Business and Professional Ethics: For Directors, Executives & Accountants, 9th Edition PDF by Leonard J Brooks and Paul Dunn


Business and Professional Ethics: For Directors, Executives & Accountants, 9th Edition

By Leonard J Brooks and Paul Dunn

Business and Professional Ethics: For Directors, Executives & Accountants, 9th Edition





The Ethics Environment for Business: The Battle

for Credibility, Reputation, & Competitive

Advantage 2

Environmental Concerns 2

Moral Sensitivity 4

Bad Judgments & Activist Stakeholders 5

Economic & Competitive Pressures 6

Financial Scandals: The Expectations Gap &

the Credibility Gap 7

Governance Failures & Risk Assessment 8

Increased Accountability & Transparency Desired 8

Synergy among Factors & Institutional Reinforcement 9

Outcomes 10

New Expectations for Business 11

New Mandate for Business 11

New Governance & Accountability Frameworks 13

Reinforced Fiduciary Role for Professional Accountants 14

Responses & Developments 15

Emerging Governance & Stakeholder Accountability

Models 15

Management Based on Values, Reputation, & Risks 20

Accountability 23

Ethical Behavior & Developments in Business Ethics 24

The Ethics Environment for Professional

Accountants 27

Role & Conduct 27

Governance 28

Services Offered 29

Managing Ethics Risks & Opportunities 29

Developing a Culture of Integrity 29

Corporate Governance 30

Questions 32

Reading Insights 33

References 33

Case Insights 34


Cases Involving Improper Behavior

Selling Only Sugary Drinks 36

Buying and Selling Blood 37

Pedophile Priests in the Catholic Church 38

Sexual Abuse by a Penn State Football Coach 39

Advertising & Sales Promotion Cases

Tiger Woods: “Winning Takes Care of Everything” 39

Pepsi’s iPhone App Stereotypes Women 40

Should Porn Be Sold by Cell Phone Companies? 41

Virgin Mobile’s Strip2Clothe Campaign: Exploitive, Risqué,

and Worthwhile? 42

Cases Involving Financial Transactions

Goldman Sachs and the Greek Veil 43

Martha Stewart’s Lost Reputation 44

Cases Involving the Control of Information

Google versus China 49

China’s Tainted Baby Milk Powder: Rumored Control of Online

News 50

Cases Concerning the Environment

Nestlé Bottles Water in a California Drought 52

Bhopal–Union Carbide 53

Texaco: The Ecuador Issue 56

Product Safety Cases

The Right to Be Informed? The Link between Talcum Powder

and Cervical Cancer 58

Valeant Pharmaceuticals vs. Coca Cola—Which Business

Model Is Worse: Price Gouging or Fostering Obesity &

Diabetes? 60

The Betaseron Decision (A) 62

Magnetic Toys Can Hurt 63

Bausch & Lomb’s Hazardous Contact Lens Cleaner 64

Accounting & Auditing Cases

Where Were the Accountants? 65

To Resign or Serve? 66


The Whistle Blower: Patriot or Bounty Hunter? 67


Ethics & Governance: A Time Line of Important

Events 77

Ethics & Governance: The Early Developments prior to

1970 77

Ethics & Governance: 1970–1990 79

Ethics & Governance: The Modern

Era—1990 to the Present 79

Significant Ethics & Governance Scandals &

Events 82

Enron—A Failure of the Board of Directors 82

Arthur Andersen—An Organizational Culture Gone

Awry 84

WorldCom—Power in the Hands of One Man 85

Crisis of Confidence 86

Sarbanes-Oxley Act—Closing the Barn Door 88

Tax Shelters—Not in the Public Interest 89

Subprime Mortgage Meltdown—Greed without Due

Diligence 91

Dodd-Frank Wall Street Reform and Consumer Protection

Act 94

Bernard Madoff—If It’s Too Good to Be True 95

Public Disillusionment: The Occupy Movement 96

Shareholder Disillusionment: Shareholder

Resolutions 97

The LIBOR Scandal: How Banks Manipulated

a Benchmark Interest Rate 98

Bribery Attracts Prosecutions and Huge Fines 103

Automaker’s Sins Come Home to Roost 103

Drugmakers Raise Prices, Gouging Patients 106

New Emphasis on Individual Accountability

for Corporate Wrongdoing 107

Panama Papers & Paradise Papers Eliminate Secrecy on

Offshore Tax Evasion 107

Unethical Bank Cultures Produce Scandals 108

#MeToo Movement Reaches a Tipping Point 109

Harmful Products Draw Huge Settlements

and Change Perspectives 109

Accounting Crises Lead to Reimagination of Professional

Accountant’s Role 110

U.S. Business Roundtable Statement Signals Acceptance

of Stakeholder Interests 111

Signs of Ethical Collapse 112

Ethics & Governance: Trends 112

Ethics & Governance: Timetables of

Important Events, 1929–2019 113

Useful Videos & Films 114

Questions 115

Case Insights 116


Enron’s Questionable Transactions 117

Arthur Andersen’s Troubles 122

WorldCom: The Final Catalyst 130

Bernie Madoff Scandal—The King of Ponzi Schemes 136

Wal-Mart Bribery in Mexico 146

LIBOR Manipulations Cause Widespread Impacts 148

General Motors Ignores Obvious Ignition Faults 150

VW Cheats on Emissions Tests 152

Deutsche Bank—A Cultural Disaster 154


Ethics & Moral Codes 159

Ethics & Business 162

Self-Interest & Economics 163

Ethics, Business, & the Law 165

Major Ethical Theories Useful in Resolving Ethical

Dilemmas 166

Teleology: Utilitarianism & Consequentialism—Impact

Analysis 166

Deontological Ethics—Motivation for Behavior 172

Justice & Fairness—Examining

the Balance 175

Virtue Ethics—Analysis of the Virtue

Expected 180

Moral Imagination 183

Questions 183

Case Insights 184

Useful Video & Film 184

References 185


Cases Involving Improper Behavior

An Illustration of Ethical Decision Making 185

Spy versus Spy: Corporate Espionage in the Canadian Airline

Industry 188

Art Forgeries: Is Deceiving Art Experts Unethical? 190

Gender Discrimination at IKEA 190

Deciding Who Receives the Swine Flu Vaccine 191

Insurance and Genetically Inherited Diseases 192

Terrorist Payments 193

The Case of Cesar Correia 194


Introduction 196

Motivating Developments for Ethical Learning 197

Ethical Decision Making Framework—An

Overview 198

Philosophical Approaches—An Overview:

Consequentialism (Utilitarianism), Deontology, &

Virtue Ethics 200

Consequentialism, Utilitarianism, or Teleology 200

Deontology 201

Virtue Ethics 203

Sniff Tests & Common Heuristics—Preliminary

Tests of Ethicality 205

Stakeholder Impact Analysis—Comprehensive

Tool for Assessing Decisions & Actions 206

Overview 206

Fundamental Interests of Stakeholders 207

Measurement of Quantifiable Impacts 209

Assessment of Nonquantifiable Impacts 213

Stakeholder Impact Analysis—Modified Traditional

Decision-Making Approaches 216

Integrating Philosophical & Stakeholder Impact

Analysis Approaches 219

Other Ethics Decision-Making Issues 220

Commons Problems 220

Developing a More Ethical Action Using Moral

Imagination 221

Common Ethics Decision-Making Pitfalls 221

A Comprehensive Ethical Decision-Making

Framework 223

Summary of Steps for an Ethical Decision 223

Conclusion 225

Questions 225

References 226

Illustrative Applications & Case Insights 227



Dealing with Disappointed Apple iPhone Customers Case 228



Bribery or Opportunity in China Case 229

Proposed Audit Adjustment Case—Castle

Manufacturing Inc. 232

When Does an “Aggressive Accounting” Choice Become

Fraudulent? 237


Concussions in the NFL 238

BP’s Gulf Oil Spill Costs 239

Tylenol Recalls (2010): It’s Still About Reputation 243

Vioxx Decisions—Were They Ethical? 245

Just Make the Numbers! 248

Smokers Are Good for the Economy—Really 248

Ford Pinto 250

The Kardell Paper Co. 251



Modern Governance & Accountability Framework—

To Shareholders & Other Stakeholders 255

New Expectations—New Framework to Restore

Credibility 255

Corporate Governance Overview 256

Accountability to Shareholders or Stakeholders? 260

The Shareholder Value Myth 262

Governance for Broad Stakeholder Accountability 263

Guidance Mechanisms—Ethical Culture & Code of

Conduct 268

Threats to Good Governance & Accountability 269

Misunderstanding Objectives & Fiduciary Duty 269

Failure to Identify & Manage Ethics Risks 270

Conflicts of Interest 272

Key Elements of Corporate Governance &

Accountability 279

Compelling Evidence for the Development of an Ethical

Corporate Culture 279

Developing, Implementing, & Managing an Ethical

Corporate Culture 282

Corporate Codes of Conduct 288

Ethical Leadership 297

Corporate Psychopaths 302

Director & Officer Liability 302

Public Accountability Benchmarks 305

Conclusion—Toward a Culture of Integrity 306

Questions 306

Case Insights 307

Reading Insights 310

References 310


Cases on Ethical Corporate Culture

Hospital Governance Challenges 312

Siemens’ Bribery Scandal 313

Cases on Ethical Leadership

Salary Equality at Gravity Payments 315

Merck and River Blindness 316

Lululemon’s Questionable Leadership 317

Cases on Bribery

SNC-Lavalin Missing Funds Topples CEO & Triggers Bribery

Investigation 318

Rio Tinto’s Bribes in China 320

Daimler’s Settles U.S. Bribery Case for $185 Million 322

HP Bribery for Russian Contract with Antibribery Prosecutor’s

Office 324

Cases on Corporate Governance & Managerial Opportunism

Spying on HP Directors 325

Lord Conrad Black’s Fiduciary Duty? 328

Manipulation of MCI’s Allowance for Doubtful

Accounts 332

Stock Options and Gifts of Publicly Traded Shares 333

The Ethics of Repricing and Backdating Employee Stock

Options 335

Cases on Fraudulent & Questionable Financial Reporting

Satyam Computer Services—The Enron of India 336

Nortel Networks’ Audit Committee Was in the Dark 338

Criminal Charges for Fraud Dismissed

Adelphia—Really the Rigas Family Piggy Bank 348

Tyco—Looting Executive Style 352

HealthSouth—Can Five CFOs Be Wrong? 356

Royal Ahold—A Dutch Company with U.S.-Style Incentives 361

The Ethics of Bankruptcy: Jetsgo Corporation 364

Stock Market Cases

Société Générale’s Rogue Trader 366

Galleon’s Insider Trading Network 368

KPMG Partner Shares Confidential Information

with a Friend—located in Chapter 6

Conflicts of Interest on Wall Street 371

Loyalty, but to Whom? 373

Bankers Trust: Learning from Derivatives 376

Barings Bank: Rogue Trader 379

Cases on Product Safety

Dow Corning Silicone Breast Implants 382

Ford/Firestone Tire Recall 384


Appendix A: Alternative Governance Theories 395



Professionalism for Accountants 401

Professional Accounting’s Traditional Role 402

Historic Shortfalls in Meeting Professional

Expectations 403

Professional Accounting and the Public

Interest 404

Public Expectations Control Reputation 404

Dominance of Ethical Values Rather Than Accounting or

Audit Techniques 408

New NOCLAR Standards 412

Guidance for Professional Accountants Discovering Actual

or Potential NOCLAR Activities 414

NOCLAR Requirements for Professional Accountants

Providing Audit or Nonaudit Services 416

NOCLAR Responsibilities of Professional Accountants in

Business (PAIB) 416

NOCLAR Implementation Issues 417

Implications for Services Offered 417

Assurance & Other Services 417

Judgment & Values 421

Sources of Ethical Guidance 422

Professional Codes of Conduct 424

Conceptual Framework for Assessing Threats to

Compliance 440

Conflict-of-Interest Threats to Independence 442

Conflicts of Interest Affecting Services

Offered 446

Laws & Jurisprudence 462

Moral Courage Is Vital to Professional Accounting:

Globalization Heightens the Requirement 464

When Codes & Laws Do Not Help 465

Broadening Role for Professional Accountants 465

Conclusion 466

Questions 467

Reading Insights 468

Case Insights 468

References 472


Famous Cases

Carillion Bankruptcy: A Nightmare That Challenged the

Foundations of the U.K. Accounting Profession 473

Parmalat–Europe’s Enron 478

Arthur Andersen, Enron, and WorldCom cases—located

in Chapter 2

Tyco, HealthSouth and Royal Ahold cases—located

in Chapter 5

Lehman Brothers case—located in Chapter 8

Sunbeam and Waste Management cases—

located in the BPE Digital Resources

Professional & Fiduciary Duty Cases

NOCLAR Solutions to Toshiba’s Accounting Scandals &

Confrontations with Auditors 485

KPMG’s Ethical Red Flags—Advance PCAOB Information and

Cheating on Ethics Exams 487

KPMG Partner Shares Confidential Information with

a Friend 488

Livent—When Maria, When? 489

The Lang Michener Affair 490

Wanda Liczyk’s Conflicts of Interest 494

Strategic Roles 496

Locker Room Talk 496

Advice for Sam and Ruby 497

Biker Nightmare 498

Budget Conflict 498

An Exotic Professional Accountant? 499

Freebie Services for Staff 499

Summer Camp Holdback 499

Theft Reimbursement, Twice 500

Accounting & Auditing Dilemmas

Sino-Forest Fraud? Audit Challenges in China 501

Massive Acquisition Write-Downs in the Mining Industry 506

Accounting Rule Changes Increase Apple Computer’s

Revenue 508

The Impact of International GAAP on Earnings 509

Auditor’s Dilemma 510

Management Choice 512

To Qualify or Not? 512

Team Player Problems 515

Minimal Disclosure 515

Opinion Shopping 516

Lowballing a Fee Quotation 517

Fundamental Accounting and Auditing Issues Cases

Societal Concerns 517

Economic Realities or GAAP 518

Multidisciplinary Practices—Ethical Challenges 518

Tax and Regulatory Cases

Multinationals and Tax Planning 519

KPMG’s Questionable Tax Shelters 520

Italian Tax Mores 522

Tax Return Complications 524

Marketing Aggressive Tax Shelters 525

Providing Tax Advice 526

Risk Management of Taxes Payable—Is It Ethical? 528


Ethics Risks & Opportunities Identification &

Assessment 529

Enterprise Risk Management Must Include Ethics Risks &

Opportunities 529

Ethics Risk Review or Audit—A Comprehensive

Approach 535

Searching for Specific Ethics Risks 537

Ethics Risks & Opportunities: Management &

Mitigation 540

Ethics Risks & Opportunities: Effective Stakeholder

Relations 540

Ethics Risks & Opportunties: Stakeholder Accountability 542

Sustainability, Corporate Social Responsibility, &

Corporate Citizenship 542

Ethics Risks & Opportunities: Key Risk Issues &

Tools 558

Workplace Ethics 558

Whistleblower Programs & Ethics Inquiry Services 566

Fraud & White-Collar Crime 568

Bribery & International Operations 573

Crisis Management 585

Conclusion 589

Questions 590

Case Insights 591

Reading Insights 593

References 593


CSR Cases—Environmental Issues

Harry Potter and the Green Brigade 595

The Carbon Footprint of British Airways 596

The Pollution Caused by Cruise Ships 597

Workplace Ethics Cases—Discrimination and Abuse

Pedophile Priests in the Catholic Church—located in Chapter 1

Sexual Abuse by a Penn State Football Coach—

located in Chapter 1

Texaco’s Jelly Beans 599

Gender Discrimination at Dell Inc. 604

Novartis’ $2501 Million Gender Discrimination Case 605

Downsize or Bonus Allocation Decisions 606

Workplace Ethics Cases—Spying

Barclays Bank: How Not to Deal with Whistleblowing 607

Workplace Ethics Cases—White-Collar Crime

Danske Bank’s Money-Laundering Scandal 608

QuadrigaCX—A Cryptocurrency Fiasco 610

Walt Pavlo’s MCI Scams/Frauds 613

Bribery & International Operations Cases

Jail and a German Subcontractor (names are fictitious) 615

AIDS Medication in South Africa 616

The following bribery cases are located in Chapter 5:

Siemens’ Bribery Scandal

Wal-Mart Bribery in Mexico

SNC Lavalin Missing Funds Topples CEO &

Triggers Bribery Investigation

Rio Tinto’s Bribes in China

Daimler Settles U.S. Bribery Case for $185 Million

Bribery for Russian Contract with Anti-Bribery

Prosecutor’s Office

Risk & Crisis Management Cases

BP’s Gulf Oil Spill Risk Management 616

BP’s Corporate Culture 620

Toyota’s Recall Problems 621

Digoxin Overdose—The Need for Skepticism, Courage, and

Persistence 625

The Exxon Valdez 627

The Brent Spar Decommissioning Disaster 630

Crisis at Wind River Energy Inc. 632


Appendix A: Ethics Audit Program Annual Audit Questions 635


The Economic Train Wreck—A Global

Disaster 637

Stages of the Subprime Lending Fiasco 638

How Did the Subprime Lending Crisis Happen? 640

Subprime Lending Developments 641

Transfer of Risk & the Liquidity Freeze 643

Contributions of Fannie Mae & Freddie Mac 644

The Conflicted Credit-Rating Sham 645

Regulators Looked in the Wrong Direction 646

Special Purpose Vehicles—Key to the Crisis 646

Unlimited Toxic Risk—Credit Default Swaps,

Naked & Otherwise 649

Crisis, Bankruptcy, Bailouts, & New Regulations 649

Worldwide Contagion 652

Subsequent Events 654

Ethics Issues—The Subprime Lending Fiasco 658

Greed, Incompetence, Dishonesty, Conflicts of Interest,

Non-transparency, Lack of Moral Courage, & Poor Risk

Management 658

Corporate Psychopaths—Potential Role in the Subprime

Lending Crisis 659

Lack of Regulation & Sound Decision Making 661

Are Mark-to-Market (M2M) Accounting Standards to

Blame? 662

The Ultimate Risk Bearers 664

Cynicism 664

Ethics Lessons 666

Questions 667

Case Insights 668

References 670


Questionable Values Produce Resignation at Goldman Sachs 671

Naked Short Selling— Lawsuit against Goldman Sachs & Merrill Lynch 672

Lehman Brothers Repo 105 Manipulation 673

Goldman Sachs Conflicts: Guilty or Not? 685

Mark-to-Market (M2M) Accounting and the Demise of AIG 692

Subprime Lending—Greed, Faith, and Disaster 694

Moral Courage: Toronto-Dominion Bank CEO Refuses to Invest

in High-Risk Asset-Backed Commercial Paper 696

The Ethics of AIG’s Commission Sales 697


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