Tonya Latirno is a staff accountant for Cannally and

Kennedy, a local CPA firm. For the past 10 years, the firm

has given employees a year-end bonus equal to two weeks'

salary. On November 15, the firm's management team

announced that there would be no annual bonus this year.

Because of the firm's long history of giving a year-end bonus,

Tonya and her coworkers had come to expect the bonus and

believed that Cannally and Kennedy had breached an implicit

agreement by discontinuing the bonus. As a result, Tonya

decided that she would make up for the lost bonus by

working an extra six hours of overtime per week for the rest

of the year. Cannally and Kennedy's policy is to pay overtime

at 150% of straight time.

Tonya's supervisor was surprised to see overtime being

reported, because there is generally very little additional or

unusual client service demands at the end of the calendar

year. However, the overtime was not questioned, because

employees are on the "honor system" in reporting their work

hours.

1. Is Cannally and Kennedy acting in an ethical manner by

eliminating the bonus? Explain your answer.

2. Is Tonya behaving ethically by making up the bonus with

unnecessary overtime? Why or why not?