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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:
stakeholders Litigation 3 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
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
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.
- Spring '11