Questions and Answers of Understanding Business Ethics

Jérôme Kerviel joined the French bank, Société Générale (SocGen), in 2000 at the age of twenty-three as part of its systems personnel in its back office. In 2005, he became a junior derivatives
On October 1, 2012, IKEA apologized for removing women from the photographs in the IKEA catalogs that were shipped to Saudi Arabia. IKEA is a Swedish company that was founded in 1943. It is now the
Harry Potter is known to tens of millions of readers as a figment of J. K. Rowling’s imagination. One of the good guys, he is a gifted apprentice magician and budding wizard. Harry and his pals
Society is quite concerned about the level of greenhouse gases that are being emitted by various businesses. Many firms are responding by becoming more candid about the effects that their operations
In essence, cruise ships are floating small towns. They carry thousands of passengers on ships that often stand thirteen decks tall. The cruise ship industry that travels from Washington State to
In1 March 1994, six African Americans employed at Texaco Inc. filed a class action lawsuit on behalf of 1,400 current and former African American employees. They alleged that Texaco had
In October 2008, Jill Hubley, a former senior strategist in the Dell Americas human resource group, a Dell Inc. division located in Texas, filed a lawsuit against the world’s second-largest maker
On May 17, 2010, a federal jury in New York decided that Novartis, a Swissheadquartered drug company, was guilty of discriminating against women and should pay the twelve women plaintiffs who
Walt1 Pavlo joined MCI in 1992 and rapidly became second in command at the company’s finance or long-distance collections unit, as is documented in the ethics case “Manipulation of MCI’s
Harold Johns found himself in jail in Germany. He was a vice president of Baranca Industries Inc., a U.S. firm that constructs and installs factory equipment.Unfortunately, he was the highest-ranking
“South Africa and the drug companies have changed forever,” say David Pilling and Nicol degli Innocenti.1 South Africa is to the drug pharmaceutical industry what Vietnam was to the U.S.
In its own Internal Investigation,1 released on September 8, 2010, BP provided its analysis of why the Deepwater Horizon oil rig exploded, precipitating one of the largest oil spills the world has
BP has had a record of mishaps affecting life, the environment, and the property of the company and other stakeholders. On October 26, 2010, the Public Broadcasting System (PBS) in the United States
In 2000,1 Toyota had a strong and growing reputation for quality. Its engineering excellence was peaking with the worldwide introduction of the first successful commercially available hybrid, the
A two-month-old child was accidentally given a drug overdose at a Texas hospital despite the fact that seven health care professionals reviewed the prescription order before the drug was given to the
Shortly after midnight on March 24, 1989, the oil tanker Exxon Valdez ran aground on Bligh Reef in Alaska’s Prince William Sound, spilling 11 million gallons of crude oil. Ecological systems were
According to the Greenpeace Web page, On16 February last year (1995),Greenpeace learned that the U.K. government had granted permission for Shell Oil to dump a huge, heavily contaminated oil
Lynn James was in the vortex of a set of crises. Lynn, an entrepreneur and the president, CEO, and 75% owner of Wind River Energy Inc., was one week away from closing a deal to secure much-needed
The government bailout of the financial community included taking an equity interest in publicly traded companies such as AIG. Is it right for the government to become an investor in publicly traded
Are the criticisms that M2M accounting rules contributed to the economic crisis valid?
Allegations of serious impropriety and perhaps illegality surrounding Goldman Sachs’s contribution to the 2008 financial crisis have been well publicized. Allegations included trading for their own
Short selling occurs when a seller borrows shares from a brokerage house and then sells those shares. At a later date, the seller buys the shares and delivers them to the brokerage house. If the
On September 15, 2008, Lehman Brothers Holdings Inc., one of the world’s most respected and profitable investment banks, filed for Chapter 11 bankruptcy protection in the United States Bankruptcy
During the depths of the subprime lending crisis in 2008, a major U.S. investment banking firm, Goldman Sachs, required a$$10$ billion bailout from the U.S. government’s Troubled Asset Relief
American International Group, Inc. (AIG)was the world’s largest insurance company with major offices in New York, London, Paris, and Hong Kong. From 2005 to 2008, the company had a series of
Although the Canadian banks did not suffer as much as other financial institutions around the world, they were not immune from the economic consequences of the subprime mortgage meltdown. In Canada,
The advantage of commission sales is that if the salesperson puts in effort and makes a sale, then both the company and the salesperson benefit. The salesperson receives a commission, and the company
What would you list as the five most important ethical guidelines for dealing with North American employees?
What would you advise that corporations do to recognize the new worldwide reach of antibribery enforcement related to the FCPA and the U.K. Bribery Act?
Parmalat Finanziaria S.p.A. and its subsidiaries manufacture food and drinks worldwide. Parmalat is one of the leading firms in the long-life milk, yogurt, and juices market. The company became the
On July 1, 2013, Scott London, a former KPMG audit partner, pleaded guilty to securities fraud. He had been passing information to his friend, Bryan Shaw, over a two-year period ending in 2012.He
Livent, once the world’s premier live entertainment companies, was sold in 1998 to buyers who soon found that the value they had paid for was an illusion. Livent had thrilled audiences with
Martin Pilzmaker was a young, aggressive lawyer from Montreal who was invited in 1985 to join the law firm Lang Michener in Toronto. It was expected that his immigration law practice “could enrich
In 1984, twenty-three-year-old Wanda Liczyk received her designation as a chartered accountant. The following year, she left Coopers & Lybrand (now part of PricewaterhouseCoopers)to become a budget
Dear John:I really appreciate your willingness to give me your opinion as a fellow professional accountant on what I should do and on what I should advise the minority owner to do. Given that I was
I need your advice on an anonymous basis.I am a professional accountant employed by a company that imports bikes from China. Before I get into the issue, I wish to advise you that I really need this
I have a question that I need a bit of help on, but I am not sure where to turn, and I hope you may be able to help me out.I am the CFO of a charitable organization, it is a paid position and I am a
I am a professional accountant and hold the position of financial analyst, capital projects, with the Town of Pinecrest. In my position, I deal with, among others, developers and their lawyers with
I think I have a problem. I am a professional accountant and work for a notfor-profit organization that operates a summer camp. We have obtained a legal opinion stating that a portion of our camp
I am the assistant controller at a mediumsized, not-for-profit organization. I hired a new accounts-payable clerk three months ago—let’s call her Mary, which is not her real name—and then I
In mid-2011, Sino-Forest Corporation was a company with timber operations in China, including tree plantation (holding of timber for appreciation and/or harvesting), log and wood products trading,
Mergers and acquisitions (M&A) are strategies that help companies to grow in size rapidly. However, some incredibly questionable M&A decisions were reported in the mining industry in 2012 and 2013,
Numerous firms, including computer and communication companies, sell products that have multiple deliverables. For example, a telephone company may sell a customer a phone and a two-year unlimited
Following the pattern of many other countries, Canada converted from domestic generally accepted accounting principles to International Financial Reporting Standards(IFRS). The changeover occurred on
Arthur sat back in his chair and looked at the other accountants who were working on their laptops. How had he gotten himself into this situation?It began last year when he was hired by Castor
Anne Distagne was the CEO of Linkage Construction Inc., which served as the general contractor for the construction of the air ducts for large shopping malls and other buildings. She prided herself
Jane1 Ashley was a staff accountant at Viccio & Martin, an accounting firm located in Windsor, Ontario. Jane had been a co-op student while in college, and during her first work term with the firm,
“We have had Paige & Gentry as our auditors for many years, haven’t we, Jane? They have been here since I became president two years ago.”“Yes, Bob, I have been the CFO for seven years, and
“Look, Tim, I’ve been told that the competition for the audit of Diamond Health Services is really competitive, and you know what it would mean to the both of us to bring this one in. You would
Two accounting students, Joan and Miguel, were studying for their final university accounting exam.“Miguel, what if they ask us whether the accounting profession should speak out about the
Stan Jones was an investor who had recently lost money on his investment in Fine Line Hotels, Inc., and he was anxious to discuss the problem with Janet Todd, a qualified accountant who was his
Multidisciplinary practices are probably an inevitable development. Clients want “onestop shopping,” at a professional firm where they can go for all their needs, and where the partner
Multinationals are headquartered in one country but have operations worldwide.Generally, each multinational pays income taxes in the jurisdiction in which it generates its profits. For example, a
The leak of the Panama Papers in 2016 revealed the existence of hundreds of thousands of offshore shell companies used by the world’s wealthy to avoid paying taxes, raised the public’s awareness
The Italian federal corporate tax system has an official, legal tax structure and tax rates just as the U.S. system does. However, all similarity between the two systems ends there.The Italian tax
As Bill Adams packed his briefcase on Friday, March 15, he could never remember being so glad to see a weekend. As a senior tax manager with a major accounting firm, Hay & Hay, on the fast track for
Before 2002, accounting firms would provide multiple services to the same firm.Hired by the shareholders, they would audit the financial statements that were prepared by management while also
Sophia and Maya were having a quiet afterwork drink at the Purple Pheasant around the corner from their office. Both are professional accountants in their late twenties and were talking about their
“At the firm, we’ve got a new way of looking at tax issues. It’s called ‘risk management,’and, in your case, John, it means that we can be more aggressive than in the past. In the past,
Siemens AG is a 160-year-old German engineering and electronics giant. It is one of Europe’s largest conglomerates, with profits in 2007 of €3.9 billion on revenue of€72.4 billion, up €6
In 2015, Dr. William Campbell was awarded the Nobel Prize in Medicine for his work in discovering ivermectins while employed with Merck & Co. in the 1970s.The drug prevents onchocerciasis, called
Pierre Duhaime “retired” as CEO of SNCLavalin on March 26, 2012, a post that he had held since 2009 following over 20 years of employment at the company. He did so, because of his role in
Bribery charges often involve a company making illegal payments to government officials in order to land lucrative contracts.For example, in April 2010, German auto manufacturer Daimler AG made a
David Bazzetta learned in July 2001 at a corporate audit executive committee meeting in Stuttgart Germany that Daimler-Chrysler “business units ‘continued to maintain secret bank accounts to
On April 14, 2010, Russian investigators raided the Moscow offices of Hewlett Packard (HP). They did so at the request of German prosecutors who were examining whether HP had paid bribes
In January 2006, the chair of Hewlett-Packard (HP), Patricia Dunn, hired a team of independent electronic-security experts to determine the source of leaked confidential details regarding HP’s
On November 17, 2005, Conrad Black and three other executives1 of Hollinger International, Inc., were charged with eleven counts of fraud with regard to payments allegedly disguised as “noncompete
Walt Pavlo joined MCI in the spring of 1992. At that time, MCI was a growth company in the booming long-distance telecommunications industry that had 15% of the long-distance market, with revenues
Pierre Garvey, the CEO of Revel Information Technology, sat back in his chair and looked at his assistants. He frowned. “My son has been diagnosed with MLD,” he said.They all looked at him with
Employee stock options allow company executives to buy shares of their company at a specified price during a specified time period. They are given to executives as a form of noncash compensation. The
Satyam Computer Services Ltd was founded in 1987 by B. Ramalinga Raju. By 2009, it was India’s fourth-largest information technology company with 53,000 employees, operating in sixty-six countries.
By the late 1990s, Nortel Networks Corporation, headquartered in Brampton, Ontario, Canada, was one of the giants of the telecommunications industry. Seventy-five percent of North America’s
On June 20, 2005, “John Rigas, the 80-year old founder of Adelphia Communications Corp., was … sentenced to 15 years in prison and his son Timothy, the exfinance chief, got 20 years for looting
Dennis Kozlowski was a dominant, largerthan-life CEO of Tyco International, Ltd, a multi-billion-dollar company whose shares are still traded on the New York Stock Exchange (Symbol: TYC). His stature
On March 19, 2003, the SEC filed accounting fraud charges in the Northern District of Alabama against HealthSouth Corporation and its CEO, Richard Scrushy. Scrushy was also charged with knowingly
According to the Royal Ahold company profile, Ahold is a global family of local food retail and foodservice operators that operate under their own brand names. Our operations are located primarily in
The discount airline Jetsgo Corporation began operations in June 2002. Within two and a half years, it grew to become Canada’s third-largest airline, moving approximately 17,000 passengers per day
Billionaire Raj Rajaratnam was arrested for insider trading on October 15, 2009, and marched in handcuffs from his New York apartment.1 Up to that point, he had enjoyed fame and fortune for founding
On December 20, 2002, New York’s attorney general, Eliot Spitzer, announced a $$1.4$ billion settlement ending a multiregulator probe of ten brokerages that alleged that“investors were duped
Glen Grossmith is an outstanding family man, a frequent coach for his children’s teams, and a dedicated athlete who enjoys individual and team sports. One day, his boss at UBS Securities Canada
Bankers Trust (BT) was one of the most powerful and profitable banks in the world in the early 1990s. Under the stewardship of chairman Charles Sanford Jr., it had transformed itself from a staid
It was early on a Friday morning in London—7:15 a.m. on February 24, 1995, to be exact—that the phone call came for Peter Baring from Peter Norris. Baring’s family had been in banking since
On January 6, 1992, the “growing controversy over the safety factor led the U.S.Food and Drug Administration to call for a moratorium on breast implants.”1 As January wore on, the crisis deepened
Answer the seven questions in the opening section of this chapter.
Can a professional accountant serve two clients whose interests conflict? Explain.
Why does the IFAC Code consider the appearance of a conflict of interests to be as important as a real but nonapparent influence that might sway the independence of mind of a professional accountant?
The NFL has known for some time that serious brain damage could be caused by the head trauma that is part of a normal football game.The sudden serious jarring of a football player’s head in normal
One of the world’s largest oil spills began on April 20, 2010, in BP’s Deepwater Horizon/Macondo well in the Gulf of Mexico.Although the world did not take significant notice until the next day,
Johnson & Johnson (J & J) enjoyed a halo effect for many decades after their iconic precautionary recall of Tylenol capsules in 1982, which was greatly facilitated by the famous Johnson & Johnson
On September 30, 2004, Merck voluntarily withdrew its rheumatoid arthritis drug(Vioxx) from the market due to severe adverse effects observed in many of its users (Exhibit 1). As a result, Merck’s
Antismoking advocates cheered in the summer of 1997 when the U.S. tobacco industry agreed to pay out more than U.S.$$368.5$ billion to settle lawsuits brought by forty states seeking compensation
In order to meet strong competition from Volkswagen as well as other foreign domestic subcompacts, Lee Iacocca, then president of Ford Motor Co., decided to introduce a new vehicle by 1970, to be
The Kardell paper mill was established at the turn of the century on the Cherokee River in southeastern Ontario by the Kardell family. By 1985, the Kardell Paper Co. had outgrown its original mill
What should an employee consider when considering whether to give or receive a gift?
Other than a code of conduct, what aspects of a corporate culture are most important and why?
Throughout 2009, the world was plagued with the H1N1 swine flu epidemic. The H1N1 influenza virus, which began in Mexico, spread rapidly. In June, the World Health Organization (WHO)declared it to be
Alex McAdams, the recently retired CEO of Athletic Shoes, was honored to be asked to join the Board of Consolidated Mines International Inc. Alex continues to sit on the Board of Athletic Shoes, as
In 1984, when he was eighteen years old, Cesar Correia murdered his father, killing him with a baseball bat. Cesar then dumped the body in the Assiniboine River. The body was eventually found, and
List the companies that have faced ethical tragedies due to the following failings in their ethical culture:a. Lack of ethical leadershipb. Lack of clarity about important valuesc. Lack of ethical
Why are we more concerned now than our parents were about fair treatment of employees?

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