generic syllabus: ethical solutions in professional accounting · pdf file... code of...

Ethical Solutions in Professional Accounting West Texas A&M University

ACCT 6321_01

SPRING 2009

CC 224 T 6:30-9:10 PM

Instructor: Dr. Laura Jean Kreissl

Office: CC 222E

Office Hours: M 5:00-6:30 PM, 9:10-10 PM, T 5:00-6:30 PM, 9:10-10 PM, Th 9AM – 1:30PM and by

appointment

Email: [email protected]

Phone: 806-651-2516 (email is strongly recommended over phoning)

Textbooks:

(Required) Brooks, Leonard J. and Dunn, Paul. Business & Professional Ethics for Directors, Executives, &

Accountants, 5th ed. Thompson/South-Western, 2007

AICPA Professional Standards: Code of Professional Conduct

http://www.aicpa.org/About/code/index.html

PwC, ―The Sarbanes-Oxley Act of 2002 and Current Proposals by NYSE, AMEX, and NASDAQ‖

http://jobfunctions.bnet.com/abstract.aspx?docid=153201

http://globalbestpractices.pwc.com/Home/Document_list.aspx?Q=273,4546,205,E024529A-6401-4B9D-AB68-

5A1C869B6C06

Texas Rules of Professional Conduct

http://info.sos.state.tx.us/pls/pub/readtac$ext.ViewTAC?tac_view=4&ti=22&pt=22&ch=501

Terms of Use A student’s continued enrollment in this course signifies understanding, acknowledgment, and agreement with the

statements, disclaimers, policies, and procedures outlined below and elsewhere in the WTClass container.

Personal computers, Cell phones, PDAs, and any other mechanical communication/listening

devices, etc. MUST BE TURNED OFF AND STOWED AWAY during this class. You may NOT

use any such devices at any time during class. No recording, taping, or photography of class

proceedings is allowed without the distinct written permission of the professor.

Students concerned about possible emergency messages should provide applicable family/business individuals with

the WTAMU police phone number so that the messages can be passed along to the student by an officer coming

immediately to the classroom.

Last Updated: 1/28/2010

This syllabus is a dynamic document. Elements of the course structure (e.g., dates and topics covered, but not

university policies) may be changed at the discretion of the professor.

COB Mission Statement The mission of the College of Business is to provide high quality undergraduate and graduate business education

with a global perspective and ethical awareness. We accomplish this though emphasis on excellence in teaching,

which is strengthened by faculty scholarship and supported by professional service.

―…Personal integrity is not a choice. It is an obligation for those who serve the public interest.” The PricewaterhouseCoopers Position on Accounting Education.

http://www.aicpa.org/About/code/index.html

http://jobfunctions.bnet.com/abstract.aspx?docid=153201

http://globalbestpractices.pwc.com/Home/Document_list.aspx?Q=273,4546,205,E024529A-6401-4B9D-AB68-5A1C869B6C06

http://globalbestpractices.pwc.com/Home/Document_list.aspx?Q=273,4546,205,E024529A-6401-4B9D-AB68-5A1C869B6C06

http://info.sos.state.tx.us/pls/pub/readtac$ext.ViewTAC?tac_view=4&ti=22&pt=22&ch=501

Technology Requirements All technological requirement for the successful completion of this course are the responsibility of the student,

including access to a working computer with broadband internet connection and state-of-the-art security. The

student is responsible for all technological problems not related to WTAMU, including but not limited to equipment

failures, power outages, and internet breakdowns. Furthermore, students are responsible for all necessary technical

and operational skills for completing this course, and for being familiar with WTClass (the Angel Learning System)

both in a general sense and in a specific sense as pertaining to this course and any materials stored within. The

professor is not responsible for any technical matters related to WTClass. Students must contact WTClass if they

have problems accessing and/or using Angel.

Viewpoints Disclaimer The views expressed in this document, web-based course materials, and/or classroom presentations are those of the

professor and do not necessarily represent the views of West Texas A&M University, its faculty and staff, or its

students. Views expressed by students are likewise those of the person making such statements.

External Websites Disclaimer

Neither the professor, the College of Business, nor WTAMU are responsible for the content of external websites

discussed in the classroom and/or linked to via online course materials, emails, message boards, or other means.

Referred websites are for illustrative purposes only, and are neither warranted nor endorsed by the professor,

College of Business, or WTAMU. Web pages change frequently, as does domain name ownership. While every

effort is made to ensure proper referencing, it is possible that students may on occasion find materials to be

objectionable for reasons beyond our control.

Copyright All original content in this document, all web-based course materials (be they text, audio, and/or video), and/or

classroom presentations are ©by Dr. Laura Jean Kreissl. No distribution without the express written consent of the

author. Students are prohibited from selling (or being paid for taking) notes during this course to or by any person

or commercial firm without the express written permission of the professor.

Repeating Course Work Students are charged a fee for any course attempted for a third or subsequent time at WTAMU other than a non-

degree credit developmental course or exempted courses.

Scholastic Dishonesty It is the responsibility of students and instructors to help maintain scholastic integrity at the University by refusing to

participate in or tolerate scholastic dishonesty. Commission of any of the following acts shall constitute scholastic

dishonesty. This listing is not exclusive of any other acts that may reasonably be said to constitute scholastic

dishonesty: acquiring or providing information for any assigned work or examination from any unauthorized source;

informing any person or persons of the contents of any examination prior to the time the examination is given in

subsequent section of the course or as a makeup; plagiarism; submission of a paper or project that is substantially the

same for two courses unless expressly authorized by the instructor to do so; submission of a paper pr project

prepared by another student as your own. You are responsible for being familiar with the university’s Academic

Integrity Code.

Physical or Educational Access:

West Texas A&M University seeks to provide reasonable accommodations for all qualified persons with disabilities.

This University will adhere to all applicable federal, state, and local laws, regulations and guidelines with respect to

providing reasonable accommodations as required to afford equal educations opportunity. It is the student’s

responsibility to register with the Disability Support Services and to contact the faculty member in a timely fashion

to arrange for suitable accommodations.

Evacuation Statement If you receive notice to evacuate the building, please evacuate promptly but in an orderly manner. Evacuation

routes are posted in various locations indicating all exits, outside assemble area, location of fire extinguishers, fire

alarm pull stations and emergency telephone numbers (651-5000 or 911). In the event an evacuation is necessary:

evacuate immediately, do not use elevators; take all personal belongings with you; report to outside assembly area

and wait for further information; students needing assistance in the evacuation process should bring this to the

attention of the instructor at the beginning of the semester.

Learning Goals of the MPA Program The College of Business at West Texas A&M University seeks to prepare students in the MPA degree program for

career in business and to foster their professional growth and advancement via the key learning goals. The key

learning goals for the MPA are as follows:

1. MPA graduates will demonstrate a capacity to lead organizations.

2. MPA graduates will illustrate a capacity to apply knowledge in new and unfamiliar circumstances through

a conceptual understanding of relevant disciplines.

3. MPA graduates will demonstrate a capacity to adapt and innovate to solve problems, to cope with

unforeseen events, and to manage in unpredictable environments.

4. MPA graduates will illustrate the ability to apply discipline-specific skills in accounting.

Introduction and Course Description:

CPAs employ intellectual processes to determine their actions and advice that add real value for their clients. These

processes: observation and inspiration, an internally consistent set of assumptions, and logical reasoning to discover

conclusions with useful implications for human behavior; are essentially the same processes that are used in the

study of ethics.

Philosophical issues dating back thousands of years are still relevant today and challenge us to consider many core

issues including individual responsibilities, basis for governance and limits of external authority. Better

understanding of the classical approaches to decision making and other constructs presented in the readings and

class discussions help students in developing their own ethical decision-making framework. It is expected that each

person will come away from this class with stronger critical thinking skills, a heightened ability to make better

ethical decisions, and improved abilities in convincing others to share in those decisions.

Specific to the accounting profession, this course will address the evolution of public accounting and accounting

controls, both internal and external; developing our own ethical models, agency theory, the structure and incentives

of organizations and how they place managers in the path of specific temptations. CPAs operate in the management

environment either as independent auditors and advisors, or as manager-employees themselves. So far as their

profession is concerned, their ethical positions are identical; that is, their actions must exemplify the core values of

the accounting profession. Students will be challenged to consider whether ethical behavior can be induced through

assignment of responsibilities, monitoring, and incentives and if so, are current programs such as Sarbanes-Oxley

working and what other measures could be taken to best serve the public interest.

Class Methodology: Class Discussion, case discussion leadership, independent study, research, and writing, and

lecture

Overall Learning Objectives:

Upon successful completion of this course, the student should:

1 Ethical Awareness

Have a raised level of awareness and ability to recognize ethical issues facing the accounting

profession and accounting practitioners.

2 Ethical Knowledge

Have enhanced ability to identify key concepts and understand different ethical approaches and

theories.

Have increased understanding of the ethical guidance (AICPA, Sarbanes-Oxley, PCAOB, SEC, state

CPA boards, etc.) available in accounting practice.

3 Ethical Judgment

Have improved moral reasoning and ethical decision making skills with objectivity, especially with

regard to issues encountered in accounting practice.

4 Integrity

Have increased ability to do the right thing and to sustain support structures which encourage making

decisions with personal and professional integrity.

Specific Learning Objectives:

Upon successful completion of this course, the student should be able to:

1 Discuss the implications of ethical, social, environmental, and political issues that arise within the

domestic environment and global situations to business organizations.

Understand changes in expectations for the professional accountant

2 Appreciate the integrity and responsibilities of business executives, audit committees, organizational

behavior toward ethics and social responsibilities.

3 Appreciate the implications of law and ethical issues to the financial statements

4 Discuss the impact of ethics on the international, national, and local accounting bodies and regulatory

institutions.

5 Critically evaluate implications of Sarbanes Oxley to the accountants, the business executives, audit

committees, the accounting and auditing profession, and the external auditors

Critically evaluate the implications of Sarbanes Oxley to internal control, transparency, and

accountability of a business organization

Critically evaluate the regulatory and compliance requirements of the AICPA, SEC, and TSCPA for

accounting operations at all levels of business organizations

Understand the issues, principles, reasoning, moral dilemmas and practices involved in the new

expectations

Explore the future expectations on governance, accountability, integrity and objectivity issues relating

to the accounting and auditing profession

6 Understand the importance of governance and accountability to corporations

Distinguish respective roles and responsibilities between the board members and external auditors

Be aware of expectations and obligations of professional accountants and the auditors to stakeholders

7 Explain public expectations for the roles, independence, objectivity and integrity of the professional

accountants and principles that should be observed in discharging that role

Understand implications for services to be offered and key value added or competitive edge services

that the accountants should focus upon

Evaluate the sources of ethical governance and guidance

8 Be familiar with codes of conduct in the process of decision making by the professional accountants

Be aware of processes, principles of frameworks needed to make defensible ethical decisions

9 Provide an understanding of several key ethics opportunities and risks facing corporations and a set of

tools to deal effectively with them including ethics risk management, ethics strategies, workplace

ethics, international operations and crisis management

10 Evaluate the ethical rules specified by the professional and regulatory bodies

Discuss the implications of the ethical rules to the national and international accounting and auditing

professions, domestic and global business executives, and the audit committees

11 Understand and be able to discuss the importance of ethical reasoning in the independence, integrity,

and objectivity of accountants and auditors

12 Discuss how the independence rules apply in the real world including any conflict with the

underlying framework on auditors’ independence and ethics

Core Competencies

The Texas Higher Education Coordinating Board has the responsibility to ensure that each state-supported college

and university has a core curriculum that emphasizes the acquisition of skills, perspectives, and knowledge that help

define the educated person.

The core curriculum is predicated on a series of basic intellectual competencies including reading, writing,

speaking, listening, critical thinking, and computer literacy. Such competencies are essential to the learning process

in any educational discipline. As applied to the discipline of accounting, it is widely recognized that these

intellectual competencies are strongly correlated with the acquisition of marketable skills, and the demonstration of

success in the work place.

Your accounting coursework will provide further instruction and practice in meeting and exceeding these

competencies at a university level:

Reading Competencies: reading at the university level means the ability to analyze and interpret a variety of

printed materials – books, articles, and documents. A core university curriculum should offer students the

opportunity to master both general methods of analyzing printed materials and specific methods for analyzing the

subject matter of individual disciplines.

Writing Competencies: Competency in writing is the ability to produce clear, correct, and coherent prose adapted

to purpose, occasion, and audience. Although correct grammar, spelling, and punctuation are essential in any

composition, they do not automatically ensure expectations of rigor and content have been met. Students should be

familiar with the writing process, including how to discover a topic, how to develop and organize it, and how to

phrase it effectively for an audience. These abilities can be acquired only through practice and reflection.

Speaking Competencies: Competence in speaking is the ability to communicate orally in clear, coherent, and

persuasive language appropriate to purpose, occasion, and audience.

Developing this competency includes acquiring poise and developing control of the language through experience in

making presentations to small groups, to large groups, and through the media.

Listening Competencies: Listening at the university level implies the ability to analyze and interpret various forms

of spoken communication.

Critical Thinking Competencies: Critical thinking embraces methods for applying both qualitative and

quantitative analytically and creatively to subject matter in order to evaluate arguments and to construct alternative

strategies. Problem solving is one of the applications of critical thinking used to address an identified task.

Computer Literacy: Computer literacy at the university level implies the ability to use computer-based technology

to communicate, solve problems, and acquire information. University students should have an understanding of the

limits, problems, and possibilities associated with the use of technology, and should have the tolls necessary to

evaluate and learn new technologies as they become available.

Course Grading

Grading in a course such as this is necessarily subjective. Much of your grade will be determined by an assessment

of your success in engaging the subject matter and by your participation in Class Discussion. Whether written or

oral, contributions that are limited and unsubstantiated will be viewed as less valuable than fresh insights and

thoughtful arguments that influence the direction of the discussion.

I will make every attempt to give you guidance in the course with respect to performance expectations through the

use of written instructions, sample procedures and solutions, use of grading rubrics, and preliminary feedback.

The Ethics Rubric listed below will be used in grading all submission. The additional rubrics listed below may be

used at the discretion of the professor, depending upon the assignments.

Grading Scale:

A: 90% or higher (162 pts or more)

B: 80-89% (144- 161 pts)

C: 70-79% (126-143 pts)

D: 60-69% (108-125 pts)

F: Lower than 60%

Grade Determination

Activity Description Points

Participation Class participation is extremely important in this class. Students who do not

actively participate in class discussions by regularly making useful contributions

cannot expect a passing grade in the class.

Attendance is not participation; but attendance is critical in order for students to

participate.

Class participation scores are earned by making significant contributions to class

regularly throughout the semester. Students should seek to ask other class members

questions regarding course material that provoke further thoughts on discussion

topics and to provide thoughtful answers at each session. Definitive answers are not

expected but should show progress in personal development, demonstrate that the

individual has consistently kept up with and critically thought about the course

assignments, and hopefully their comments will provoke further questions for the

class discussion. When making comments, students should support their assertions

by citing specific items from the case or inferences they perceived in reading the

case, by citing specific items from the text chapters, AICPA rules and guidelines,

TSCPA rules and guidelines, Sarbanes Oxley Act, and/or other pertinent

information. Simply making broad unsupported comments is not helpful and will

not be considered good participation and may in fact result in the commenter losing

points.

Students should raise their hand and wait to be called upon by the case leaders

before speaking in order to give everyone equal opportunity to participate. People

who consistently abuse this request will lose points. Leaders should endeavor at all

times to give all students opportunity to participate.

Since class participation is such an important element of this course, STUDENTS

ARE ALLOWED ONLY ONE CLASS ABSENSE WITHOUT SEVERE PENALTY

(ONE LETTER GRADE PER EACH ADDITIONAL ABSENSE). Leaving prior to

end of a class meeting may be deemed an absence for the entire class period.

60

(5pts x 12

weeks)

(excluding

first night,

film night

and final

night)

***

Reference:

Participation

Rubric

Case

Discussion

Each group is responsible for leading the discussion of at least one case. Discussion

time may vary but 25-30 minutes per case is suggested as an approximate time in

20

Leadership order to achieve some depth of discussion. In planning discussion questions and

direction, groups should carefully consider topics covered in the case, current and

previous chapters assigned in the text, readings from the text, other cases previously

assigned from the text, AICPA rules and guidelines, etc. Planning and leadership

should put priority on issues arising in the cases that are important to primarily to

accounting professionals and then others in order of importance as guided by the

case. It is the responsibility of the group to develop good questions to start and

further develop discussions. It is the responsibility of the leaders to keep the class on

track if discussion strays or if a person or persons attempt to dominate the

discussions. Discussion leaders should work to actively engage the entire class in

meaningful participation. Leaders should work to provide some summary of the

class discussion at the end of each case (or may call upon any student…preferably

someone who had not been able to participate as actively as others, to sum up the

discussion in detail).

Although each group member is not required to lead discussion, all members should

equally contribute to the group’s preparation/presentation.

Points to consider in preparing discussion direction and questions (may vary

depending on topic) may include:

1. Ethical dilemma (s) faced by each person/ firm/ etc;

2. Identify what encouraged them to act ethically and what tempted

them to act unethically;

3. Primary and secondary (if applies) ethical paradigm(s) each used;

4. What each of them could have done to help themselves (stakeholders)

act more ethically;

5. Describe the effects(s) of their acting ethically/unethically;

6. Make any useful comparisons between the people you analyzed;

7. Who is the most exemplary role model from your perspective? Why? and

8. Always be sure to seek out and include related AICPA Code of

Professional Conduct, professional auditing standards that address training,

independence, and due care (AICPA, EC, and PCAOB), and regulatory acts (i.e.,

Sarbanes-Oxley) throughout your class discussion as appropriate.

8 Writing

Assignments

These assignments may range from “Explain the one discussion topic that you found

most interesting today and how it might impact your behavior?’ to ethical analysis

of current events or short cases. In addressing each assignment you will be expected

to demonstrate your critical and ethical decision making skills, understanding and

practical application of the AICPA Professional Code of Ethics, the Texas CPA

Rules of Professional Conduct, the Sarbanes Oxley Act, AICPA Rules and

Guidelines, and any other pertinent rules and guidelines that might be apply.

80

(10 pts x 8

assignments)

Reference:

Skill

assessment

forms

Personal

journal

Your effort in this class may result in knowledge that will change your beliefs,

and/or your behavior. You will keep a typed journal to reflect your participation in

the class and the changes it brings. Be prepared to submit your complete journal to

date at any class meeting (Bring the journal to class every time.) I may occasionally

inspect it. The points may build during the semester and not be all awarded at once.

A typical week’s entry might have the subtopics, Preparation for class, Discussion in

Class, Analysis of Materials, Conclusions, (and) Implications and Consequences of

Conclusions.

In addition, each week you should identify and include in the journal a a minimum

of one news-story or topical discussion from that week that contains ethical issues

related to accounting or management. Be sure to carefully identify the source, date,

20

page, title,[publication name/date/page, or precise news program ,e.g., PBS,

“Charlie Rose,” March 20, 2010, “Interview with Warren Buffet, CEO of Berkshire

Hathaway”, PBS, “Nightly Business Report” April 12, 2011, “Interview with the

Head of the General Electric Corporation on effects of executive bonuses on

shareprice and company percention,” internet site address, etc] , so that your item

can be independently located as required. You should write a minimum of two

paragraphs commenting on the story and how it impacts your thinking and daily life,

incorporating new information from the class.

Hopefully you will find keeping the journal to be an aid in class preparation and

more importantly in developing your critical thinking skills. It should also provide

you with an interesting self-review of the progress you are making.

Total 180

One or more assignments from this class may be evaluated by an outside panel of instructors/professionals using the

Ethics Assessment Form listed below. The evaluation of the panel will not affect individual grades in any way.

Evaluations are done for Program assessment and for AACSB compliance.

Topic Area – Presentations and Assignments

Week

1

Jan 12

Introduction

A. Overview of the course

B. Form Groups

C. What qualifies as an ethical issue

What is right? According to Brooks, p. 14, “hypernorms” are values that are respected by most

groups or cultures around the world. Do you agree/disagree and why?

Is it OK to eat beef? horsemeat?

Is it OK to offer to pay for a kidney?

D. Why ethics matters

What is the importance of the individual?

What are the responsibilities of the individual?

How should we treat each other?

E. What motivates us to do right?

How do we know (when must we know something ourselves, through logic and

understanding, and when must we accept the authority of others?)

Assignments: Read and prepare to discuss next week:

Ch. 1 The Ethics Environment pp. 2-24. Questions 1-16

Where Were the Accountants? pp. 44-45

To Resign or Serve p. 45

Reading: Managing for Organizational Integrity, pp. 46-56

Reading: The Whistle-Blower: Patriot or Bounty Hunter? pp. 56-63

Reading: Law Case Summary: Caremark National Inc., p. 63

Week

2

Jan 19

The Ethics Environment

Discussion:

Ch. 1 The Ethics Environment pp. 2-24. Questions 1-16

Where Were the Accountants? pp. 44-45

To Resign or Serve p. 45

Reading: Managing for Organizational Integrity, pp. 46-56

Reading: The Whistle-Blower: Patriot or Bounty Hunter? pp. 56-63

Reading: Law Case Summary: Caremark National Inc., p. 63

Ethics Expectations

Professions exist to publicize and reinforce the values of their members. When a client hires a professional

as an agent, it incurs associated selection, contracting, and monitoring costs. The client incurs selection

costs because the desired special ability or knowledge of the professional is not easy for the client to

evaluate, and so the client may seek paid help to try to avoid hiring someone without the necessary

knowledge or skills. The contracting costs arise from negotiation between the professional and the client of

an engagement agreement that determines the compensation to the professional to produce the scope and

depth of results the client wants. In addition, the client may incur costs to monitor the professional and

ensure the professional's performance. The client cannot always observe the professional’s effort (or the

result of the efforts), and so may need expert help to make this observation possible.

In addition to the client's out-of-pocket compensation, contracting, and monitoring costs, there are also the

government-incurred costs of professional regulation. Such regulation protects a profession by granting its

members exclusive rights to perform certain services, and in return requires them to undertake obligations of

qualifications and behavior. A regulatory body may reduce the total of all selection costs associated with

agency (at least for clients with modest expectations) by licensing only those deemed qualified to provide a

limited range of services. A potential client is assured that all members of the profession meet the qualifying

standard of competence, and may require fewer of its own resources to verify that. It may reduce

contracting costs by restricting the ways in which principals may compensate CPAs as agents. The

regulatory body may reduce monitoring costs by conducting its own monitoring programs (e.g., quality

review and peer review) and by providing an avenue for accepting and resolving complaints about CPA

performance.

Although the public incurs the costs of this regulation, it receives reimbursement of these costs to the

members of the CPA profession, who pay licensing fees in order to be legally available for hire. (In fact, the

licensing fees paid by CPAs in Texas are roughly four times the actual budget of the regulating agency, a

capture by the state for itself of some of the value of the CPA “brand”). In the absence of regulation, the

average client would incur greater expense trying to select, contract, and monitor a professional; the

profession's ethical rules and regulation make such monitoring less necessary.

State and National Regulation – is it ethical?

Texas State Board Rules of Professional Conduct, Chapter 501

http://info.sos.state.tx.us/pls/pub/readtac$ext.ViewTAC?tac_view=4&ti=22&ch=501

AICPA Code of Professional Conduct

http://www.aicpa.org/about/code/index.html

A. The Ethics Environment for Accounting Professionals

B. Core ethical principles for the Accounting Profession

Integrity

Competence

Independence

Objectivity

http://info.sos.state.tx.us/pls/pub/readtac$ext.ViewTAC?tac_view=4&ti=22&ch=501

http://www.aicpa.org/about/code/

Approaches to Ethical Decision Making

Models addressing ethical decision making are built upon well-considered assumptions. From those

assumptions, logical reasoning is employed to determine rules of conduct. Sometimes the

assumptions and rules are extracted from a series of situations which were handled in

consistent ways acceptable to society. As we work towards developing and improving our own

ethical models, we need to improve our skills of recognizing and analyzing situations that present

ethical challenges.

Many groups adopt a “code of ethics” meant to lay out the rules of what group members

may and may not do. The rules may be self-serving and promote the welfare of group

members.

Can we make universally applicable rules that guarantee ethical conduct?

Assignment for next week:

Writing Assignment #1: Write a Class Code of Ethics

Writing Assignment #2: Write a Personal Code of Ethics

Each submission should be typewritten on separate pages .

All writing submissions should be typewritten (single-spaced, 12 pt) for submission be submitted at the next

class meeting.

Submissions must ALSO be submitted via the Turnitin dropbox PRIOR to the beginning of class.

Don’t forget to include your name on the top of the pages.

Late submissions will not be accepted.

Read and prepare to discuss the following cases:

Martha Stewart’s Lost Reputation, pp. 34-37

The Ethics of Bankruptcy: Jetsgo Corporation, pp.30-32

Waste Management, Inc. pp. 127-133

Royal Ahold –A Dutch Company with U.S.-Style Incentives, pp. 402-405

Week

3

Jan 26

The Ethics Environment

Group1 Discussion Leadership:

Martha Stewart’s Lost Reputation, pp. 34-37

The Ethics of Bankruptcy: Jetsgo Corporation, pp. 30-32

Group 2 Discussion Leadership:

Waste Management, Inc. pp. 127-133

Royal Ahold—A Dutch Company with U.S—Style Incentives, pp. 402-405

When Ethics Fail

Organizational structure and incentives place managers in the path of specific temptations.

Two of them are especially important:

(a) packing the Board of Directors with managers and cronies who will agree to large top-management

compensation packages, and

(b) including stock options in the compensation packages. Such options have no obvious cash cost to the

organization (but there IS a cost!) and, in a bull market, can be highly lucrative. Since only the equities of

successful enterprises appreciate, there’s a related temptation, to cook the financial statements to ensure they

present a positive picture to analysts. That some managers are willing to spend so much time manipulating

financial statements is a refutation of the bubble-era conventional wisdom that financial statements

had lost their importance as indicators of organization performance, in favor of the effusions of financial

analysts.

Very few adults actually set out to do the wrong thing, create havoc, steal, and wreck organizations. So why

are these results so often the consequence of their actions? The answer may lie in what goals managers do

have, and how they pursue those goals. A manager may truly believe that certain actions, though they are

designed to benefit her, will also benefit the organization at large. Negative consequences may seem

impossible from less selfish acts, too. Such rationalizations can take on all the color and substance of reality.

A senior who initials audit steps and does not actually perform them has, to the objective observer,

committed an ethical error. However, the auditor rationalizes that no audit steps actually performed have

revealed significant control weaknesses, that all the managers known to her seem to have high integrity and

competence, and that the client actually benefits from fewer hours being charged for auditors chasing down

blind alleys. In the vast majority of cases, the auditor knows, such arguments will never be tested.

Why should this situation be an exception? Behavior based on rationalization entails risks- if not the risk of

audit or control failure, then certainly the risk of character failure – potentially a much more dangerous kind

of failure.

Week

4

Feb 2

Events Motivate Governance & Ethics Reform

Film: Enron, the Smartest Guys in the Room

Assignments for next week: Read and prepare to discuss the following:

Ch. 2 Enron Events Motivate Governance & Ethics Reform, pp. 64-101

Q. 1-8. P. 101

Enron’s Questionable Transactions, pp. 102-114

Arthur Anderson’s Troubles, pp. 114-121

World Com: The Final Catalyst, pp. 121-127

Writing Assignment #3: Enron had a ―Code of Ethics.‖ Why did it fail? What are your responsibilities as

an employee to insure that ethics are upheld?


class meeting.




Week

5

Feb 9

Events Motivate Governance & Ethics Reform


Enron’s Questionable Transactions, pp. 102-114


Arthur Andersen’s Troubles, pp. 114-121

World Com: The Final Catalyst, pp. 121-127

Assignments: Read and prepare to discuss the following next week:

Ch. 3 Philosophers’ Contributions, pp. 141-167

Q. 1-7, p. 167

Reading: Ethics of Options Repricing and Backdating: Banishing Greed from Corporate governance and

Management, pp. 172-179

Sunbeam Corporation and Chainsaw Al, pp. 133-140

To Qualify or Not, pp. 418-420

The Ethics of Repricing and Backdating Employee Stock Options, pp. 171-172

Livent-When Maria…When?, pp. 405-407

Week

6

Feb 16

Ethical Behavior -Philosophers’ Contributions


Sunbeam Corporation and Chainsaw Al, pp. 133-140

To Qualify or Not, pp. 418-420



Livent- When Maria…When? , pp. 405-407


Ch. 4 Practical Ethical Decision Making, pp. 180-207

Q 1-11, pp. 206-207

An Illustration of Ethical Decision Making: Dealing with Disappointed Apple iPhone Customers , pp. 164-

167, pp. 209-210

Ethical Analysis for Environmental Problem Solving, pp. 233-237

Illustrative Application of Stakeholder Impact Analysis: Bribery or Opportunity in China, pp. 210-212

Illustrative Application of Stakeholder Impact Analysis : Proposed Audit Adjustment Case—Castle

Manufacturing Inc., pp. 213-218

Reading: Ethical Analysis for Environmental Problem Solving, pp. 233-237

Advise for Sam and Ruby, pp. 411-412

Freebie Services for Staff, p. 413

Week

7

Feb 23

Practical Ethical Decision Making


Illustrative Application of Stakeholder Impact Analysis: Bribery or Opportunity in China, pp. 210-212

Illustrative Application of Stakeholder Impact Analysis: Proposed Audit Adjustment Case-Castle

Manufacturing Inc., pp. 213-218


Advise for Same and Ruby, pp. 411-412

Freebie Services for Staff, p. 413


Ch. 5 Corporate Ethical Governance & Accountability, pp. 239-275

Q. 1-17

Spying on HP Directors, pp. 282-285

Manipulation of MCI’s Allowance for Doubtful Accounts, pp. 285-286

Stock Options and Gifts of Publicly Traded Shares, pp. 288-289


Week

8

Mar 2

Corporate Ethical Governance & Accountability


Spying on HP Directors, pp. 282-285

Manipulation of MCI’s Allowance for Doubtful Accounts, pp. 285-286

Group 10 Discussion Leadership”

Stock Options and Gifts of Publicly Traded Shares, pp. 288-289



Ch. 5 Corporate Ethical Governance & Accountability, pp. 239-275

Q. 1-17

Reading: Creative Ethical Corporate Structures, pp. 331-338

APPENDIX A Alternative Governance Theories: A Traditional Governance Model-Agency Theory, pp.

339-342

Lord Conrad Black’s Fiduciary Duty?, pp. 279-282

A Minority-Controlling Shareholder: The New York Times Company and the Ochs and Sulzberger Families,

pp. 286-288

Adelphia- Really the Rigas’ Family Piggy Bank, pp. 296-300

Just Make the Numbers, p. 220

Week

9

Mar 9

Corporate Ethical Governance & Accountability

Group 11 Discussion Leadership

Lord Conrad Black’s Fiduciary Duty?, pp. 279-282

A Minority-Controlling Shareholder: The New York Times Company and the Ochs and Sulzberger Families,

pp. 286-288


Adelphia- Really the Rigas’ Family Piggy Bank, pp. 296-300

Just Make the Numbers, p. 220

Assignments: Read and prepare to discuss the following for next week:

Ch. 6 Professional Accounting in the Public Interest, Post-Enron. Pp. 343-386

Q. 1-25

Reading: The Liability Crisis in the United States: Impact on the Accounting Profession—A Statement of

Position, pp 431-436

Reading: Ethics in Taxation Practice, pp 436-439

Appendix A: International Comparison of Main Aspects of Professional Codes of Conduct, pp. 440-450

Appendix B: Trends in the Legal Liability of Accountants and Auditors and Legal Defense Available, pp.

451-459

Tyco-Looting Executive Style, pp. 300-304

Economic Realities or GAAP, p 423

Paramalet—Europe’s Enron, pp 396-402

Freebie Services for Staff, p 413

Writing assignment #4: What specific audit procedures might have uncovered the Parmalat fraud earlier?


class meeting.




Week

10

Mar

23

Professional Accounting in the Public Interest, Post-Enron


Tyco-Looting Executive Style, pp. 300-304

Economic Realities or GAAP, p 423


Paramalet—Europe’s Enron, pp 396-402

Freebie Services for Staff, p 413

Professional Accounting and the Public Interest

Most economies have an economy sector that is competitive, where the entities are publicly owned and

independently audited. The limited-liability, publicly-owned entity was a breakthrough in management

because it made possible the separation of ownership and management. That gives rise to the agency

problem, for owners lack the knowledge to select, observe, and evaluate their managerial agents. The use of

auditors represents a partial solution to the owners’ problem. From the manager’s point of view, being a

manager is very high-risk: their company could be acquired, driven into the ground by a powerful

competitor, sued, or turn against them in many ways, including firing them. In a typical company, the

owners are represented by the board of directors. Owners seek contracts with management which will incent

managers to act in the best interests of the owners. Stock options won’t benefit managers unless the

company stock appreciates, so if managers have stock options, the reasoning goes, they will manage the

company to cause equity appreciation, and both they and the non-management owners will benefit. Long-

term contracts with benefits in case of severance give managers an opportunity to look at the long term, and

make decisions that have long-term beneficial effects. Other protections make it hard to dissolve or take

over the company and dispose of management. None of these are unreasonable ideas, except… When

management takes over the board of directors, it controls the extent of owner representation and

participation. With no checks on their greed, a management will vote itself ever-higher compensation, stock

options, and protections. However, because such managements also control their own evaluations, they may

come to be composed of less-competent individuals. When performance does not match their own

expectations, their self-enrichment process slows, or stops, or even reverses. The thing to remember about

the management world is not that all managements have succumbed to selfishness-induced policies. The

thing to remember is that constant testing and vigilance are the only safeguards against such policies.

CPAs operate in the management environment either a independent auditors and advisers, or as manager-

employees themselves. So far as their profession is concerned, their ethical positions are identical; that is,

their actions must exemplify the core values of the accounting profession. Thus, CPA agendas may be

almost diametrically at odds with the agendas of management; indeed, CPAs must assume this is so until

and unless the evidence shows it is not so.

Assignments: Re-read,and further prepare to discuss the following for next week:

:

Ch. 6 Professional Accounting in the Public Interest, Post-Enron. Pp. 343-386

Q. 1-25

Reading: The Liability Crisis in the United States: Impact on the Accounting Profession—A Statement of

Position, pp 431-436

Reading: Ethics in Taxation Practice, pp 436-439

Appendix A: International Comparison of Main Aspects of Professional Codes of Conduct, pp. 440-450

Appendix B: Trends in the Legal Liability of Accountants and Auditors and Legal Defense Available, pp.

451-459

Read and prepare to discuss the following for next week:

The Dilemma of an Accountant, pp 415-417

Lowballing a Fee Quotation, p. 422

Marketing Aggressive Tax Shelters, pp. 427-429

Providing Tax Advice, pp 429-430

Writing Assignment #5: Which would you choose as the key idea for ethical behavior in the accounting

profession: ―Protect the public interest‖ or ―Protect the credibility of the profession.‖ Why?


class meeting.




Week

11

Mar

30

Professional Accounting in the Public Interest, Post-Enron


The Dilemma of an Accountant, pp 415-417

Lowballing a Fee Quotation, p. 422


Marketing Aggressive Tax Shelters, pp. 427-429

Providing Tax Advice, pp 429-430

Assignments:

Read and prepare to discuss the following for next week:

Ch. 7 Managing Ethics Risks & Opportunities, pp. 461-491

Q 1-12, p. 492

Appendix B: Ethics Audit Program Annual Audit Questions, pp. 542-543

Downsize or Bonus Allocation Decisions, p. 499

The Exxon Valdez, pp. 505-507

Walt Pavlo’s MCI Scams/Frauds pp. 499-501

Jail and a German Sub-contractor, p. 502

Writing Assignment 6: What would you list as the five most important ethical guidelines for dealing with

North American employees?


class meeting.




Week

12

April

6

Managing Ethics Risks & Opportunities


Downsize or Bonus Allocation Decisions, p. 499

The Exxon Valdez, pp. 505-507


Walt Pavlo’s MCI Scams/Frauds pp. 499-501

Jail and a German Sub-contractor, p. 502

Assignments: Read and prepare for discussion for next week:

Ch. 8 Subprime Lending Fiasco—Ethics Issues, pp. 544-558

Q. 1-14, pp. 557-558

Reading: Can’t We All Just Get Along: Cultural Variables in Codes of Ethics, pp. 511-519

Mark-to-Market Accounting and the Demise of AIG, pp. 559-561

Subprime Lending—Greed, Faith & Disaster, pp. 561-562

Week

13

April

13

Subprime Lending Fiasco—Ethics Issues


Mark-to-Market Accounting and the Demise of AIG, pp. 559-561

Subprime Lending—Greed, Faith & Disaster, pp. 561-562

Assignments: Re-read and prepare for discussion for next week:

Ch. 8 Subprime Lending Fiasco—Ethics Issues, pp. 544-558

Q. 1-14, pp. 557-558

Reading: Can’t We All Just Get Along: Cultural Variables in Codes of Ethics, pp. 511-519

Read and prepare for discussion for next week:

Moral Courage: Toronto-Dominion Bank CEO Refuses to Invest in High-Risk Asset-Backed Commercial

Paper, pp 563-564

The Ethics of AIG’s Commission Sales, pp. 564-566

Week

14

April

20

Subprime Lending Fiasco—Ethics Issues


Moral Courage: Toronto-Dominion Bank CEO Refuses to Invest in High-Risk Asset-Backed Commercial

Paper, pp 563-564

The Ethics of AIG’s Commission Sales, pp. 564-566

Writing Assignments #7 and 8: TBA

Week

15

April

27

TBA

PBS Show: In Search of the Good Corporate Citizen 30 min

Ethics Skills Assessment Form

Course:______________________ Semester:______________ Year: ____________

Student:______________________ Major:_________________

Identification Poor Acceptable Excellent

Fails to identify all

major ethical, factual, and

conceptual issues/options.

Identifies most of

the relevant practical

issues/options but overlooks some

related conceptual

problems and

issues.

Identifies all major

issues and stakeholders.

Correctly identifies all of the

relevant practical

options and the

related conceptual

issues.

1 2 3 4 5 Comments:

Construction Poor Acceptable Excellent

Fails to apply

moral standards

and ethical principles

correctly.

Applied some

moral standards

and principles correctly but

overlooks or misapplies some

ethical principles.

Correctly applies

the moral

standards and ethical principles

that are relevant to the case.

1 2 3 4 5 Comments:

Evaluation Poor Acceptable Excellent

Fails to provide weightings of

various ethical

arguments and reasons.

Provides some evaluation of

reasons and

arguments but overlooks

important facts or

puts forth minor errors with respect

to logical

reasoning.

Provides appropriate and

defensible

evaluation for all relevant

arguments, notes

facts and avoids errors in logical

reasoning.

1 2 3 4 5 Comments:

Decision Poor Acceptable Excellent

Decision is not

justified by the arguments and

reasons put forth.

Decision put forth

is justified by ethical arguments,

but failed to

identify and respond to

reasonable

counter-arguments.

Decision put forth

is justified by ethical arguments.

Care is taken in

responding to reasonable

counter-

arguments.

1 2 3 4 5 Comments:

Total =

Critical Thinking Skills Assessment Form


Student:______________________ Major:_________________

Identification Poor Acceptable Excellent

Fails to identify

and summarize the problem

accurately.

Summary of issues

is mostly accurate but nuances and

critical details are glossed over.

Clearly identifies

and summarizes main problem or

issue. Identifies secondary or

implicit issues.

1 2 3 4 5 Comments:

Evaluation Poor Acceptable Excellent

Does not distinguish among

fact, opinion, and

value judgements.

Discerns fact from opinion and may

recognize bias in

evidence. Routine exploration of the

issue.

Thoroughly examines the

evidence and

questions its accuracy and

completeness.

Clear evidence of search, selection,

and source

evaluation skills.

1 2 3 4 5 Comments:

Analysis Poor Acceptable Excellent

Quantitative or

qualitative analysis conducted

is inappropriate,

inaccurate, or superficial.

Quantitative or


is appropriate and

accurate but rather superficial.

Quantitative or


is appropriate,

accurate, and thorough.

1 2 3 4 5 Comments:

Decision Poor Acceptable Excellent

Fails to identify conclusions and

implications of the

issue or the key relationships

between the other

elements, such as other perspectives,

assumptions, or

data and evidence.

Conclusions begin to reflect influence

of other

perspectives, assumptions, and

evidence that leads

to consequences that extend beyond

the borders of a

discipline or single issue.

Identifies conclusions,

implications, and

consequences considering

assumptions, data,

and evidence. Recognizes

limitations of

correlations and qualifies

implications of

assertions accordingly.

1 2 3 4 5 Comments:

Total =

Writing Skills Assessment Form


Student:______________________ Major:_________________

Content Poor Acceptable Excellent

Topic is poorly developed.

Supporting details

are absent or vague. Trite ideas

and/or unclear

wording reflect lack of

understanding of

topic and audience.

Topic is evident with some

supporting details;

generally meets requirements of

assignment.

Topic is well developed,

effectively

supported and appropriate for the

assignment.

Effective thinking is clearly and

creatively

expressed.

1 2 3 4 5 Comments:

Organization Poor Acceptable Excellent

Writing is rambling and

unfocused, with

main theme and supporting details

presented in a

disorganized, unrelated way.

Writing demonstrates some

grasp of

organization, with a discernible

theme and

supporting details.

Writing is clearly organized around a

central theme.

Each paragraph is clear and relates to

the others in a

well-planned framework.

1 2 3 4 5 Comments:

Language Poor Acceptable Excellent

Writing lacks sentence variety.

Significant

deficiencies in wording, spelling,

grammar,

punctuation, or presentation.

Sources, if

consulted, poorly cited.

Some sentence variety; adequate

usage of wording,

grammar, and punctuation. Some

cited sources used.

Wide variety of sentence

structures.

Excellent word usage, spelling,

grammar and

punctuation. Multiple sources

correctly cited.

Effective integration of

information.

1 2 3 4 5 Comments:

Total =

Speaking Skills Assessment Form


Student:______________________ Major:_________________

Content Poor Acceptable Excellent

Topic is poorly

developed. Supporting details

are absent or vague. Trite ideas

and/or unclear

wording reflect

lack of

understanding of

topic and audience.

Topic is evident

with some supporting details;

generally meets requirements of

assignment.

Topic is well

developed, effectively

supported and appropriate for the

assignment.

Effective thinking

is clearly and

creatively

expressed.

1 2 3 4 5 Comments:

Organization Poor Acceptable Excellent

Speech is rambling and unfocused,

with main theme

and supporting details presented

in a disorganized,

unrelated way.

Speech demonstrates some

grasp of

organization, with a discernible

theme and

supporting details.

Speech is clearly organized with

effective

introduction and conclusion. Each

segment relates to

the others

according to a

carefully planned

framework.

1 2 3 4 5 Comments:

Delivery Poor Acceptable Excellent

Speakers appear

unpracticed. Use of unnecessary

pauses or filler

words. Problems with voice control,

eye contact, or

posture. Incorrect or inappropriate

language.

Speaker appears

proficient with language, vocal,

and physical

expression. Notes and visuals used as

needed.

Speaker uses

grammatically correct and

appropriate

language. Delivery is smooth

and effective.

Good voice control, eye

contact, and

physical demeanor. Notes

and visuals used to

enhance the presentation.

1 2 3 4 5 Comments:

Total =

Participation Skills Assessment Form

Course:_____________________________________________ Semester:_______________ Year:___________

Student:___________________________________________________________ Major:______________

Outstanding Contributor Good Contributor Adequate Contributor Non –Participant Unsatisfactory Contributor

5 4 3 1 - 0 1-0 *Contributions in class demonstrate

exceptional preparation: has analyzed

case exceptionally well, relating it to

readings, course material, discussion,

experiences, etc.

*Offers substantive analysis (one or

more major insights), syntheses, and

evaluation of case material, i.e., puts

together pieces of the discussion to

develop new approaches that take the

class further.

*Contributes in a very significant way

to ongoing discussion: keeps analysis

focused, responds very thoughtfully to

other students’ comments, contributes

to the cooperative argument-building,

asks thoughtful questions that enhance

discussion and engage peers, suggests

alternative ways of approaching

material and helps class analyze which

approaches are appropriate, etc.

*Posture, demeanor and behavior

clearly demonstrate respect and

attentiveness to others and consistent

ongoing very active involvement.

* If this person were not a member of

the class, the quality of discussion

would be diminished markedly.

*Contributions in class

demonstrates thorough

preparation: knows case or

reading facts well, has thought

through implications of them.

*Offers interpretations and

analysis of case material (more

than just facts) to class, i.e.,

ideas offered are usually

substantive, often persuasive,

and provide good insights and

sometimes develops new

direction for the class.

*Contributes well to discussion

in an ongoing way: responds to

other students’ points, thinks

through own points, asks

thoughtful questions that

enhance discussion and engage

peers, offers and supports

suggestions that may be

counter to the majority opinion.

*Posture, demeanor and

behavior clearly demonstrate

respect and attentiveness to

others and consistent ongoing

involvement.

*If this person were not a

member of the class, the quality

of discussion would be

diminished somewhat.

*Contributions in class

demonstrate satisfactory

preparation: knows basic

case or reading facts, but

does not show evidence of

trying to interpret or analyze

them.

*Offers straightforward

information, i.e. straight

from the case or reading,

without elaboration or very

infrequently (perhaps once a

class) that seldom offer a

new direction for the

discussion.

*Does not actively offer to

contribute to discussion, but

contributes to a moderate

degree when called on.

*Listens to others some of

the time, does not stay

focused on other’s comments

(too busy formulating own)

or loses continuity of

discussion. Shows some

consistency in responding to

the comments of others.

* If this person were not a

member of the class, the

quality of discussion would

be diminished somewhat.

* Present, not

disruptive.

*Tries to respond

when called on

or directly

questioned but

does not offer

much: may

simply restate

questions or

points previously

raised, says little

or nothing in

class to

demonstrate

preparation and

analysis of topic

material.

*Demonstrates

very infrequent

involvement in

discussion.

* If this person

were not a

member of the

class, the quality

of discussion

would not be

changed.

*Contributions in class often

rely on personal opinions

rather than demonstrating

preparation and analysis of

topic material.

*Ideas offered are seldom

substantive, provides few if

any insights and rarely a

constructive direction for the

class, comments are

inappropriate or off topic.

*Being disrepectful of others

when they are speaking,

dominating class discussions

thereby restricting others’

participation.

*Listens to others some of the

time, does not stay focused on

other’s comments (too busy

formulating own) or loses

continuity of discussion.

Shows some consistency in

responding to the comments of

others.

* If this person were not a

member of the class, valuable

time would be saved.

*Using ANY electronic

devices such as but not limited

to cell phones, iPods, or

computers during class.

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