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The Ethical Compass: A Toolkit for Integrity in Business Applied Ethics Cases Student Activity Applied Ethics Cases - Student Activity List of the Applied Ethics Cases: Case 1 - A Questionable Expense Case 7 - Going Green Case 2 - The Shady Signature Case 8 - Two week notice Case 3 - A Lack of Expertise Case 9 - The Birthday Party Case 4 - Taking the Hit Case 10 - The Roommates Case 5 - Taking the Credit Case 11 - My Sister's Stock Case 6 - The New Intern Case Study 1 - A Questionable Expense Carl Quandary, a tax accountant, has been working for his firm for several years and his career has been advancing well. Recently, based upon his excellent work, Carl has been assigned an important client, Marla Money. Carl's supervisor, Tom O'Blivious, explains how this tax engagement presents an excellent opportunity for Carl to promote his abilities and advance at the firm. Carl has been reminded frequently by his superiors of the importance of this client. After reviewing Marla's previous return and current tax documents, Carl notices some unusual tax deductions. Carl is determined to take advantage of every legal tax deduction to minimize his new client's tax liability. However, he is cognizant of the standards of his firm and his profession. At their first meeting, Marla is surprised and annoyed at the amount she owes the IRS based upon Carl's work to this point. Marla instructs Carl to report the questionable deduction although she could not support the amount with a business purpose or receipts. Carl is not convinced this deduction is appropriate. The meeting ends with the client insisting that this deduction be included on her current tax return. Marla threatens to take her business elsewhere if Carl continues to \"give her a hard time.\" To meet the filing deadline, Carl needs to inform Marla of his decision first thing in the morning. That evening, Carl sits at home with his new baby on his lap and considers his options. What should Carl do? Case Study 2 - The Shady Signature Hannah Harried, a tax accountant, is up against a tight filing deadline. Hannah has recently transferred from another state and is new to this office. Based upon recommendations from her previous supervisors, Hannah was assigned to manage an important client, Wallace Wealthy. This high profile client will give Hannah the opportunity to impress her new colleagues. Hannah is relieved that she completed the tax returns on time even though Wallace has been difficult to reach and has been slow in providing necessary documentation. Unfortunately, Hannah is unable to complete the filing process because her repeated attempts to reach Wallace have been unsuccessful. An entire week has gone by with no response from her client. With April 15 just one day away, Hannah considers the substantial filing penalties and professional consequences of not filing the returns by the deadline. Finally able to connect to Wallace by telephone on April 15, Hannah informs him that the returns are complete and that he needs to sign the forms. Wallace insists that he is unavailable to come to her office. Wallace directs Hannah to sign his name and arrange for the tax returns to be postmarked by April 15. Hannah reminds Wallace that he has not executed a Power of Attorney giving Hannah the authority to sign the returns and as a result, Wallace needs to sign the returns himself. Wallace is furious at Hannah's response and tells her that she should reconsider her decision and \"make sure the returns are filed on time!\" What should Hannah do? Applied Ethics Cases / 2014 The Ethical Compass: A Toolkit for Integrity in Business Applied Ethics Cases Student Activity Case Study 3 - A Lack of Expertise Arnold Ambitious has recently completed a difficult Financial Statement audit for a nonpublic audit client. Ingrid Influence, the CFO, is thrilled with Arnold's work and tells him that she will recommend his firm to other corporate leaders. Ingrid is so impressed with Arnold's abilities, she asks him to prepare a complex feasibility analysis regarding an international acquisition. Eager to advance his career, Arnold accepts the special project even though he knows he is unqualified. Arnold plans to learn on the job. Later that week, Arnold's supervisor expresses both surprise and pleasure that Arnold has the expertise to prepare the analysis and has taken the initiative to accept additional work from the client. As Arnold begins to research the tasks involved, it becomes clear that he lacks the necessary expertise to complete the analysis competently. Arnold's supervisor has told other partners that Ingrid is planning to refer new clients to the firm because of Arnold's initiative. Arnold has been receiving regular calls from both Ingrid and his supervisor inquiring about his progress. Recently, Arnold's supervisor told him that Arnold is on the short list for a promotion. Arnold thinks he might be able perform a substandard job with no one being the wiser, since no one else at the firm has the expertise to review his work. Arnold sits in his office helplessly going through Ingrid's documents and is completely at a loss. What should Arnold do? Case Study 4 - Taking the Hit Peter Perturbed is an exemplary worker and has an excellent career ahead of him at a major international accounting firm. Edith Evasive has been Peter's mentor and supportive confidant since he started at the firm as her summer intern, six years ago. Edith also writes Peter's quarterly performance evaluations. During Peter's audit review, he has uncovered a serious error in some audit procedures performed by Edith. As Peter examines Edith's work, he realizes that the error is material and most likely the result of carelessness. This error will result in a significant amount of lost time and additional audit procedures that cannot be billed to the client. Edith's skills are highly regarded; she has a reputation for being thorough - never careless. She has recently been assigned added responsibilities and is on the fast track to partner. This additional workload has likely resulted in her careless error. Peter brings the error to Edith's attention at a private meeting in his office. Edith tells Peter that, to protect herself, she plans to blame Peter for her mistake and promises Peter that she will protect him from any fall out that might affect his career. Just before she walks out of his office, Edith also warns Peter that if she accepts responsibility for the error, she will not be promoted to partner and will no longer be an asset to his career advancement. Peter sits at his desk unsure of his next move. What should Peter do? Page 2 The Ethical Compass: A Toolkit for Integrity in Business Applied Ethics Cases Student Activity Case Study 5 - Taking the Credit Paula Praise and Donna Dearth are members of the audit staff of a major accounting firm. Although Donna has been with the firm a few months longer than Paula, both are being considered for a promotion. During regular audit engagement meetings, Paula does most of the talking, leaving their in-charge, Alice Absent, with the impression that Paula does most of the work. In reality, Donna is a much harder worker with a greater level of expertise. Paula has two children and often leaves work early to fulfill various family obligations. Donna, who is single, never expresses any displeasure to Alice. Donna is a quiet and passive person and is unlikely to challenge anything Paula does or says. Paula and Donna have recently completed a lengthy and complex audit. Alice is greatly impressed with their work and calls both Paula and Donna in for a final meeting to express her pleasure. Donna, hard at work finalizing the audit workpapers, asks Paula to explain to her absence to Alice. Alice, noticeably annoyed by Donna's absence at the meeting, congratulates Paula and expresses the belief that Paula must have done most of the work. Alice goes on to say that she is recommending Paula for a promotion. Paula acknowledges Alice's praise by saying \"thank you\". During her drive to pick up her two children at their after-school program, Paula mulls over her options. What should Paula do? Case Study 6 - The New Intern Frank Fair is heading an audit team on an important engagement, he has an available spot for a coveted internship that will likely result in a full-time offer. Frank is considering two candidates - one is Michele Merit, a highly-qualified and highly-recommended senior that Frank knows from the previous summer. The other is Nick Nepotism, a senior with an unimpressive GPA and no prior experience. Frank found Nick somewhat obnoxious and arrogant during the interview. On his way out the door one evening, Frank's supervisor calls him into his office and informs him that Nick is the son of an important client and it would be \"best for everyone\" if Nick was given the internship, eliminating Michele's opportunity. Frank has already been discussing the status of several projects with Michele in anticipation of her summer start date. Frank heads back to his office to think about the situation and remembers that he secured his first internship with the support of a family friend. Frank has yet to respond to the email he received from the client. What should Frank do? Page 3 The Ethical Compass: A Toolkit for Integrity in Business Applied Ethics Cases Student Activity Case Study 7 - Going Green Sheila Scruples, the Vice President of Contracts and Procurement, has been tasked with indentifying a new janitorial and refuse removal firm. If Sheila is successful in keeping costs down in the procurement process, she will receive a substantial year-end bonus. Her inquiry will culminate in a recommendation to her immediate supervisor, Edward Eco, an environmental enthusiast. For several weeks, she has accepted and reviewed proposals from a number of organizations and has settled on the two most competitive bids. The first bid, from GreenClean, an environmentally conscious company, is more expensive. The second bid is from Mucky Trucking, which has been cited several times for violating environmental regulations. Both companies have reputations for professional and reliable service. However, GreenClean is slightly more expensive but Mucky Trucking is not environmentally friendly. While the firm does not have any specific environmental policies, Sheila knows that her boss would probably prefer GreenClean, a recommendation that would likely result in a loss of her bonus. What should Sheila Scruples do? Case Study 8 - Two Weeks Notice Daniel Dual has accepted a new position at another firm that will commence in two months. His current supervisor, Barbara Brutal, who he considers to be harsh and unpleasant, has given him a new and important assignment that will take four months to complete. The project will culminate in a presentation in London and is important to the future of Daniel's current firm. Company policy requires two-week's notice. If Daniel complies with this policy, he will have only two months to complete a four month project. When Daniel leaves the firm, the project will be only half-completed, causing his colleagues and subordinates to face a significantly reduced likelihood of a successful outcome. Daniel is concerned with the possible ramifications of informing Barbara Brutal immediately of his scheduled departure from the firm. What should Daniel Dual do? Case Study 9 - The Birthday Party Gabby Garrolous's mother and siblings are throwing a 70th birthday party for Gabby's father. Her family has been planning the party for a few months. Unfortunately, the date of the party conflicts with Gabby's client obligation for her high profile engagement. The timing of her client travel would cause her to miss the party. Gabby calls her sister and explains the situation and why she will miss the event but will come visit her father after the end of the engagement to celebrate. That same evening, Gabby's mother calls and is upset about what she feels is a ruined party. Gabby's mother demands an explanation. Gabby explains her need to fly to Chicago for a few days on business. When her mother dismisses this as unimportant, Gabby reveals that her responsibilities include working on the due diligence for an upcoming merger between very large publically held companies, and shares the names with her mother. Gabby expresses her hope that this important assignment may lead to a promotion for her and hopes her parents can understand why she will miss the party. Gabby's mother is impressed and, offering her congratulations, hangs up. Later that evening, while checking her social networking page, Gabby sees that her mother has posted that Gabby will not be attending the party and the reason why, including naming the companies involved. Gabby, realizing that confidential information about a merger has been shared, hurriedly calls her mother and tells her to delete the update immediately. Gabby checks the page again and sees that the update is no longer there. Also, Gabby thinks no one had a chance to see it and notes that her mother has fewer than 100 contacts, most of whom are family. Tomorrow morning, Gabby has a team meeting to discuss the preparations for the Chicago trip. What should Gabby Garrulous do? Page 4 The Ethical Compass: A Toolkit for Integrity in Business Applied Ethics Cases Student Activity Case Study 10 - The Roommates Jake, Ian and Sam recently graduated from college and all work for public accounting firms. Jake and Ian have been best friends and roommates since freshman year but neither knew Sam well when he moved into the apartment they all share. Jake and Sam work at the same firm and met at their firm's training program. Ian chose not to join a big accounting firm. Shortly after moving in with Jake and Ian, Sam was assigned a large healthcare center known for caring for well-known celebrities. Although Sam is learning a lot, he has been working long hours. Sam was hoping to spend some time getting to know his new roommates but he has not had an evening free in weeks. Jake and Ian have been teasing Sam about not being able join them at the local clubs but Sam's work hours are increasing as the filing deadlines approach. Finally, one Friday evening Sam manages to leave work in time to join the others for drinks at a local bar. While Jake was getting a few beers, Ian asked Sam whether he has come across any celebrity information at work. During his substantive testing of hospital records Sam identified documentation that confirmed a celebrity had recently undergone plastic surgery. The actor is one of Ian's favorite celebrities and sharing this information could help Sam's friendship with Ian. At first Sam was hesitant to share the information but Ian pressured him by reminding him that they were roommates and both CPA's. Just as Sam disclosed all the details to Ian, Jake returned with the drinks and overheard all the celebrity secrets. What should Jake do? Case Study 11 - My Sister's Stock Bobby recently graduated from college and went to work for a public accounting firm. For his first engagement, Bobby was assigned to an Internal Audit Outsourcing engagement at a large financial service firm. Since Bobby and his team members sit together in proximity to a trading floor for the investment advisory division of this company, Bobby is exposed to confidential information on a regular basis. While getting a cup of coffee, Bobby overhears two portfolio managers engaging in a discussion about some changes to the list of companies included in the IM Mutual Fund they manage. One of the portfolio managers describes her research findings and indicates that her conviction in XYZ Company is diminishing. She recommends the mutual fund changes its investment strategy by including New Corp instead of XYZ Company and mentions that she is going to bring the suggestion to the team meeting tomorrow and believes the Chief Portfolio Manager will support her decision but in the meantime asks her colleague to keep her plan quiet. New Corp is a growing company, developing lots of new products and will be a better fit for the IM Mutual Fund. Bobby and his sister Becky both own 1000 shares of XYZ Company. The stock was inherited from their grandfather. He does not follow the stock because fortunately Bobby has a great job and he is not relying on the stock appreciation. However, his sister Becky is a single mom and is really struggling. Selling XYZ Company stock at its peak price would be critical to Becky's financial situation. Bobby knows he cannot trade in client securities but XYZ Company is not a client and he does not plan on selling his shares. XYZ Company's common stock average trading volume is over 11,500,000 daily so Becky selling 1000 shares would not have any impact on the company financial health. What should Bobby do? Page 5 The Ethical Compass: A Toolkit for Integrity in Business Applied Ethics Cases CARE2 Ethical Decision-Making Process C Consider facts A Assess alternatives R Review resources E Evaluate outcomes Page 6 Student Activity The Ethical Compass: A Toolkit for Integrity in Business Applied Ethics Cases Student Activity CARE2 Ethical Decision-Making Process The process BEFORE the DECISION! The process AFTER the DECISION! Consider Assess Review Evaluate Consistency Awareness Rules & Principles Equity What decision does your group recommend for _____________________________________________________________? The Decision - Write your group's recommendation for________________________________________________________: Challenge the decision you recommend for ________________________________ by generating questions for each step in the CARE2 process. Write your questions for each category below: C - Consistency: A - Accountability: R - Rationality E - Equity: After reviewing your questions for each category, did your group decision change? KPMG University Connection www.KPMGUniversityConnection.com 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (\"KPMG International\"), a Swiss entity. All rights reserved. The KPMG name, logo and \"cutting through complexity\" are registered trademarks or trademarks of KPMG International. 2014 Drs. Barbara Porco and Steven D'Agustino. Used with Permission. All rights reserved