1. Why would VW engineers think they could get away with a defeat device when the technique had been caught twice before? 2. If they thought they would be caught, why did they try the defeat device? 3. Why didn’t one of the several design engineers and test engineers and technicians involved blow the whistle to top management, or and/or the regulators? 4. VW has a governance system, where the Supervisory Board is different from North American Boards of Directors. a) How is it different from North American governance models? 4b. The VW governance system does not appear to have had a whistleblower encouragement and reporting system. Could the differences in governance have contributed to the decision to cheat, and to keeping it a secret? If so, how? 5. Describe how VW would have to change to institute a culture of integrity. 6. How would VW ensure that their policy on environmental protection be upheld? 7. Should VW engineers, managers and the CEO be sent to jail? Why and why not? 8. Would you buy a VW? Why and why not?
> 1. Was the decision not to install the rubber bladder appropriate? Use the 5 question/box framework to support your analysis. 2. What faults can you identify in Ford's cost-benefit analysis? 3. Should Ford have given its Pinto customers the option to ha
> 1. What should the individuals involved have done? 2. How can the Hermann Hospital ensure that individuals do what they should? 3. Should the doctor, residents, pharmacist and nurses involved in this tragedy be fired? If not, should they be sanctioned,
> 1. Keeping in mind that no compensation, nor accounting services, were ever received or provided, has Sam stepped “out of bounds”? 2. What is your advice for Sam? 3. What is your advice for Ruby? 4. Given the alleged disclosures by Jimmy’s accountant, ha
> 1. What breaches of fiduciary duty does the Adelphia case raise? 2. Why do you think the Rigas family though they could get away with using Adelphia as their own piggy bank? 3. What allowed the Rigas family to get away with their fraudulent behaviour for
> 1. What does our professional code say about this? 2. If this issue is uncovered by the government regulatory authorities, will I be implicated? 3. Should I quit my job and then go and report this situation to the regulatory authorities?
> 1. Based on the conflicts of interest raised in the case, has Goldman Sachs, in effect, shorted itself? Explain why and why not. 2. How should Goldman Sachs have handled each conflict of interest? 3. If Goldman Sachs really is innocent of all conflicts,
> 1. From a utilitarian point of view, who do you think should be in the priority group? 2. From a justice as fairness perspective, who should be in the priority group? 3. Should people who make society flourish through their economic productivity, such as
> 1. Do you think that Apple’s new accounting policy, that is consistent with the 2009 FASB statement, results in fair financial reporting? 2. Do you think that Apple’s share price should have gone up as a result of increased revenue due to a change in an
> 1. Why did BP fail its oversight and decision capabilities? 2. Describe your vision of a good risk management process that BP should have been following. 3. What aspects of a good risk management process appear does BP not appear to have been using? 4. H
> 1. Which segment of its operations got Enron into difficulties? 2. How were profits made in that segment of operations (i.e. what was the business model)? 3. Did Enron’s directors understand how profits were being made in this segment? Why not? 4. Enron
> 1. Apparently Daimler executives were not concerned enough with personal sanctions to change the company’s bribery practices to comply with German and U.S. statutes. How can these attitudes be changed? 2. What internal controls could have been usefully
> 1. Is Madoff’s sentence too long? 2. Some SEC personnel were derelict in their duty. What should happen to them? 3. Are the reforms undertaken by the SEC (“The Securities and Exchange Commission Post-Madoff Reforms” (last update October 16, 2014), http
> 1. Did Goldman Sachs do anything wrong legally or ethically? Explain your answer. 2. Would it make a difference if other investment bankers were also providing such services? 3. What subsequent impacts could the transactions described above have on Gold
> 1. What are the ethical issues? 2. What should Albert Gable do?
> 1. Did the bank have a moral responsibility to assist in the restructuring of the commercial paper market? 2. How would you explain to the board of directors that you were having a bank exit a market in which your competitors were making a lot of money?
> 1. Who are the stakeholders involved and what are their interests? 2. Which stakeholders and interests are the most important? Why? 3. What was wrong with the quality of the board of directors’ debate? 4. What is the downside if the right decision is not
> What should Ron consider in making his decision?
> 1. What differentiates very aggressive tax shelters from reasonable tax shelters? 2. As a result of the E&Y and KPMG tax fiascos, the large accounting firms have become wary of marketing very aggressive tax shelters. Now, most shelters are being sold by
> 1. Balancing personal self-interest against the interests of others 2. Profitability is too narrowly defined 3. Are there occasions when lowballing is appropriate? 4. What control strategies may be advisable?
> 1. Did Maria blow the whistle at the right time? Why or why not? 2. Was her planned response appropriate? Why or why not? 3. How would you suggest she should have dealt with the problem? 4. Should whistle-blowing be encouraged? Why or why not? 5. How sho
> 1. Who are the stakeholders involved in this decision? 2. What are the ethical issues involved? 3. What should Sue do?
> 1. Do you think that the executives at Lululemon demonstrated ethical leadership? Could it have been improved? 2. Does a CEO have an ethical responsibility to step down as CEO when there is a production and marketing disaster that requires a product reca
> 1. Should the CEOs of these mining companies be held accountable for commodity prices that have dropped precipitously while operating costs have soared? 2. Should Albanese be held responsible for the fact that the Chinese market did not open as he predic
> 1. Whose codes will predominate: lawyers, engineers or accountants? 2. Do professionals report to one of their own or to a member from a different profession? 3. Who would be sued? 4. Won’t focus be on profit rather than serving the public interest?
> 1. Should the Italian bank’s general manager hire a commercialista and pay busterella? 2. Should the general manager phone the bank’s American CEO in New York and ask for advice? 3. If you were the bank’s American CEO, would you want to receive the phone
> 1. Do you consider it to be unethical for insurance companies to charge high-risk people a higher premium than low-risk people? 2. Are insurance companies acting responsibly when they require customers to disclose medical information and/or submit to a m
> 1. Which groups were most at fault for the LIBOR manipulations: brokers, traders, bank executives, bank boards of directors, or regulators? Why? 2. What should the regulatory bodies do with the fines paid by these banks? Reduce tax rates for the general
> 1. What major governance problems does WGH face? Which problems are the most important and need to be fixed as soon as possible? 2. What are the most important ethical problems faced by a general hospital? How could these ethical problems best be manag
> a) Is this a fair law? b) If you were Harold Johns, how would you ensure that Baranca executives and Baranca itself would never be vulnerable to such problems again?
> 1. Does accounting cause bankruptcy? 2. Should the federal government have bailed out AIG, especially when it had not rescued Lehman Brothers and had let Merrill Lynch be taken over by Bank of America?
> 1. What conflicts of interest may have been involved in Black’s activities? 2. Were Black’s non-compete agreements and payments unethical and/or illegal? 3. What questions should have been asked by International’s directors? 4. If the boards of directors
> 1. What was the most important reason for Lehman Brothers failure? 2. What is leverage and why is it so important? 3. Prepare the journal entries for a Repo 105 transaction sequence for $1 million in securities. 4. In your opinion, how large should a Rep
> 1. Do you consider transfer pricing to be an ethical means of reducing a business’s tax liability? Why, and why not? 2. At what level would a transfer price cease to become reasonable, and become unethical and probably illegal? 3. Does transfer pricing
> 1. Pharmaceutical companies have to spend millions of dollars and years of research to find just one successful drug. Merck spent time and money developing and then distributing Mectizan for free. Is it possible for Merck to justify, to its shareholders,
> 1. Are offshore tax havens that are technically legal but socially unacceptable in the public interest? 2. Are tax accountants promoting the public interest when they design, promote, and sell tax shelters that reduce or eliminate paying taxes by the wea
> 1. After being told that the guideline for bad debts for 1996 was $15 million, what should Walt do? 2. What are the risks for MCI in setting an unrealistic allowance for doubtful accounts?
> 1. Loyalty is a highly desirable ethical value, and disloyalty is serious unethical and often illegal activity. Explain how and to whom Grossmith, Horcsok, and Webb (G, H, and W) were disloyal. 2. Although Grossmith’s actions did not negatively affect
> 1. If you were an executive of Mega Brands, what concerns would you express to the CEO about the Magnetix Toy issues noted above? 2. If the CEO didn’t pay any attention, what would you do? 3. Should the CPSC have more powers to deal with such hazards and
> 1. Why would HP bribe think they could get away with bribing an employee in the Russian anti-bribery prosecutor’s office? 2. Why was it done through a series of companies in different countries? 3. What has changed to now allow investigators to unravel s
> 1. Should an accounting firm have to resign as the auditor of a company when the partner in charge of the audit is convicted of releasing confidential information about that audit client? 2. How can accounting firms ensure that their partners and staff d
> 1. What was the basis of Martha Stewart’s reputation? 2. Why did MSO’s stock price decline due to Martha Stewart’s loss of reputation? 3. Who is Martha Stewart’s target market? 4. What qualities were associated with the Martha Stewart brand, before the c
> 1. The pattern of illegal and improper conduct described above took place for at least 5 years prior to June 3, 2002. What red flags or governance mechanisms should have alerted the following people to this pattern: a. Tyco management accountants? b. Ty
> 1. Do you think that the gross value method distorts earnings because it overstates revenue? 2. The total cash that the company receives is the same regardless of the method the company uses to report revenue. So, is one revenue recognition method just a
> 1. What were the responsibilities of the company, the government authorities, and the employees of the company, that were not properly discharged? 2. Should Exxon abide by the Valdez Principles? 3. Could a better code of conduct have prevented this accid
> 1. Do you think that stock options actually motivate employees to work for the long-term good of the company? 2. Do you think that stock options inadvertently encourage manager to engage in questionable accounting activities, such as earnings management,
> a) What are the crises that Lynn faces? b) What order should the crises be considered in? (i.e., Which are the most serious?) Why? c) What solutions can they offer? d) How would they guard against and prevent such crises in the future?
> 1. Utilizing the information provided and available from web sources, use the ethical decision-making techniques discussed in the chapter to form an opinion about whether Merck’s decisions regarding Vioxx were ethical. Show your analysis. 2. In order to
> 1. Did Toyota handle its recalls ethically? Why and why not? 2. What changes would you recommend to Toyota’s crisis management approach? Why? 3. Do you think that Mr. Toyoda’s testimony on February 24, 2010 was effective? How might it be improved? 4. Toy
> 1. What aspects of the schemes described in this case were a) unethical? b) illegal? c) fraudulent? 2. When would a healthy skepticism by senior management or professional skepticism by an accounting or legal professional have been useful in combating th
> 1. For many organizations, bankruptcy protection is just another operational and financial strategy. Discuss the ethical aspects of intentionally remaining silent, collecting money and then suddenly announcing that the company is bankrupt? 2. Do you acce
> 1. Ethics of commissions and commission caps 2. Perks to sales staff 3. Re-hiring managers
> 1. Does winning take care of everything? In golf? In life? In business? 2. Does how you play the game or run your business ever matter? 3. Is the reputational impact of unethical behavior different for a sports star than for a business, or for yoursel
> 1. Ignoring any legal issues, was Cesar ethically obligated to inform his partner, George, of his criminal past? 2. Did George have a right to know about Cesar’s criminal past?
> 1. Describe the mechanisms that WorldCom’s management used to transfer profit from other time periods to inflate the current period. 2. Why did Arthur Andersen go along with each of these mechanisms? 3. How should WorldCom’s board of directors have preve
> 1. Who was really to blame for the lax procedures found? 2. How should this situation be remedied? 3. How could the job done by the FDA be improved? 4. J & J had lived under a positive halo due to their earlier recall of tainted capsules of Tylenol. Why
> 1. How would you answer the assistant controller? 2. What advice would you give to the controller? 3. What aspects of the organization’s governance process and/or internal controls were flawed? 4. Should the directors be told about the fraud and/or any o
> 1. Was J&J’s decision to not inform its customers of the potential risks of extended use of talcum powder products acceptable? 2. If J&J knew about the potential risks of talcum powder products in 1987, should the company have withdrawn all its talcum pr
> 1. If Wanda Liczyk did not benefit financially, did she really have a conflict of interest? Should she have been disciplined by the ICAO [now CPAO]? Why or why not? 2. Should the accounting profession be allowed to police itself, or should an independent
> 1. The Strip2Clothe campaign may have been in questionable taste, but it did raise tens of thousands of pieces of clothing for the homeless. Does the end justify the means? 2. Virgin Mobile has a history of using cutting edge advertisements. It poked fun
> 1. Where were Wal-Mart’s questionable payments made, and where did this result in serious damage to the company and its executives? Why? 2. The ‘gestores’ payments were made to third parties, who then bribed local officials. How would a company ensure t
> 1. Do you think that British Airways is being hypocritical? 2. British Airways is attempting to reduce its carbon footprint by flying more fuel efficient airplanes, such as the A318. The carbon footprint per passenger is lower if 100 people occupy the A3
> 1. Are professionals bound to meet a higher standard of ethical behavior than nonprofessionals? If so, why? 2. In what respects were the actions of the lawyers involved in the Lang Michener affair not up to the ethical standard you would expect? Consider
> Should organizations that have a risk-taking culture, such as the one developed by Stan O’Neil at Merrill Lynch, enjoy the gains and suffer the losses, without recourse to government bailouts?
> Should the CEOs who refused to have their firms invest in mortgage-backed securities in the early years because the risks were too great receive bonuses in the latter years because their firms did not incur any mortgage-backed security losses? How would
> Should CEOs who made large bonuses by having their firms invest in mortgage-backed securities in the early years have to repay those bonuses in the later years when the firm records losses on those same securities?
> The government bailout of the financial community included taking an equity interest in publicly traded companies such as American International Group (AIG). Is it right for the government to become an investor in publicly traded companies?
> How much should the exiting CEOs of Fannie Mae and Freddie Mac have received when they were replaced in September 2008?
> Identify and explain five examples where executives or directors faced moral hazards and did not deal with them ethically.
> How could ethical considerations improve unbridled self-interest in ethical decision making?
> How could increased regulation improve the exercise of unbridled self-interest in decision making?
> What were the three most important ethical failures that contributed to the subprime lending fiasco?
> Does the Dodd-Frank Act go far enough, or are some important issues not addressed?
> Should members and executives in investment firms be forced to be members of a profession with entrance exams and with adherence to a professional code such as is the case for professional accountants or lawyers?
> Given that the marketplace for securities is global, and that the risks involved can affect people worldwide, should there be a global regulatory regime to protect investors? If so, should it be based on the regulations of one country? Should enforcement
> The global economic crisis was caused by the meltdown in the U.S. housing market. Should the U.S. government bear some of the responsibility of bailing out the economies of all countries that were harmed by this crisis?
> How much and in which ways did unbridled self-interest contribute to the subprime lending crisis?
> Is trust really important – can’t employees work effectively for someone they are afraid of, or at least where there is some “creative tension”?
> What would you list as the five most important ethical guidelines for dealing with North American employees?
> Do professional accountants have the expertise to audit corporate social performance reports?
> Why should a corporation make use of a comprehensive framework for considering, managing and reporting corporate social performance? How should they do so?
> Descriptive commentary about corporate social performance is sometimes included in annual reports. Is this indicative of good performance, or is it just window dressing? How can the credibility of such commentary be enhanced?
> How could a corporation utilize stakeholder analysis to formulate strategies?
> How will the U.S. external auditor’s mindset change in order to discharge the duties contemplated by SAS 99 on finding fraud?
> If a corporation’s governance process does not involve ethics risk management, what unfortunate consequences might befall a corporation?
> Why should ethical decision making be incorporated into crisis management?
> How would you advise your company’s personnel to act with regard to expectations of guanxi in China?
> What should a North American company do in a foreign country where women are regarded as secondary to men, and are not allowed to negotiate contracts or undertake senior corporate positions?
> Should a North American corporation operating abroad respect each foreign culture encountered, or insist that all employees and agents follow only one corporate culture?
> In what ways do ethics risk and opportunity management as described in this chapter go beyond the scope of traditional risk management?
> Why did the SEC ban certain nonaudit services from being offered to SEC-registrant audit clients even though it has been possible to effectively manage such conflict of interest situations?
> What is the difference between exercising “due care” and “exercising professional skepticism”?
> Why is maintaining the confidentiality of client or employer matters essential to the effectiveness of the audit or accountant relationship?
> Which would you chose as the key idea for ethical behavior in the accounting profession: “Protect the public interest” or “Protect the credibility of the profession”? Why?
> When should an accountant place his or her duty to the public ahead of his or her duty to a client or employer?
> Why do codes of conduct or existing jurisprudence not provide sufficient guidance for accountants in ethical matters?
> Why are most of the ethical decisions accountants face complex rather than straightforward?
> Many professional accountants know of questionable transactions but fail to speak out against them. Can this lack of moral courage be corrected? How?
> Transfer pricing can be used to shift profits to jurisdictions with low or no tax to reduce the taxes payable for multinational companies. If such profit shifting is legal, is it ethical? Was Apple well-advised to shift $30 billion in profits to its Iris
> An engineer employed by a large multidisciplinary accounting firm has spotted a condition in a client’s plant that is seriously jeopardizing the safety of the client’s workers. The engineer believes that the professional engineering code requires that t
> Are the governing partners of accounting firms subject to a “due diligence” requirement similar to that for corporation executives in building an ethical culture? Can a firm and/or its governors be sanctioned for the misdeeds of its members?
