(Ethics) You are a senior manager at MegaMac Inc. All senior managers and the board of directors are scheduled to meet next week to discuss the questionable earnings management found by the outside independent audi¬ tors. The CEO has asked you to be prepared to start the discussion by de¬ veloping questions that should be addressed before responding to the auditors.

a. Why would the CEO be concerned about the questionable earnings management? After all, isn't it the auditor who attests to the accuracy of financial reporting?

b. If the board of directors insisted on not further addressing the question¬ able earnings management and you decided to resign and blow the whistle, would you have any protection? (You might want to read an ar¬ ticle by G. L. Porter entitled “Whistleblowers: A Rare Breed” in the Au¬ gust 2003 issue of Strategic Finance.)

LO1.