Ethical Reasoning: Implications for Accounting 1
Ethics Reflection 1 Integrity: The Basis of Accounting 3 Religious and Philosophical Foundations of Ethics 4 What Is Ethics? 5
Norms, Values, and the Law 6 Ethical Relativism 8 Situation Ethics 8 Cultural Values 10
The Six Pillars of Character 11 Trustworthiness 12 Respect 15 Responsibility 15 Fairness 15 Caring 16 Citizenship 16
Reputation 16 The Public Interest in Accounting 18
Professional Accounting Associations 18 AICPA Code of Conduct 19
Virtue, Character, and CPA Obligations 20 Modern Moral Philosophies 21
Teleology 22 Deontology 25 Justice 27 Virtue Ethics 28
Application of Ethical Reasoning in Accounting 29 DigitPrint Case Study 31
Scope and Organization of the Text 33 Concluding Thoughts 34 Discussion Questions 35 Endnotes 37 Chapter 1 Cases 41
Case 1-1: Harvard Cheating Scandal 42 Case 1-2: Giles and Regas 43 Case 1-3: NYC Subway Death: Bystander Effect or Moral Blindness 45 Case 1-4: Lone Star School District 46 Case 1-5: Reneging on a Promise 47 Case 1-6: Capitalization versus Expensing 48 Case 1-7: Eating Time 49 Case 1-8: A Faulty Budget 50 Case 1-9: Cleveland Custom Cabinets 51 Case 1-10: Telecommunications, Inc. 52
Chapter 2 Cognitive Processes and Ethical Decision Making in Accounting 54
Ethics Reflection 54 Kohlberg and the Cognitive Development Approach 55
Heinz and the Drug 56 Universal Sequence 58
The Ethical Domain in Accounting and Auditing 59 Rest’s Four-Component Model of Ethical Decision Making 59
Moral Sensitivity 60 Moral Judgment 60 Moral Motivation 60 Moral Character 60
Rest’s Model and Organizational Behavior 61 Professional Judgment in Accounting: Transitioning from Moral Intent to Moral Action 63
Diem-Thi Le and Whistleblowing at the DCCA 64 Behavioral Ethics 67
Ethical Decision-Making Model 68 Application of the Model 71 Concluding Thoughts 72 Discussion Questions 72 Endnotes 74 Chapter 2 Cases 77
Case 2-1: WorldCom 78 Case 2-2: Better Boston Beans 79 Case 2-3: The Tax Return 80 Case 2-4: Shifty Industries 81 Case 2-5: Blues Brothers 83 Case 2-6: Supreme Designs, Inc. 84 Case 2-7: Milton Manufacturing Company 85 Case 2-8: Juggyfroot 87 Case 2-9: Phar-Mor 88 Case 2-10: Gateway Hospital 90
Chapter 3 Creating an Ethical Organization Environment and Effective Corporate Governance Systems 91
Ethics Reflection 91 Seven Signs of Ethical Collapse 92
Pressure to Maintain the Numbers 93 Fear of Reprisals 93
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Loyalty to the Boss 93 Weak Board of Directors 94
A Culture of Conflicting Interests 94 Innovation and Ethics 95 Community Involvement and Ethics 95 Organizational Influence on Ethical Decision Making 95 Individual-Organization Interchange 96 Ethical Dissonance Model 96
Business Ethics 98 Guiding Principles 98 Values 99 Ethical Standards 99 Business Ethics versus Personal Ethics 100 Ends versus Means 101 Trust in Business 101 Johnson & Johnson: A Case of Dr. Jekyll and Mr. Hyde? 103 Employees Perceptions of Ethics in the Workplace 105
Stakeholder Perspective 107 The Case of the Ford Pinto 107
Fraud in Organizations 109 Fraudulent Business Practices 109 Occupational Fraud 110 Financial Statement Fraud 112
Foundations of Corporate Governance Systems 114
Defining Corporate Governance 115 Views of Corporate Governance 115 The Importance of Good Governance 116 Executive Compensation 117
Corporate Governance Mechanisms 119 The Role of the Board of Directors 119 Audit Committee 120 Internal Controls as a Monitoring Device 122 Internal Auditors 123 Audited Financial Statements 125 NYSE Listing Requirements 125 Code of Ethics for CEOs and CFOs 127 Compliance Function 128