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Chapter: 1- Ethics Expectations -Problem: 8 >> Should executives and directors be sent to jail for the acts of their corporation’s employees?
Answer Preview: Yes, they should, if the executives a…

, Chapter: 7- Managing Ethics Risks & Opportunities -Problem: 16 >> If a company is to be sentenced for paying bribes 10 years ago, should the company be banned from all government contracts for 10 years, just made to pay a fine, or both? Consider the impacts on all stakeholder groups, including current and past shareholders, current employees and their families, people who paid the bribes, and current and past members of the board of directors, as well as competi
Answer Preview: Consider these questions: Are the real culprits going to be punished (bribers, executives respo…

, Chapter: 1- Ethics Expectations -Problem: 13 >> What are the common elements of the three practical approaches to ethical decision making that are briefly outlined in this chapter?
Answer Preview: Answer; The common elements found in the three methods of ethical decision making o…

, Chapter: 3- Ethical Behavior-Philosophers' Contributions -Problem: 7 >> Adverse selection occurs when one party has an information advantage over the other party. In the case of insurance, people taking out insurance know more about their health and lifestyle than the insurance company. Therefore, in order to reduce information asymmetry, the insurance company asks prospective customers to complete a medical questionnaire and/or submit to a medical examination. Knowin
Answer Preview: 1. Health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care expenses among a targeted group, an insurer can develop …

, Chapter: 5- Corporate Ethical Governance & Accountability -Problem: 5 >> Lululemon Athletica, Inc., was founded by Chip Wilson in 1998 to sell yoga-inspired athletic clothing. The company’s target market was women who wanted stylish exercise apparel. In 2012, the Vancouver based company, whose shares traded on both the Toronto Stock Exchange in Canada and NASDAQ in the United States, had sales of $1.4 billion and a net income of $270 million. Its 211 stores were locate
Answer Preview: 1. Chip Wilson became a liabilitya reputational riskto his own company, because it outgrew his vision, and his management ability. The company became a feel-good illusion, and cult fashion and yoga pl…

, Chapter: 1- Ethics Expectations -Problem: 7 >> Telus Corp., the second-largest wireless company in Canada, introduced an “adult content” service to their cell phone customers in 2007. Customers were charged $3 to $4 for downloads, and the company expected to make very large amounts of money based on observable Internet trends. Fairly quickly, however, Telus was under pressure from customers rather than the government to discontinue the service
Answer Preview: 1. The argument in favor of permitting adult content on cell phones is freedom of expression. Some students will try to use an ethical relativism approach; that is, they will argue that whatever is in …

, Chapter: 2- Ethics & Governance Scandals -Problem: 13 >> What are the reactions and outcomes that can be attributed to the leaked Panama Papers and Paradise Papers?
Answer Preview: Release of the Panama Papers and Paradise Papers shocked the public and regulators, and galvanized b…

, Chapter: 7- Managing Ethics Risks & Opportunities -Problem: 2 >> If a corporation’s governance process does not involve ethics risk management, what unfortunate consequences might befall that corporation?
Answer Preview: Unexpected consequences leading to e…

, Chapter: 1- Ethics Expectations -Problem: 5 >> Tiger Woods, once probably the world’s greatest golfer, lost his number one ranking in October 2010, the same year that his marriage to Elin Nordegren blew up when she chased him out of the house and broke the windows of his vehicle with a 9 iron. His popularity sagged as the stories of his infidelity with strippers became common in national news and his back injuries prevented him from competing
Answer Preview: 1. No, it should notbut it often does cause blind eyes, particularly in the short run. Consider a performance evaluation: it is based on many performance measures, not a single one. Also, short-term s…

, Chapter: 2- Ethics & Governance Scandals -Problem: 15 >> The J&J (talcum powder) and Wells Fargo (unethical incentives) scandals suggest that even companies whose reputations are based on ethical conduct can suffer ethical scandals. Why is this?
Answer Preview: An organization cannot rest on its laurels, because institutional memory fades, …

, Chapter: 2- Ethics & Governance Scandals -Problem: 12 >> The CEOs of Valeant Pharmaceuticals and Turing Pharmaceuticals took the view that they could jack up the price of their drugs by huge percentages because they could, and they failed to consider seriously enough whether they should. Whose fault was this? In a well-functioning corporate governance system, what measures should be in place to control such actions?
Answer Preview: The CEOs of Valeant and Turing had, for some time, gotten away with the strategy of buying fully dev…

, Chapter: 7- Managing Ethics Risks & Opportunities -Problem: 8 >> Headquartered in London, Barclays is an investment and financial services bank with operations throughout the world. In December 2015, Barclays hired Jes Staley as CEO. Previously, Staley had been a 30-year veteran with JP Morgan in its investment banking division. In June 2016, Staley hired Tim Main, a friend and former colleague at JP Morgan, as head of Barclays’ financial group in New York. An
Answer Preview: 1. Whistleblowing programsfor the reporting of corporate wrongdoingare only successful if they are b…

, Chapter: 6- Professional Accounting in the Public Interest -Problem: 25 >> “John, I have questions about that job you want me to do next week—the one where I am supposed to go and be part of that multidisciplinary team to study how the hospitals in Denver ought to be restructured for maximum efficiency and how they should be reporting that efficiency in the future. As you know, I am a professional accountant, but I’m not going to be the study leader. What happens if I di
Answer Preview: Applicability of code The PAs code of ethics would have to be applied if the PA were known to be a P…

, Chapter: 7- Managing Ethics Risks & Opportunities -Problem: 7 >> Assume that you have just been placed in charge of the Claims Investigation Unit of a small insurance company based in Minneapolis. Your personnel department has provided the following details on your personnel. However, because your insurance company is in the midst of take-over discussions, you have been asked to decide whom you would terminate if you were called on to downsize by one person an
Answer Preview: I usually use the question of downsizing first. I ask which employee the class would choose, and why. Usually there will be a range of choices and I e…

, Chapter: 6- Professional Accounting in the Public Interest -Problem: 1 >> What is the difference between an honest financial statement and one with integrity?
Answer Preview: An honest financial statement is accurate bu…

, Chapter: 5- Corporate Ethical Governance & Accountability -Problem: 1 >> Must a company be incorporated as a benefit corporation in order to legally consider actions other than those in pursuit of profit?
Answer Preview: No. All publicly traded corporations must meet governance requirements. Given the ab…

, Chapter: 6- Professional Accounting in the Public Interest -Problem: 17 >> An auditor naturally wishes his or her activity to be as profitable as possible, but when, if ever, should the drive for profit be tempered?
Answer Preview: Answer; The drive for profit might be tempered if the auditor's client is a public company and …

, Chapter: 1- Ethics Expectations -Problem: 15 >> Decades after the event, Johnson & Johnson (J&J), the 130-year-old American multinational, is still praised for swiftly The company indicated that its response was based on the expectations set forth in the Credo, its moral compass. The Credo, which begins with the sentence “We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use ou
Answer Preview: 1. From the viewpoint of its Credo, J & J did not meet the needs of doctors, nurses and patients, to mothers and fathers and all others who use our products. From the viewpoint of customers, J & Js ac…

, Chapter: 7- Managing Ethics Risks & Opportunities -Problem: 6 >> Descriptive commentary about corporate social responsibility 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?
Answer Preview: Sometimes such disclosures are window-dressing, but continued disclosures often become more a…

, Chapter: 6- Professional Accounting in the Public Interest -Problem: 10 >> How do the NOCLAR Standards change the traditional practice of maintaining confidentiality of audit or client information? Why?
Answer Preview: NOCLAR provides a sanctioned, mandated response protocol when PAs discover or suspect that their client or employer is not complying on significant ma…

, Chapter: 1- Ethics Expectations -Problem: 22 >> The Prairieland Bank was a mediumsized midwestern financial institution. The management had a good reputation for backing successful deals, but the CEO (and significant shareholder) had recently moved to San Francisco to be “close to the big-bank center of activity.” He commuted into the Prairieland head office for two or three days each week to oversee major deals. Lately, the bank’s profitabili
Answer Preview: 1. The right decision was to resign. Ben and James had a moral obligation to the Prairieland shareho…

, Chapter: 6- Professional Accounting in the Public Interest -Problem: 10 >> Albert Gable is a partner in a CPA firm located in a small midwestern city that has a population of approximately 65,000. Mr. Gable’s practice is primarily in the area of personal financial planning; however, he also performs an annual audit on the city’s largest bank. Recently, Mr. Gable was engaged by Larry and Susan Wilson to prepare a comprehensive personal financial plan. While preparing the
Answer Preview: 1. Confidentiality and the role of an auditor In order to perform the audit and assess audit risks, an auditor must be party to information and discussions about issues, such as are subject to settlem…

, Chapter: 5- Corporate Ethical Governance & Accountability -Problem: 10 >> What is the most important contribution of a corporate code of conduct?
Answer Preview: A code of conduct is a company manual that states …

, Chapter: 1- Ethics Expectations -Problem: 19 >> On April 13, 2006, Bausch & Lomb (B&L) CEO Ron Zarrella indicated that B&L would not be recalling their soft contact lens cleaner Renu with MoistureLoc. Drugstores in the United States were, however, removing the product from their shelves due to a concern over reported infections related to Fusarium keratitis, a fungus frequently found in drains and sinks. Zarrella went on to say that Renu kills
Answer Preview: 1. The lessons that should be taken from B&Ls Renu experience are : 1 1 A strong brand will …

, Chapter: 1- Ethics Expectations -Problem: 1 >> It’s legal, but is it ethical? For years, a nationally known doughnut chain only sold sugary drinks at its retail outlets on a prominent university campus. Sugar consumption is known to contribute to diseases such as heart disease, tooth decay, diabetes, kidney stones, and obesity. Although these health concerns were brought to the attention of the chain several times, patrons were told that if th
Answer Preview: 1. The profit margin on sugary drinks increases with the size of the beverage, because drinks are made by adding water to syrup. The marginal cost of a larger sugary drink is small, so the profit is g…

, Chapter: 2- Ethics & Governance Scandals -Problem: 11 >> At GM and Takata, whose improper actions finally came to light, a whistleblower raised objections to the actions before or very early in the production process. Why were their concerns ignored and risks taken? In VW’s case, why didn’t a whistle-blower come forward? What aspects of governance were lacking in each company?
Answer Preview: At GM and Takata the whistleblowers concerns were not taken very seriously. Neither company had a whistleblowing program that brought complaints to th…

, Chapter: 6- Professional Accounting in the Public Interest -Problem: 20 >> If you were a management accountant, would you buy a product from a supplier for personal use at 25% off list?
Answer Preview: Answer; If I were a management accountant, I would …

, Chapter: 3- Ethical Behavior-Philosophers' Contributions -Problem: 2 >> Eric Hebborn (1934–1996) was an English painter and art forger. Hebborn attended the Royal Academy of Arts and then the British School at Rome, two of the most prestigious fine arts schools at the time. Underappreciated as an artist, he turned his hand to copying old masters. His forgeries were detected when an art curator noticed that two of the Gallery’s drawings, by two different artists, were
Answer Preview: 1. Selling forgeries to an expert who should be able to tell a forgery from an authentic piece of art, compared to selling to an amateur, just means the deception is greater. Is deception ethical? It …

, Chapter: 6- Professional Accounting in the Public Interest -Problem: 18 >> If the provision of management advisory services can create conflicts of interest, why are audit firms still offering them?
Answer Preview: Answer; Audit firms, as well as management advisory services, are able to thrive because estab…

, Chapter: 5- Corporate Ethical Governance & Accountability -Problem: 3 >> Dan Price is the owner of Gravity Payments, a Seattle-based credit card company that he founded in 2004. In 2014, the company processed more than $65 billion of credit card transactions for more than 12,000 small and medium-sized businesses. In April 2015, thirty-year-old Price announced to his staff that everyone’s salary would rise to a minimum of $70,000, even the lowest-paid employee. Further
Answer Preview: 1. Dan seems to have characteristics of an ethical leader, which, from Chapter 5, include integrity, trustworthiness, honesty, sincerity, and forthrightness. He shows compassion and that a company's p…

, Chapter: 5- Corporate Ethical Governance & Accountability -Problem: 2 >> If Lynn Stout is correct, that the drive for shareholder value is a myth, why do so many companies continue to use it as a goal?
Answer Preview: Stout asserts that U S corporate law does not require corporations to maximize share price, sharehol…

, Chapter: 6- Professional Accounting in the Public Interest -Problem: 21 >> If you were a professional accountant and you discovered your superior was inflating his or her expense reports, what would you do?
Answer Preview: The most reasonable course of action would be to report the …

, Chapter: 2- Ethics & Governance Scandals -Problem: 16 >> Is the 2019 Business Roundtable Statement (BRS) redefining the purpose of corporations likely to make any difference to boards of directors and to activists?
Answer Preview: Yes. It signals the thinking of a large group of dominant senior executives rather than just idealis…

, Chapter: 2- Ethics & Governance Scandals -Problem: 14 >> The legal consequences for frauds, bribery, or other malfeasance have become very severe, particularly since 2009. Why has this happened? Are higher legal consequences having much of an impact?
Answer Preview: Investors and the public realize now that bribery and frauds are very bad for corporate earnings, an…

, Chapter: 5- Corporate Ethical Governance & Accountability -Problem: 7 >> Can an apparent conflict of interest where there are adequate safeguards to prevent harm be as important to an executive or a company as one where safeguards are not adequate?
Answer Preview: Yes, because an apparent conflict of interest can be perceived as r…

, Chapter: 1- Ethics Expectations -Problem: 10 >> How can a corporation show respect for its stakeholders?
Answer Preview: Assure relevant information and sources are accessible to …

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