Test Bank Ethical Obligations and Decision Making in Accounting Text and Cases 4th Edition by Steven M Mintz Chair

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Test Bank Ethical Obligations and Decision Making in Accounting Text and Cases 4th Edition by Steven M Mintz Chair

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WITH ANSWERS

 

Test Bank Ethical Obligations and Decision Making in Accounting Text and Cases 4th Edition by Steven M Mintz Chair

Chapter 03

Organizational Ethics and Corporate Governance

 

Multiple Choice Questions

1. Organizational ethics can be thought of as:

A. Descriptions of how ethics occurs at a company

 

B. Principles and standards of behavior that guide business decisions

 

C. Rules of conduct that establish legal requirements for businesses

 

D. Standards of reporting ethical violations

 

2. The role of a leader in an organization is to:

A. Establish principles and standards of behavior that guide business decisions

 

B. Enforce violations of code rules of conduct

 

C. Determine organizational climate and define norms

 

D. Develop the principles and strategic initiatives to guide ethical action

 

3. Which of the following is NOT an underlying trait of character of an effective leader identified by Johnson?

A. Confidence

 

B. Temperance

 

C. Reverence

 

D. Compassion

 

4. Which of the following is not a component of the Framework for Understanding Ethical Decision Making in Business?

A. Ethical issue intensity

 

B. Individual and organizational factors

 

C. Internal controls

 

D. Business ethics intentions, behaviors, and evaluations

 

5. What are the five elements of the framework for understanding ethical decision making in business?

A. Ethical issue sensitivity; individual factors; organizational factors; opportunity; and business ethics intentions and evaluations.

 

B. Individual factors; organizational factors; opportunity; moral character; and business ethics intentions, behavior, and evaluations.

 

C. Ethical issue intensity; individual factors; organizational factors; opportunity; and business ethics intentions, behavior, and evaluations.

 

D. Organizational factors; opportunity; moral judgment; individual values; and business ethics intentions, behavior, and evaluations.

 

6. With respect to the importance of moral issues in business, Thomas Jones posited that:

A. Moral issues of high intensity are more pronounced than those of low intensity

 

B. Moral issues of high intensity are subtler and difficult to evaluate

 

C. Moral issues of low intensity are more pronounced because they are difficult to identify

 

D. Moral issues of high and low intensity have equal effects on decision making

 

7. The ethical dissonance model looks at the ethical fit of the organizational and individual values. The optimal fit for an individual with high individual ethics would be:

A. High-High

 

B. High-Low

 

C. Low-High

 

D. Low-Low

 

8. The Ethical Dissonance Model helps to evaluate:

A. Whether the organization sets an ethical tone at the top

 

B. Whether the organization has ethical leadership

 

C. Whether the organization has a whistle-blowing process

 

D. Whether the organizations ethics aligns with individual ethics

 

9. The most important element of a high ethics organization would be:

A. Acting in accordance with self-interest

 

B. Having a credo and mission statement

 

C. Having a mission statement, values, and ethical code

 

D. Acting opposite of stated values, ethics and mission

 

10. An ethical organization includes the following traits:

A. Zero tolerance for individual and collective mistakes

 

B. Shared values, goals, and problem-solving mechanisms

 

C. A focus on results over process

 

D. A culture of do what I say, not what I do

 

11. The seven signs of a pending ethical collapse include all but:

A. Pressure to make numbers

 

B. Whistleblowing hotline

 

C. Bigger than life CEO

 

D. Conflicts of interest overlooked

 

12. In the Pinto case, Ford relied on which approaches to ethical reasoning to decide on a course of action with respect to the faulty gas tank placement:

A. Egoism and utilitarianism

 

B. Enlightened egoism and rights theory

 

C. Ethical legalism and utilitarianism

 

D. Justice and rights theory

 

13. The stakeholder view emphasizes the obligations of management to:

A. The shareholders

 

B. The shareholders and creditors

 

C. All parties impacted by corporate decisions in a significant way

 

D. The board of directors

 

14. Which of the following is not an element of an ethical corporate culture?

A. Setting a proper tone at the top

 

B. Establishing strong internal controls

 

C. Having an effective internal audit function

 

D. Having an effective external audit

 

15. Trust in business is important because:

A. Management needs to feel confident that employees will carry out organizational objectives

 

B. Stakeholders need to feel confident that relationships with organizations will be consistent and reliable

 

C. Stakeholders rely on management to produce shareholder returns

 

D. Management needs to feel confident that those with relationships with the organization do what they say

 

16. A unique aspect of Johnson & Johnsons Credo is that it:

A. It is an aspirational statement rather than the typical thou shalt not form of a code of ethics

 

B. It encourages employees to interpret the values of the company

 

C. It follows an agency approach to decision making

 

D. It establishes general guidelines for ethical behavior when the codes ethics rules are unclear

 

17. Lawsuits filed against Johnson & Johnson for product defects years after the Tylenol affair best illustrates that:

A. Even good companies can do bad things

 

B. A reputation for trust can be lost in an instance

 

C. Good companies are targets of consumer lawsuits

 

D. Ignoring bad evidence about a product is a bad idea

 

18. Which of the following is NOT a factor that managers use to set the right tone at the top and foster ethical leadership?

A. Consider the implications of ones actions on the stakeholders

 

B. Make decisions that do not harm others

 

C. Make decisions that are universal

 

D. Reflect before deciding

 

19. A troubling result of the 2013 National Business Ethics Survey is:

A. Increased witnessing of misconduct in the workplace

 

B. Decline in pressure to compromise ethics

 

C. Percentage of employees retaliated against for whistle-blowing is a problem

 

D. Lessening of observed misconduct

 

20. The 2013 Ethics Resource Center National Business Ethics Survey indicates each of the following results with respect to how employees view the ethics and ethical practices of organizations they work for except:

A. Misconduct at work has declined over the years

 

B. Whistleblowing is up

 

C. Ethical cultures are weaker

 

D. Pressure to cut corners is lower

 

21. Which of the following is not considered a behavioral indicator of fraud?

A. Refusal to take vacations

 

B. Satisfaction with pay

 

C. Financial difficulties

 

D. An unwillingness to share duties

 

22. Fraud can be defined as:

A. A deliberate misrepresentation to gain an advantage over another party

 

B. A cover-up of a mistake made in the financial statements

 

C. An error in preparing financial statements

 

D. All of the above

 

23. A unique aspect of occupational fraud is:

A. The misuse of company assets

 

B. The falsification of financial statements

 

C. The failure to disclose full and complete information

 

D. The failure to resolve conflicts of interest

 

24. The difference between occupational and financial statement fraud is:

A. Occupational fraud is generally committed by employees

 

B. Occupational fraud is generally committed by external auditors

 

C. Financial statement fraud occurs either by accident or deliberation

 

D. Financial statement fraud always starts with non-executive decisions

 

25. According to the ACFE survey, the most common type of occupational fraud scheme is:

A. Corruption

 

B. Fraudulent billing

 

C. Illegal gratuities

 

D. Asset misappropriation

 

26. The ACFE found that the most common way that fraud is first detected is:

A. Internal audit

 

B. Internal controls

 

C. External audit

 

D. Tip

 

27. Which of the following was not a finding of the ACFE 2014 Report to the Nation on Occupational Fraud?

A. Fraud is more likely to be detected by tips than any other way

 

B. Frauds lasted a medium of 18 months before detection

 

C. Asset misappropriation schemes was the most common type of occupational fraud

 

D. External auditors discover about 10 percent of the frauds

 

28. Which of the following was the most frequent anti-fraud control identified in the 2014 ACFE Global Fraud Survey?

A. External audit of financial statements

 

B. Code of conduct

 

C. Internal audit department

 

D. External audit of internal controls over financial reporting

 

29. According to the ACFE Global Fraud Study, which of the following was the most common behavioral indicator of fraud?

A. Living beyond means

 

B. Financial difficulties

 

C. Addiction problems

 

D. Refusal to take vacations

 

30. An example of revenue overstatement is:

A. Manipulating reserves

 

B. Recording gross, rather than net, revenue

 

C. Reporting cost of sales as a non-operating expense

 

D. Deferring revenue

 

31. Which of the following is not a fraud method to overstate revenues?

A. Recording future sales in the current period

 

B. Recording sales of products that are out on consignment

 

C. Recording sales based on F.O.B. shipping point

 

D. Recording revenues of other companies by acting as a middleman

 

32. The Miniscribe fraud was carried out by:

A. Recording nonexistent revenues

 

B. Delaying recording expenses

 

C. Counting nonexistent product in inventory

 

D. All of the above

 

33. Which of the following is NOT a characteristic behavior illustrating the fiduciary duty of the board of directors?

A. Safeguarding corporate assets

 

B. Promoting shareholder interests

 

C. Exercising care in carrying out their responsibilities

 

D. Representing the interests of all stakeholders

 

34. The level of care expected of a reasonable person under similar circumstances in meeting ones fiduciary duty is called:

A. Duty of loyalty

 

B. Duty of care

 

C. Transparency

 

D. Fairness

 

35. What is the main fiduciary duty of the board of directors?

A. Maximize profits for the company

 

B. Monitor executive compensation

 

C. Safeguard the interests of the companys stakeholders

 

D. Allow high risk accounting practices

 

36. The business judgment rule refers to:

A. Faithfulness to ones obligations and duties

 

B. Honesty of purpose and caring

 

C. Decision making under uncertainty

 

D. Acting with due care and good faith

 

37. The honest services fraud rule that was used by Jeff Skilling was successful because the U.S. Supreme Court rule that:

A. He did not conspire to defraud shareholders of Enron

 

B. He did not accept bribes or kickbacks as an Enron officer

 

C. He did not commit fraud

 

D. He resigned from Enron before the fraud became public knowledge

 

38. The relationship between the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy and rule of law is known as:

A. Code of ethics.

 

B. Corporate leadership.

 

C. Corporate responsibility.

 

D. Corporate governance.

 

39. Which of the following is NOT an element of the corporate governance system?

A. Board of directors

 

B. Internal controls

 

C. Executive compensation policies

 

D. Monitoring by top management

 

40. Corporate governance structures and relationships are shaped by internal and external mechanisms. Which of the following is an external mechanism?

A. State and federal statues require a baseline corporate governance system

 

B. Audit committees must consist of at least three members all of whom are independent of management and the entity

 

C. All directors must be independent of management

 

D. Each listed company must have an internal audit function

 

41. Strong corporate governance relies on a strong board of directors. Which of the following would be a strong candidate to be a board director for XYZ, Inc.?

A. Community member who has already served on the board for 15 years.

 

B. Investor who has a multi-million-dollar joint venture with the CEO and CFO.

 

C. Retired controller of a Fortune 500 company.

 

D. Community member who receives annual large consulting contracts from XYZ.

 

42. Which of the following is NOT an element of internal control over financial reporting?

A. Maintaining accurate financial records

 

B. Providing reasonable assurance that receipts and expenditures are recorded based on proper authorization by management

 

C. Developing a code of conduct and whistle-blowing procedures

 

D. Providing reasonable assurance that the financial statements are prepared in accordance with generally accepted accounting principles

 

43. Under the Sarbanes-Oxley Act, which of the following bodies must contain members that are 100% independent of management?

A. Board of directors

 

B. Audit committee

 

C. Internal auditors

 

D. Board of supervisors

 

44. To ensure audit committee independence, the committee should meet separately with each of the following groups except:

A. Senior executives

 

B. Internal auditors

 

C. External auditors

 

D. Shareholders

 

45. Which of the following is NOT one of the audit committees responsibilities?

A. Monitor the integrity of the financial statements

 

B. Review all financial reporting judgments

 

C. Review whistleblowing and compliance processes

 

D. Review and monitor the external audit process

 

46. External auditor communications with the audit committee include each of the following except:

A. Matters related to why certain accounting policies are considered critical

 

B. Shareholder returns

 

C. Significant estimates made by management

 

D. Significant unusual transactions

 

47. A strong and effective internal control environment can be enhanced by:

A. Financial statements that present fairly financial position and results of operations

 

B. Giving the internal auditors direct and unrestricted access to the audit committee

 

C. Having the internal auditors report to the external auditors

 

D. Having the external auditors report to the audit committee

 

48. Section 302 of the Sarbanes-Oxley Act requires that management:

A. Assess the companys internal controls

 

B. Certify the financial statements

 

C. Disclose all executive compensation

 

D. Blow the whistle on corporate wrongdoing

 

49. Which of the following is NOT a component of an effective internal control environment in COSO Internal Control Integrated Framework?

A. The control environment

 

B. Risk abatement

 

C. Control activities

 

D. Information and communication

 

50. Agency theory can best be described as:

A. The relationship between top management and the board of directors

 

B. The relationship between the board of directors and shareholders

 

C. The relationship between top management, the board of directors, and shareholders

 

D. The relationship between the external auditors and top management

 

51. Each of the following is an element of agency costs except:

A. The costs incurred in monitoring managerial performance

 

B. The costs incurred because there is information symmetry between the corporation and outsiders

 

C. The costs incurred because insiders know more about a company than do outsiders

 

D. The costs incurred in developing internal controls over financial reporting

 

52. Backdating of stock options is unethical because:

A. It favors top executives over other company employees with respect to the number of options

 

B. It purposefully manipulates the option criteria that determine their value

 

C. It changes the exercise price on options to benefit top executives

 

D. It changes the exercise date on options to benefit top executives

 

53. Compensation of executives has soared over the last forty plus years to more than 400 times the pay for average workers. Remedies to rein in executive compensation include all but:

A. Say on pay provisions

 

B. More diligent board oversight of compensation packages

 

C. Restrictions by the law as to the maximum total compensation allowable

 

D. Clawbacks of compensation when it can be shown executives knew of fraud

 

54. The term disgorgement means:

A. To give up ones meal after eating

 

B. To return profits earned illegally

 

C. To return ill-gotten gains

 

D. To give up ones board position after a fraud incident

 

55. As a manager in her firm, Lucy concerns herself with the effectiveness of internal controls. Her main focus is how efficient and effective the companys internal controls are over time. Which component of internal control is Lucy engaging in?

A. Risk assessment

 

B. Control activities

 

C. Control environment

 

D. Monitoring

 

56. The fraud at Groupon occurred because the company:

A. Accelerated the recording of customer revenues from high-priced offers

 

B. Delayed recording customer refunds

 

C. Failed to set aside enough money to cover customer refunds

 

D. Included revenue from nonexistent customers

 

57. The 2012 State of Compliance Study of PwC indicates that:

A. About the same percentage of compliance officers report to the audit committee as to the general counsel

 

B. A compliance officer works with the external auditors to ensure accurate and reliable financial reporting

 

C. Compliance officers always are part of the internal audit group

 

D. Compliance officers should never be part of the management team

 

58. Has SOX accomplished its intended goal of reliable financial reporting by public companies?

A. Yes, as the CEO and CFO are certifying that financial statements contain no material misstatements.

 

B. Maybe, as very few defendants have been charged with false certification, and fewer still have been convicted.

 

C. Maybe, as laws are needed but they serve as only a minimum standard of ethical conduct and may not lead to ethical conduct.

 

D. No, as the SEC has unsuccessfully sought to collected disgorgement of bonuses and other compensations of officers.

 

59. DeGeorge thinks that corporations have a moral obligation not to harm. Which of the following would be one of his criteria for morally permitted whistleblowing?

A. Documented evidence exists that would convince a reasonable and impartial observer that ones view of the situation is correct but that serious harm is unlikely to occur.

 

B. The employee must reasonably believe that going public will not create the necessary change to protect the public and is worth the risk to oneself.

 

C. The employee should report a firms actions that will do serious and considerable harm to others to her supervisor, and keep reporting all the way up to board until the actions are corrected.

 

D. The employee must first report wrongdoing to the external auditor before going public.

 

60. Research by Miceli and Near indicates that:

A. Whistleblowers hope their speaking out achieves the correction of an organization wrongdoing

 

B. Whistleblowers hope those who violate the rules are prosecuted

 

C. Whistleblowers are motivated to report under Dodd-Frank to receive an award

 

D. Whistleblowers always blow the whistle because of altruistic reasons

 

61. What is the significance of the Menendez v Halliburton, Inc.?

A. Halliburton was able to preserve and show that their bill and hold method was in accordance with GAAP.

 

B. Menendez was awarded his position back at Halliburton, but the actions of Halliburton were retaliatory.

 

C. Appeals court panel ruled that Menendez (an internal accountant) had been retaliated against for blowing the whistle.

 

D. The SEC agreed with Menendez about the bill and hold method; Halliburton restated their financial statements and paid penalties.

 

62. With respect to whistleblowing, the Sarbanes-Oxley Act:

A. Protects employees of publicly traded companies who provide evidence in fraud cases

 

B. Confers legal protection on managers who reported wrongdoing by top executives

 

C. Confers legal protection on the board of directors for fraudulent actions by management

 

D. Protects auditors who blow the whistle to the SEC

 

63. The SEC has increased focus on identifying and penalizing misstatements in public company financials. What is one method that the SEC is using to identify companies, CEOs, and CFOs that are misstating financial statements?

A. Utilizing the whistleblower provisions of the Dodd-Frank Act to provide a hot line.

 

B. Analyzing patterns of internal control problems even absent a restatement of the financials.

 

C. Analyzing whether the CFO has implemented adequate internal controls and safeguards over the financial reporting function.

 

D. Utilizing the companys ethics code to spot misstatements.

 

64. The reporting requirements for fraud are detailed in Section 10A of the Securities Exchange Act of 1934. Which of the following steps are NOT part of a prescribed process that should be followed in deciding whether to report fraud?

A. Determine who is responsible for the fraud.

 

B. Determine whether the violations have a material effect, quantitatively or qualitatively, on the financial statements.

 

C. Determine whether appropriate remedial action has been taken.

 

D. Determine whether reporting to the SEC is necessary.

 

65. The 2010 Dodd-Frank Act includes additional incentives for whistleblowers. What is the acts effect on whistleblowing by accountants?

A. No accountant, internal or external, whether by job title or certification may receive a reward.

 

B. All accountants who whistle-blow are protected against retaliation, but may not receive a reward.

 

C. Internal auditors who whistle-blow may not receive a reward.

 

D. A CPA may report a violation of a public accounting firms performance in an audit.

 

66. Under certain circumstances, internal accountants are eligible to become Dodd-Frank whistleblowers. Which of the following is not one of those conditions?

A. Disclosure to the SEC is needed to prevent substantial injury to the financial interest of an entity or its investors

 

B. The whistleblower reasonably believes the entity is impeding investigation of the misconduct

 

C. The whistleblower has first reported the violation internally and at least 120 days have passed with no action

 

D. Disclosure to the SEC is needed to prevent substantial injury to the audit firm

 

67. In the Parable of Sadhu case, Bowen T. McCoys friend Stephen summed up the dilemma by saying:

A. I feel that what happened with the sadhu is a good example of the breakdown between ethics in different cultures

 

B. I feel that what happened with the sadhu is a good example of the breakdown between the individual and corporate ethics

 

C. People tend to inevitably act in their own best interest

 

D. All of the above

 

68. What is the ethical issue in the Rite Aid Inventory Surplus Fraud case?

A. The surplus inventory sales and kickback involved collusion between two officers of the company. When Foster wanted to stop the scheme, he was blackmailed in continuing the fraud.

 

B. Rite-Aid had a comprehensive corporate governance system that complied with all the requirements of Sarbanes-Oxley.

 

C. The internal auditor found and blew the whistle on the surplus inventory sales and kickback cover-up.

 

D. Vice Presidents of the company were involved in a material, nine year surplus inventory sales and kickback scheme.

 

69. The primary ethical issue in United Thermostatic Controls is:

A. Misappropriation of corporate assets

 

B. Accelerating the recording of revenue into an earlier period

 

C. Delaying the recording of expenses into a later period

 

D. Failure to fully disclose all information

 

70. The key fraud issue in the Franklin Industries Whistleblowing Case is:

A. Fraudulent financial statements were covered-up

 

B. Corporate culture pressured an employee to go along with fraud

 

C. Retaliation for reporting an embezzlement fraud

 

D. Recording revenues too soon led to fraudulent statements

 

71. What was the result of the annual inventory audit of the inventory shrinkage problem at Walmart?

A. Inventory shrinkage doubled year-over-year

 

B. Inventory shrinkage increased by 90 percent

 

C. Inventory shrinkage decreased by 90 percent

 

D. There was no change in inventory shrinkage

 

72. The Bennie and the Jets case centers on utility rates and the issue of:

A. Lowering the rate of return on utility sales

 

B. Lowering the rate of rebates to lower operating income

 

C. Falsifying utility rates to receive approval to charge higher rates

 

D. All of the above

 

73. The Olympus case was unique from a corporate governance perspective because it deals with:

A. A board of directors that was completely under the influence of the CEO

 

B. Cultural differences between Japanese management and western style of management

 

C. Cultural differences between U.S. and non-U.S. companies

 

D. A company that consistently overrides its internal controls and commits fraud

 

74. What non GAAP accounting method did Tony Menendez cite in blowing the whistle on Halliburton?

A. Recording sales that lack economic substance

 

B. Failing to write off impaired assets

 

C. Bill and hold revenue recognition

 

D. Releasing cookie jar reserves to smooth income

 

75. In the Bhopal case, in evaluating its exposure to possible future liability due to technology failures, Union Carbide used which of the following concepts?

A. Professional skepticism

 

B. Business risk

 

C. Cost-benefit analysis

 

D. Rights Theory

 

76. Jodie Fishers allegations of sexual harassment are made believable due to Mark Hurds:

A. Conflict of interests

 

B. Misuse of company assets

 

C. Inaccurate expense reports

 

D. All of the above

 

 

Essay Questions

77. Analyze the reaction of Toyota from an ethical perspective to disclosures that occurred in late 2009 and early 2010 that the accelerator in some brands might get stuck and result in unintended acceleration of the car. How does Toyotas reaction relate to that of Ford with the Pinto and Johnson & Johnson with the Tylenol poisoning?

 

 

 

 

78. In September 2015, Volkswagen disclosed it had sold hundreds of thousands of diesel cars in the U.S. with software specifically designed to evade government pollution tests. The company disclosed that the irregularities on diesel-emission readings extend to some 11 million vehicles globally. The company has admitted that it rigged diesel vehicles using a defeat device to pass lab tests, even though they emitted as much as 40 times the legal limit of pollutants on the road.

In November 2015, VW set a November 30 deadline for staff with knowledge about its diesel emissions test cheating to come forward. Workers who get in touch with internal investigators by then would be exempt from dismissal. VW said it would not sack workers for what they might reveal, but they might be transferred to other duties. Employees covered by collective bargaining agreements who get in touch promptly, but no later than November 30, 2015 and may rest assured that the company will waive consequences under labor law such as the termination of employment, and will not make any claim for damages, according to the letter sent to workers.

Evaluate VWs actions from an ethical perspective.

 

 

 

 

79. Tommy Hubbs is the new controller of XYZ Corporation. Recently, Hubbs was approached by Carol Franks, the CFO, and told in no uncertain terms to record $100,000 in revenue at the end of 2015 even though the sale was not made until January 3, 2016. Describe Hubbss ethical responsibilities in this matter if he is a CPA?

 

 

 

 

80. Tommy Hubbs is the new controller of XYZ Corporation. Recently, Hubbs was approached by Carol Franks, the CFO, and told in no uncertain terms to record $100,000 in revenue at the end of 2015 even though the sale was not made until January 3, 2016. Hubbs contacts a good friend who used to be the controller of XYZ and is told the environment of the company is one of loyalty at all costs. His friend shares that he left the company because of differences on numerous accounting issues. The friend advises Hubbs to let it go this one time to show he is a team player.

Assume Hubbs decides not to go along with Franks dictum. Prepare an outline to help him give voice to his values and attempt to change hearts and minds of those in XYZ that might block proper accounting.

Use the following to guide students on what is expected of them in answering this question.

As you read the case, think about the following series of questions for the protagonist to address after identifying the right thing to do including:

How can they get it done effectively and efficiently?
What do they need to say, to whom, and in what sequence?
What will the objections or push-back be and, then?
What would they say next? What data and examples do they need?

 

 

 

 

81. Is whistle-blowing a moral practice? How might you evaluate whether it is or is not?

 

 

 

 

82. What causes auditors to make unethical decisions? Are these factors different across different types of auditors?

 

 

 

 

83. Explain what is meant by the ethical-person organization exchange and ethical dissonance including its implications for workplace ethics.

 

 

 

 

84. An Internet Company has a chance to expand its business into a developing country. This opportunity if executed would make money for the shareholders, as it would be the first Internet Company allowed in the country. However, the conditions demanded by the country includes that the company must turn over to the government the history of Internet sites visited by its citizens. Additionally, the Internet Company must also censor Internet sites requested through the search engine. In the United States and other countries, the Internet Company would not monitor, censor, or turn over a history of Internet sites to any government.

What should the Internet Company do? Use ethical theories and ethical decision making model to back up your decision.

 

 

 

 

85. Lana is a CPA and works as an internal auditor for Dynamite, Inc. As she was performing a revenue timing test, for the internal audit schedule and the external auditors, she noticed that the Western division consistently kept the books open 4 days into the next quarter. Lana immediately reported to the Chief Internal Auditor; together they took the issue to the CFO and Controller. The CFO assured them that the issue would be resolved. It has been 90 days since the meeting. Lana is considering blowing the whistle but cannot decide who to tell and when.

What are the ethical issues of concern for Lana? What would you advise Lana to do, how, to whom and in what order, assuming she could qualify for a reward under Dodd-Frank?

 

 

 

 

86. Kyle and Luis were friends since rooming together in college ten years ago. They were both finance and accounting double majors. They were each others weddings and their wives were also good friends. After college Kyle went on to get his CPA license and ultimately went to work as controller, and then CFO, of a publicly held hardware chain, Kings Hardware. Kings had twenty-five retail outlets in a five state region and looking at acquiring a hardware chain (Rexs) of six retail outlets in a state that Kings wants to get a presence in. Luis worked for a bank after college but then changed to being a real estate investor. Luis was the one who gave Kyle the tip on Rexs being open to a takeover offer; Luis was the realtor for all of Rexs store locations.

Kyle hired a CPA firm to do due diligence for the acquisition, including updated appraisals of Rexs store locations and valuations of contents of each store. Kyle had the report. The problem was that the report is showing that Luis was a 10% owner of Rexs; would be paid a 15% commission by Rexs upon a successful buy-out; and, most troubling of all, the value of Rexs locations and inventory was overstated on Rexs books by 50%.

Kyle is considering who to tell, how, when. Most of all he is feeling betrayed by Luis.

1. What are the ethical issues?
2. What would you do next and why? Consider the following in your response.

What do you need to say, to whom, and in what sequence?
What are the reasons and rationalizations you are likely to hear from those who would try to detract you from your goal?
How can you counteract those pressures? What is your powerful and persuasive response to these arguments? To whom should you make them? When and in what context?

 

 

 

 

87. Imagine you just went to your local pharmacy and were told that the cost of a life-saving drug was $22,500 for 30 tablets to treat AIDS or another infectious disease. Well, if you needed the drug Daraprim that is what you would have to pay according to the CEO of the company that manufactured it. Turing Pharmaceuticals purchased the right to Daraprim in August 2015 and CEO Martin Shkreli decided a price increase of 5500% was needed. Evaluate the ethics and co

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If you have questions, you can contact us here