3ProfessionalismAndEthics_Class-1 - Professionalism &...

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Unformatted text preview: Professionalism & Ethics Professionalism & Ethics 1 Characteristics of a Characteristics of a professional ­ McDonald Specialized knowledge base Complex skills Autonomy of practice Adherence to a code of ethical behavior 2 Business Ethics Business Ethics Why should we be concerned about ethics in the business world? In business, conflicts may arise between: – – – employees management stakeholders Litigation 3 Business Ethics Business Ethics Business ethics involves finding the answers to two questions: How do managers decide on what is right in conducting their business? How do they achieve it? 4 Four Main Areas of Business Ethics Four Main Areas of Business Ethics 5 Computer Ethics… Computer Ethics… concerns the social impact of computer technology (hardware, software, and telecommunications). What are the main computer ethics issues? Privacy Security—accuracy and confidentiality Ownership of property Equity in access Environmental issues Artificial intelligence Unemployment and displacement Misuse of computer 6 Legal Definition of Fraud Legal Definition of Fraud False representation Material fact Intent to deceive Justifiable reliance upon information, which caused someone to act Caused injury or loss 7 Figure 3­1 Fraud Triangle Pressure Opportunity No Fraud Pressure Opportunity Ethics Fraud Ethics 8 2008 ACFE Study of Fraud 2008 ACFE Study of Fraud Loss due to fraud equal to 7% of revenues—approximately $994 billion Loss by position within the company: Position % of Frauds Loss $ Owner/Executiv e Manager 23% $834,000 37% 150,000 Employee 40% 70,000 Fraud Fraud Employee Fraud – Committed by non­management personnel – Usually: employee taking asset for personal gain bypassing internal controls Management Fraud – Management above the internal control – Frequently financial statements used to create an illusion of good performance – Involves misappropriation of assets using complex business transactions 10 Fraud Schemes Fraud Schemes Three categories of fraud schemes according to the Association of Certified Fraud Examiners: A. fraudulent statements B. corruption C. asset misappropriation 11 Ethics in Accounting Ethics in Accounting To be useful, accounting information must be objective and reliable. Management may be under pressure to report desired results and ignore or bend existing rules. 12 Notorious ethics cases Notorious ethics cases Charles Ponzi ­ 1920 – Multi­million dollar fraud with international postal reply coupons – Used money from new investors to pay off old investors – Five years in federal prison for mail fraud with additional 7 – 9 years in Massachusetts 13 Recent ethics case ­ Enron Recent ethics case ­ Enron Natural gas and pipeline industries Moved into trading rights for oil and gas pipelines Earnings increased without cash flow – Stock price increased 20 quarters in a row Earnings management, off balance­sheet debt, related­party transactions, disclosure issues Bankruptcy in December 2001 Demise of Arthur Andersen 14 Enron, WorldCom Enron, WorldCom Underlying Problems Lack of Auditor Independence Lack of Director Independence Questionable Executive Compensation Schemes Inappropriate Accounting Practices: 15 Ethical codes in Ethical codes in accounting Institute of Management Accountants – Principles Honesty and fairness Objectivity and responsibility Standards Competence Confidentiality Integrity Credibility 16 Sarbanes­Oxley Act of 2002 Sarbanes­Oxley Act of 2002 Some pertinent reforms: – Creation of the Public Company Accounting Oversight Board (PCAOB) – Auditor independence – Corporate governance and responsibility – Disclosure requirements – New federal crimes for destruction of documents, securities fraud, and actions against 17 whistleblowers Resolution of ethical dilemmas­ Resolution of ethical dilemmas­ Langenderfer and Rockness 1. Determine the facts of the situation. 1. Identify the ethical issue and the stakeholders. 1. Identify the norms, principles and values related to the situation. 1. Identify alternative courses of action. 18 Resolution of ethical dilemmas­ Resolution of ethical dilemmas­ Langenderfer and Rockness 1. Evaluate the consequences of each course of action. 2. Decide the best course of action consistent with the norms, principles and values 1. If appropriate, discuss the alternative with a trusted person 2. Reach a decision as to the appropriate course of action. 19 ASSIGNMENT ASSIGNMENT Bristol­Meyers Squibb Adelphia Communications 20 ...
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This note was uploaded on 09/29/2011 for the course ACG 3401 taught by Professor Donald during the Spring '11 term at FAU.

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