1. According to the Business Roundtable, "Effective corporate governance requires a clear understanding of the respective roles of the board and senior management and their relationships with others in the corporate structure. The relationships of the board and management with stockholders should be characterized with candor; their relationships with employees should be characterized by fairness; their relationships with communities in which they operate should be characterized by good citizenship; and their relationships with government should be characterized by a commitment to compliance." Discuss what is meant by each element of the statement with respect to creating an ethical organizational environment.
Incorporate concepts from this week's lecture in your post. Your main post should be at least 250 words in length.
2. It is a distinguishing mark of actions labeled "whistleblowing" that the agent intends to force attention to a serious moral problem. How does this statement relate to whistle-blowers who come forward under provisions of the Dodd-Frank Financial Reform Act? Respond to the question by considering the motivations to blow the whistle as discussed in this chapter. Do you believe that the Dodd-Frank whistle-blower program that incentivizes reporting fraud and other wrongdoings in return for a monetary reward is ethical? Use the ethical reasoning methods to answer the question.
Incorporate concepts from this week's lecture in your post. Your main post should be at least 250 words in length.
THIS LECTURE IS FOR QUESTIONS 1 AND 2
Business Roundtable - According to the Business Roundtable, "Effective corporate governance requires a clear understanding of the respective roles of the board and senior management and their relationships with others in the corporate structure. The relationships of the board and management with stockholders should be characterized with candor; their relationships with employees should be characterized by fairness; their relationships with communities in which they operate should be characterized by good citizenship; and their relationships with government should be characterized by a commitment to compliance." Discuss what is meant by each element of the statement with respect to creating an ethical organizational environment.
One method of dealing with ethics is to look at what does the least harm to people versus the most good. The rights approach looks at the rights of those involved, and believes ethical decisions should be made based on individual rights. The fairness or justice approach says that people should be treated the same no matter what. The common good approach looks at what is the best thing for the majority of people. The virtue approach looks at common "virtues" in people and asks the question "Am I behaving in this way?" Prudence, integrity, generosity, courage, self-control, fidelity, trust, and compassion are commonly accepted virtues. Of course, each person has a different ‘level' of virtue which makes their level of acceptable behavior different than others.
Here is our second discussion question for this week:
Dodd-Frank Reform Act - It is a distinguishing mark of actions labeled "whistleblowing" that the agent intends to force attention to a serious moral problem. How does this statement relate to whistle-blowers who come forward under provisions of the Dodd-Frank Financial Reform Act? Respond to the question by considering the motivations to blow the whistle as discussed in this chapter. Do you believe that the Dodd-Frank whistle-blower program that incentivizes reporting fraud and other wrongdoings in return for a monetary reward is ethical? Use the ethical reasoning methods to answer the question.
In order to get people to adhere to company ethics, there are six common things companies can do to increase the chances of this happening. First, top management must adopt and support the codes. Next, expectations by all in the organization must be understood in all levels of the organization. Managers and employees, if possible, should be trained on ethics and taught how to make ethical decisions. Companies should have an ethics office where people can report violations anonymously. Outsiders such as suppliers and factories need to also know about ethics codes. Finally, the code must be enforced if violations are found.
References
Mintz, S. M., & Morris, R. E. (2014). Ethical obligations and decision making in accounting: Text and cases (3rd ed.). Boston: McGraw-Hill/Irwin.
3. Can a CPA be independent without being objective? Why or why not? Can a CPA be objective without being independent? Why or why not? Does your answer matter assuming you only provide only non-auditing services to the client? What if you provide both audit and non-auditing services?
Incorporate concepts from this week's lecture in your post. Your main post should be at least 250 words in length.
4. What is the danger from an ethical perspective of having a CPA firm that conducts the audit of a public company to also engage in consulting for installation of a new financial information system? What about giving tax advice to an audit client? What are the possible ethical dangers of having the tax practitioners at a CPA firm that audits a client entity prepare the tax return for members of management of the client who have a financial reporting oversight role?
Incorporate concepts from this week's lecture in your post. Your main post should be at least 250 words in length.
THIS IS THE LECTURE FOR QUESTIONS 3 AND 4
CPA Independence - Can a CPA be independent without being objective? Why or why not? Can a CPA be objective without being independent? Why or why not? Does your answer matter assuming you only provide only non-auditing services to the client? What if you provide both audit and non-auditing services?
As the text has covered, moral hazard can occur when interest for one party lies under the responsibility of another party and that party has incentive of putting their interest first. This was prevalent in 2007 & 2008. This led to the U.S. Senate to focus in on the situation. The SEC then required a mandatory rotation of key personnel involved in auditing within a firm every five years. There was much resistance to this rotation, especially amongst smaller firms. It is widely believed that violations will continue to occur due to the relationship between clients, client management and auditing firms. There is a growing emphasis on marketing of professional services which in turn leads to growth and revenue increases. Firms put a higher emphasis on this rather than providing services in the public interest.
Many companies are now asking their entire accounting and finance staff to sign off on the accuracy of their work for quarterly financial reporting. This is a relatively new trend where even "lower level" employees are signing these internal company documents. This then goes up the hierarchy chain to the highest level, CEO and CFO. It is still debatable if going to the lowest levels in the organization is a worthwhile practice or not.
Here is the second discussion question for this week:
CPA Ethical Concerns - What is the danger from an ethical perspective of having a CPA firm that conducts the audit of a public company to also engage in consulting for installation of a new financial information system? What about giving tax advice to an audit client? What are the possible ethical dangers of having the tax practitioners at a CPA firm that audits a client entity prepare the tax return for members of management of the client who have a financial reporting oversight role?
The accounting profession's backbone is based in independence. An audit opinion's usefulness is dependent on it. But, auditors are being pressured to compromise that independence. Accountants and auditors need to always keep in mind that public interest comes before other's interest, including their own, and even the client's. If they lose sight of this and give in to client or employer demands, they place the public trust at risk. When a business fails, it can be difficult to confirm who failed at foreseeing the failure. Did the management cause the failure by abusive business practices and fraudulent financial reporting, or did the auditor fail to raise a red flag in time to save shareholders, employees and the public from being harmed?
References
Mintz, S. M., & Morris, R. E. (2014). Ethical obligations and decision making in accounting: Text and cases (3rd ed.). Boston: McGraw-Hill/Irwin.