyndie felt terrible about it, apologized to the customer after serving his coffee, and left work that night wondering if it was time to4.apply to graduate school. The customer was so irate that he contacted David and expressed his displeasure about both the service and Cyndie's attitude. David asks to meet with Jeffrey, Sarah, and Cyndie the next day. What are Cyndie's ethical responsibilities at this point?
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Ethical responsibility: It is responsibility of every individual to follow morally correct path. Business ethics which is also known as corporate ethics examines ethical principles and problem related to it in business environment. It is relevant in the management of employees working in an organization.
'C' is working in BB coffee shop which was quite famous for its exotic blended coffee. She being a new employee in the café has to work from 4pm to mid night with another coworker 'J' who was assistant shift supervisor. J was who was working from three years in BB coffee shop was recently demoted from shift supervisor. Now he has to report to S who was new shift supervisor who then then reports to the owner of the coffee shop.
From last two weeks he has been leaving shop early after most of the shops in that area are closed. This shifts the entire work load of the shop to one person who is 'C'. C being a new employee was afraid to report this problem to her senior as she was afraid to lose her job. One night a group of tourist came and she had to handle them alone which resulted in delay in service which was objected by one of the tourist that one person is not sufficient to handle such big coffee shop alone.
1.
Teleological reasoning explains that the action is ethically right if the result from such action is good or desirable. Hence one time lie by C to the tourist to save the image of the coffee shop can be regarded as ethically and morally correct. But she should make sure that such kind of situation does not arise in future and she also inform the same to her immediate superior about the ongoing problem she has to face because of the leniency of her coworker.
2.
The decision made by C to speak directly with J can be considered as ethical as her intention was good. She knew that J was demoted few days back and if any new complaint is made against him to the shift supervisor or the owner then he may lose his job. He may also pose harm to her in future on discovery of the reason behind the suspension of his job or the punishment that will be given to him by the seniors.
Any person in place of C would have done the same as it will be better to warn J for the leniency he is doing with his job otherwise the repercussions will not be good. If in case any complaint is made directly to the senior and they leave him with a mere warning then the relation among these employees will become bad.
3.
As told by J that he was having alcohol problem which was the reason for his recent demotion and also due to which he left the shop early. He told C that he was given a warning for this that if same mistake is repeated again then the owner will fire him.
Any person in place of C should make complaint to his/her seniors as such kind of person is not good for the image of the shop. He can pose a serious harm to the customers as well his collogues working with him in the shop. If he is having such problems then he should take few days leave and try to overcome his problem.
If the person did not make any complaint then in future if any problem arises then the person will be responsible for not informing their superiors about such employee and earlier incidences.
No, even if J is a close friend a complaint should be made against him as it will be ethically right. Such person should be suspended for few days so that he can overcome his drinking problem or either should be fired. It is not ethical or morally correct to involve personal relations at work place especially those that includes safety related issues to the customer or the employees working in that environment
4.
Is C opts to ignore this incidence and did not inform any of his seniors and in future same incidence takes places and she indulges in an argument with the customers later on who made a complaint of same to the owner of the shop.
When a meeting is conducted to discuss the same issue C should not leave the shop for such incidence or she wants to resign she should first inform her seniors that it was J's fault as he has some drinking problem due to which he most of the times leaves shop early. As a result of which entire burden of shop comes of C and hence resulted in an argument with one of the customer.
She should also tell her seniors that earlier also same incidence took place but J promised that he will not repeat this mistake again and hence she didn't complained her seniors.

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Giles and Regas 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 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 foe 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 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. Questions 1.Analyze the behavior of each party from the perspective of the Six Pillars of Character. Assess the personal responsibility of Ed Giles and Susan Regas for the relationship that developed between them. Who do you think is mostly to blame? 2.If Giles were a person of integrity but just happened to have a "weak moment" in starting a relationship with Regas, what do you think he will say when he meets with Herb Morris? Why? 3.Assume that Ed Giles is the biggest "rainmaker" in the firm. What would you do if you were in Herb Morris's position when you meet with Giles? In your response, consider how you would resolve the situation in regard to both the completion of the CAA Industries audit and the longer-term issue of the continued employment of Giles and Regas in the accounting firm.
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The following summarizes the events in the case:
• An accounting firm strictly forbids dating between different rank employees of its firm
• The firm's executive, G, and his employee, R, are dating
• They are conducting an audit
• Another executive suspects their amounts on their billable hours.
1.
The Josephson's Six Pillars of character are:
• Trustworthiness - need for honesty and integrity.
• Respect - treat people with respect and as equals
• Responsibility - be accountable for actions, act with a reasonable level of care
• Fairness - treat people with an equal, impartial standard
• Caring - be understanding of another's issues
• Citizenship - obey laws, be involved in community, vote.
The characters relevant to G and R is trustworthiness and responsibility. They were not trustworthy by hiding their relationship to the company. They also did not act with responsibility. As professional auditors they should be well aware that their degree of fraternization can be viewed as suspicious.
2.
If G was a person of integrity he will admit his relationship to his boss. He will take responsibility for his actions and request to be taken off the audit project.
3.
If G is a valuable employee and there's no other reason to question his work capabilities, the firm may decide to keep him. Out of fairness, they will have to request that either G or R resign from the firm or fire both of them. The firm is concerned with conflict of interest between superiors and their employees, so they can only keep one or the other.

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a.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? b.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.
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Shifty Industries Shifty Industries is a small business that sells home beauty products in the San Luis Obispo, California, area. The company has experienced a cash crunch and is unable to pay its bills on a timely basis. A great deal of pressure exists to minimize cash outflows such as income tax payments to the Internal Revenue Service (IRS) by interpreting income tax regulations as liberally as possible. You are the tax accountant and a CPA working at the company and you report to the tax manager. He reports to the controller. You are concerned about the fact that your supervisor has asked you to go along with an improper treatment of section 179 depreciation on the 2015 tax return so you can deduct the $100,000 full cost of eligible equipment against taxable income. The problem as you see it is the 2014 limitation of $500,000, which would have been fine for 2015 had Congress extended it, was rolled back to a maximum of $25,000. Therefore, your supervisor is planning to allow Shifty to deduct $75,000 more than allowed by law. Using a 35 percent tax rate it means the company is "increasing" its cash flow by $26,250. Answer the following questions to prepare for a meeting you will have tomorrow morning with the tax manager. Questions 1.What values are most important to you in deciding on a course of action? Why? 2.Who are the stakeholders in this case and how might they be affected by your course of action? 3.What would you do and why, assuming your approach will be based on the application of the ethical reasoning methods discussed in the chapter?
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Eating Time Kevin Lowe is depressed. He has been with the CPA firm Stooges LLP for only three months. Yet the partners in charge of the firm-Bo Chambers and his brother, Moe-have asked for a "sit-down." Here's how it goes: "Kevin, we asked to see you because your time reports indicate that it takes you 50 percent longer to complete audit work than your predecessor," Moe said. "Well, I am new and still learning on the job," replied Lowe. "That's true," Bo responded, "but you have to appreciate that we have fixed budgets for these audits. Every hour over the budgeted time costs us money. While we can handle it in the short run, we will have to bill the clients whose audit you work on a larger fee in the future. We don't want to lose clients as a result." "Are you asking me to cut down on the work I do?" Lowe asked. "We would never compromise the quality of our audit work," Moe said. "We're trying to figure out why it takes you so much longer than other staff members." At this point, Lowe started to perspire. He wiped his forehead, took a glass of water, and asked, "Would it be better if I took some of the work home at night and on weekends, completed it, but didn't charge the firm or the client for my time?" Bo and Moe were surprised by Kevin's openness. On one hand, they valued that trait in their employees. On the other hand, they couldn't answer with a yes. Moe looked at Bo, and then turned to Kevin and said, 'It's up to you to decide how to increase your productivity on audits. As you know, this is an important element of performance evaluation." Kevin cringed. Was the handwriting on the wall in terms of his future with the firm? "I understand what you're saying," Kevin said. "I will do better in the future-I promise." "Good," responded Bo and Moe. "Let's meet 30 days from now and we'll discuss your progress on the matters we've discussed today and your future with the firm." In an effort to deal with the problem, Kevin contacts Joyce, a friend and fellow employee, and asks if she has faced similar problems. Joyce answers "yes" and goes on to explain she handles it by "ghost-ticking." Kevin asks her to explain. "Ghost-ticking is when we document audit procedures that have not been completed." Kevin, dumbfounded, wonders, what kind of a firm am I working for? Questions 1.Kevin is not a CPA yet. What are his ethical obligations in this case? 2.Given the facts in the case, evaluate using deontological and teleological reasoning whether Kevin should take work home and not charge it to the job. What about engaging in ghost-ticking? 3.What would you do if you were Kevin and why? How would you explain your position to Bo and Moe when you meet in 30 days?
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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. Broad well 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?
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NYC Subway Death: Bystander Effect or Moral Blindness On December 3, 2012, a terrible incident occurred in the New York City subway when Ki-Suck Han was pushed off a subway platform by Naeem Davis. Han was hit and killed by the train, while observers did nothing other than snap photos on their cell phones as Han was struggling to climb back onto the platform before the oncoming train struck him. Davis was arraigned on a second-degree murder charge and held without bail in the death of Han. One of the most controversial aspects of this story is that of R. Umar Abbasi, a freelance photographer for the New York Post, who was waiting for a train when he said he saw a man approach Han at the Times Square station, get into an altercation with him, and push him into the train's path. He too chose to take pictures of the incident, and the next day, the Post published the photographer's handiwork: a photo of Han with his head turned toward the approaching train, his arms reaching up but unable to climb off the tracks in time. Abbasi told NBC's "Today" show that he was trying to alert the motorman to what was going on by flashing his camera. He said he was shocked that people nearer to the victim didn't try to help in the 22 seconds before the train struck. "It took me a second to figure out what was happening ... I saw the lights in the distance. My mind was to alert the train," Abbasi said. "The people who were standing close to him ... they could have moved and grabbed him and pulled him up. No one made an effort." In a written account Abbasi gave the Post, he said that the crowd took videos and snapped photos on their cell phones after Han's mangled body was pulled onto the platform. He said that he shoved the onlookers back while a doctor and another man tried to resuscitate the victim, but Han died in front of them. Some have attributed the lack of any attempt by those on the subway platform to get involved and go to Han's aid as the bystander effect. The term bystander effect refers to the phenomenon in which the greater the number of people present, the less likely people will be to help a person in distress. When an emergency situation occurs, observers are more likely to take action if there are few or no other witnesses. One explanation for the bystander effect is that each individual thinks that others will come to the aid of the threatened person. But when you are alone, either you will help, or no one will. Questions 1.Do you think the bystander effect was at work in the subway death incident? What role might situational ethics have played in Abbasi's response? How might the bystander effect translate to a situation where members of a work group observe financial improprieties committed by one of their group that threatens the organization? In general, do you think that someone would come forward? 2.Another explanation for the inaction in the subway incident is a kind of moral blindness, where a person fails to perceive the existence of moral issues in a particular situation. Do you believe moral blindness existed in the incident? Be sure to address the specific moral issues that give rise to your answer. 3.What would you have done if you were in Abbasi's place and why?
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Capitalization versus Expensing Gloria Hernandez is the controller of a public company. She just completed a meeting with her superior, John Harrison, who is the CFO of the company. Harrison tried to convince Hernandez to go along with his proposal to combine 12 expenditures for repair and maintenance of a plant asset into one amount ($1 million). Each of the expenditures is less than $100,000, the cutoff point for capitalizing expenditures as an asset and depreciating it over the useful life. Hernandez asked for time to think about the matter. As the controller and chief accounting officer of the company, Hernandez knows it's her responsibility to decide how to record the expenditures. She knows that the $1 million amount is material to earnings and the rules in accounting require expensing of each individual item, not capitalization. However, she is under a great deal of pressure to go along with capitalization to boost earnings and meet financial analysts' earnings expectations, and provide for a bonus to top management including herself. Her job may be at stake, and she doesn't want to disappoint her boss. Questions Assume both Hernandez and Harrison hold the CPA and CMA designations. 1.What are the loyalty obligations of both parties in this case? 2.Assume that you were in Gloria Hernandez's position. What would motivate you to speak up and act or to stay silent? Would it make a difference if Harrison promised this was a one-time request? 3.What would you do and why?
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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?
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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.
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Lone Star School District Jose and Emily work as auditors for the state of Texas. They have been assigned to the audit of the Lone StarSchool District. There have been some problems with audit documentation for the travel and entertainmentreimbursement claims of the manager of the school district. The manager knows about the concerns of Jose andEmily, and he approaches them about the matter. The following conversation takes place: Manager: Listen, I've requested the documentation you asked for, but the hotel says it's no longer in its system. Jose: Don't you have the credit card receipt or credit card statement? Manager: I paid cash. Jose: What about a copy of the hotel bill? Manager: I threw it out. Emily: That's a problem. We have to document all your travel and entertainment expenses for the city manager's office. Manager: Well, I can't produce documents that the hotel can't find. What do you want me to do? Questions 1.Assume that Jose and Emily are CPAs and members of the AICPA. What ethical standards in the Code of Professional Conduct should guide them in dealing with the manager's inability to support travel and entertainment expenses? 2. Using Josephson's Six Pillars of Character as a guide, evaluate the statements and behavior of the manager. 3. a.Assume that Jose and Emily report to Sharon, the manager of the school district audit. Should they inform Sharon of their concerns? Why or why not? b. Assume that they don't inform Sharon, but she finds out from another source. What would you do if you were in Sharon's position?
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Cleveland Custom Cabinets Cleveland Custom Cabinets is a specialty cabinet manufacturer for high-end homes in the Cleveland Heights and Shaker Heights areas. The company manufactures cabinets built to the specifications of homeowners and employs 125 custom cabinetmakers and installers. There are 30 administrative and sales staff members working for the company. James Leroy owns Cleveland Custom Cabinets. His accounting manager is Marcus Sims, who reports to the director of finance. Sims manages 15 accountants. The staff is responsible for keeping track of manufacturing costs by job and preparing internal and external financial reports. The internal reports are used by management for decision making. The external reports are used to support bank loan applications. The company applies overhead to jobs based on direct labor hours. For 2016 , it estimated total overhead to be $ 4.8 million and 80,000 direct labor hours. The cost of direct materials used during the first quarter of the year is $ 600,000 , and direct labor cost is $400,000 (based on 20,000 hours worked). The company's accounting system is old and does not provide actual overhead information until about four weeks after the close of a quarter. As a result, the applied overhead amount is used for quarterly reports. On April 10, 2016, Leroy came into Sims's office to pick up the quarterly report. He looked at it aghast. Leroy had planned to take the statements to the bank the next day and meet with the vice president to discuss a $1 million working capital loan. He knew the bank would be reluctant to grant the loan based on the income numbers in Exhibit 1. Without the money, Cleveland could have problems financing everyday operations. EXHIBIT 1 Cleveland Custom Cabinets img Leroy asked Sims to explain how net income could have gone from 14.2 percent of sales for the year ended December 31, 2015, to 1.4 percent for March 31, 2016. Sims pointed out that the estimated overhead cost had doubled for 2016 compared to the actual cost for 2015 . He explained to Leroy that rent had doubled and the cost of utilities skyrocketed. In addition, the custom-making machinery was wearing out more rapidly, so the company's repair and maintenance costs also doubled from 2015 . Leroy wouldn't accept Sims's explanation. Instead, he told Sims that the quarterly income had to be at least the same percentage of sales as at December 31, 2015. Sims looked confused and reminded Leroy that the external auditors would wrap up their audit on April 30. Leroy told Sims not to worry about the auditors. He would take care of them. Furthermore, "as the sole owner of the company, there is no reason not to 'tweak' the numbers on a one-time basis. I own the board of directors, so no worries there." He went on to say, "Do it this one time and I won't ask you to do it again." He then reminded Sims of his obligation to remain loyal to the company and its interests. Sims started to soften and asked Leroy just how he expected the tweaking to happen. Leroy flinched, held up his hands, and said, "I'll leave the creative accounting to you." Questions 1.Do you agree with Leroy's statement that it doesn't matter what the numbers look like because he is the sole owner? Even if it is true that Sims "owns" the board of directors, what should be their role in this matter? What about the external auditors? Should Sims simply accept Leroy's statement that he would handle them? 2. a. Assume that Sims is a CPA and holds the CMA. Put yourself in Sims's position. What are your ethical considerations in deciding whether to tweak the numbers? b.Assume you do a utilitarian analysis to help decide what to do. Evaluate the harms and benefits of alternative courses of action. What would you do? Would your analysis change if you use a rights theory approach? 3.Think about how you would actually implement your chosen action. What barriers could you face? How would you overcome them? Is it worth jeopardizing your job in this case? Why or why not?
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a. What is the relationship between the ethical obligation of honesty and truth telling? b. 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?
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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 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 10percent 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 (36.8percent) 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.
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The following two statements about virtue were made by noted philosophers/writers: a.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"? b.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.
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One explanation about rights is that there is a difference between what we have the right to do and what the right thing to do is. 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?
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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. I 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 e-mail 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 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? 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. 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. 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?
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Reneging on a Promise Part A Billy Tushoes recently received an offer to join the accounting firm of Tick and Check LLP. Billy would prefer to work for Foot and Balance LLP but has not received an offer from the firm the day before he must decide whether to accept the position at Tick and Check. Billy has a friend at Foot and Balance and is thinking about calling her to see if she can find out whether an offer is forthcoming. Question 1. Should Billy call his friend? Provide reasons why you think he should or should not. Is there any other action you suggest Billy take prior to deciding on the offer of Tick and Check? Why do you recommend that action? Part B Assume that Billy calls his friend at Foot and Balance and she explains the delay is due to the recent merger of Vouch and Trace LLP with Foot and Balance. She tells Billy that the offer should be forthcoming. However, Billy gets nervous about the situation and decides to accept the offer of Tick and Check. A week later, he receives a phone call from the partner at Foot and Balance who had promised to contact him about the firm's offer. Billy is offered a position at Foot and Balance at the same salary as Tick and Check. He has one week to decide whether to accept that offer. Billy is not sure what to do. On one hand, he knows it's wrong to accept an offer and then renege on it. On the other hand, Billy hasn't signed a contract with Tick and Check, and the offer with Foot and Balance is his clear preference because he has many friends at that firm. Questions 1.Identify the stakeholders in this case. Evaluate the alternative courses of action for Billy using ethical reasoning. What should Billy do? Why? 2. Do you think it is ever right to back out of a promise that you gave to someone else? If so, under what circumstances? If not, why not?
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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 on coming 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.
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