Instructor's Manual
For
Business & Professional
Ethics for Directors,
Executives & Accountants
7e
Leonard J. Brooks and Paul Dunn
Chapter 1 – Ethics Expectations
Chapter Questions and Case Solutions
Chapter Questions..................................................................2
Case Solutions.........................................................................5
, Page |2
Chapter Questions
1. Why have concerns over pollution become so important for management and Directors?
Because the public perceive that our environment is finite and that our well-being is
threatened. In turn they have influenced politicians to enact tougher laws and heavier
penalties... up to $2 million/day, with the prospect of personal liability and jail. In
addition, U.S. courts have agreed to hear lawsuits brought by foreigners for pollution on
foreign soil (see Texaco: The Ecuador Issue). Finally, pollution can erode the trust
necessary to preserve stakeholder support, and this will be seen by stakeholders with
negative consequences in consumer and capital markets.
2. Why are we more concerned now than our parents were about fair treatment of employees?
Our social consciousness is higher due to the reasons listed in Ch. 1.
3. What could professional accountants have done to prevent the development of the credibility
gap and the expectations gap?
See the discussion on the Treadway, Metcalf and Macdonald Commissions. Also see
Arthur Andersen’s Troubles case in Chapter 2.
4. Why might ethical corporate behavior lead to higher profitability?
Because attention to ethical concerns can keep corporations out of costly problems such
as clean-up of pollution problems, fines, low morale, and loss of reputation and
stakeholder support; and it can open up profitable opportunities such as developing
green product lines.
5. Why is it important for the clients of professional accountants to be ethical?
Because auditors don't check 100% of all transactions, and even if they did there would
be conflicts of interest and other hidden issues which would be found only by fluke,
making sure that clients are ethical provides assurance that they will not be hiding
things from the auditors or engaging in unethical activities. The value of the auditor's
opinion depends upon it.
6. How can corporations ensure that their employees behave ethically?
By developing ethical corporate cultures based codes of conduct in place to provide
guidance, training to provide awareness, understanding, monitoring to assure
compliance, and rewards or sanctions to reinforce the desired behavior. Also, the top
executives should set the best example possible.
7. Should executives and Directors be sent to jail for the acts of their corporation's employees?
Yes, if they executives and Directors act negligently or without engaging in due diligence
procedures which are designed to ensure that reasonable and proper actions are taken.
8. Why are the expectations of a corporation’s stakeholders important to the reputation of the
corporation and to its profitability?
Business & Professional Ethics for Directors, Executives & Accountants, 7e
L.J. Brooks & P. Dunn, Cengage Learning, 2015
, Page |3
Without the support of key or primary stakeholders such as customers and employees
the sustained profitability is not possible. A corporation’s reputation is based on the
elements that such stakeholders find relevant to their support, including: credibility,
reliability, trustworthiness and the taking of responsibility.
9. How can a corporation show respect for its stakeholders?
By taking their interests into account (respecting them) when making decisions.
10. How can conflicts of interest between stakeholders be resolved by a corporation’s
management?
By displaying sensitivity to each side, ranking the interests involved and using this
ranking to favor the most important as is discussed in Chapter 6. Stakeholders should
be made aware of the ranking and decision process where possible. In the end, tough
trade-off decisions may be involved, but stakeholders should have confidence in the
process.
11. Why are philosophical approaches to ethical decision making relevant to modern corporations and
professional accountants?
The philosophical approaches to ethical decision making (utilitarianism, deontology, and
virtue ethics) are relevant because of the greater and growing ethical awareness,
sensitivity and power of stakeholders that can make a difference to the reputations and
fortunes of companies and of professional accountants. Their support is needed now
more than ever.
12. What are the common elements of the three approaches to ethical decision making which are
briefly outlined in the chapter?
The common elements are measures of well-offness, fairness, right(ness), and virtues
expected.
13. Is a professional accountant a businessperson pursuing a profit or a fiduciary that is to act in the
public interest?
Both, but when there is a conflict between these roles, the professional accountant
must place fiduciary duty above personal profit. Otherwise the public interest will not
be protected (which is the primary goal of a professional – see later chapters for
discussion).
14. Why is it important for a professional accountant to understand the ethical trends discussed in
this chapter?
So that the expectations for business can be understood and advice given or actions
screened with regard to what might be acceptable and desirable, now and in the future
with regard to operations as well as financial matters. Also, the accounting profession is
subject to the same set of expectations, and is expected to rise to higher standards of
performance than business.
15. Why should a professional accountant be aware of the Ethics Code of the International
Business & Professional Ethics for Directors, Executives & Accountants, 7e
L.J. Brooks & P. Dunn, Cengage Learning, 2015
, Page |4
Federation of Accountants (IFAC)?
Because the IFAC Code is the newly defined standard to which all IFAC members
including the AICPA, CICA and ICAEW, IMA and SMAC have pledged to harmonize their
Codes to during the next 5 years. The IFAC Code contains the common elements to
which all professional accountants will adhere.
16. Why is an ethical corporate culture important?
An ethical corporate culture is considered to be one of the most important aspects by
which behavioral guidance in the form of corporate policies and compliance therewith
can be passed on to employees and agents. Developing and maintaining an ethical
corporate culture is now an expected facet of good governance, and therefore part of
what directors and senior executives must ensure as part of their responsibilities and
duties.
Business & Professional Ethics for Directors, Executives & Accountants, 7e
L.J. Brooks & P. Dunn, Cengage Learning, 2015
For
Business & Professional
Ethics for Directors,
Executives & Accountants
7e
Leonard J. Brooks and Paul Dunn
Chapter 1 – Ethics Expectations
Chapter Questions and Case Solutions
Chapter Questions..................................................................2
Case Solutions.........................................................................5
, Page |2
Chapter Questions
1. Why have concerns over pollution become so important for management and Directors?
Because the public perceive that our environment is finite and that our well-being is
threatened. In turn they have influenced politicians to enact tougher laws and heavier
penalties... up to $2 million/day, with the prospect of personal liability and jail. In
addition, U.S. courts have agreed to hear lawsuits brought by foreigners for pollution on
foreign soil (see Texaco: The Ecuador Issue). Finally, pollution can erode the trust
necessary to preserve stakeholder support, and this will be seen by stakeholders with
negative consequences in consumer and capital markets.
2. Why are we more concerned now than our parents were about fair treatment of employees?
Our social consciousness is higher due to the reasons listed in Ch. 1.
3. What could professional accountants have done to prevent the development of the credibility
gap and the expectations gap?
See the discussion on the Treadway, Metcalf and Macdonald Commissions. Also see
Arthur Andersen’s Troubles case in Chapter 2.
4. Why might ethical corporate behavior lead to higher profitability?
Because attention to ethical concerns can keep corporations out of costly problems such
as clean-up of pollution problems, fines, low morale, and loss of reputation and
stakeholder support; and it can open up profitable opportunities such as developing
green product lines.
5. Why is it important for the clients of professional accountants to be ethical?
Because auditors don't check 100% of all transactions, and even if they did there would
be conflicts of interest and other hidden issues which would be found only by fluke,
making sure that clients are ethical provides assurance that they will not be hiding
things from the auditors or engaging in unethical activities. The value of the auditor's
opinion depends upon it.
6. How can corporations ensure that their employees behave ethically?
By developing ethical corporate cultures based codes of conduct in place to provide
guidance, training to provide awareness, understanding, monitoring to assure
compliance, and rewards or sanctions to reinforce the desired behavior. Also, the top
executives should set the best example possible.
7. Should executives and Directors be sent to jail for the acts of their corporation's employees?
Yes, if they executives and Directors act negligently or without engaging in due diligence
procedures which are designed to ensure that reasonable and proper actions are taken.
8. Why are the expectations of a corporation’s stakeholders important to the reputation of the
corporation and to its profitability?
Business & Professional Ethics for Directors, Executives & Accountants, 7e
L.J. Brooks & P. Dunn, Cengage Learning, 2015
, Page |3
Without the support of key or primary stakeholders such as customers and employees
the sustained profitability is not possible. A corporation’s reputation is based on the
elements that such stakeholders find relevant to their support, including: credibility,
reliability, trustworthiness and the taking of responsibility.
9. How can a corporation show respect for its stakeholders?
By taking their interests into account (respecting them) when making decisions.
10. How can conflicts of interest between stakeholders be resolved by a corporation’s
management?
By displaying sensitivity to each side, ranking the interests involved and using this
ranking to favor the most important as is discussed in Chapter 6. Stakeholders should
be made aware of the ranking and decision process where possible. In the end, tough
trade-off decisions may be involved, but stakeholders should have confidence in the
process.
11. Why are philosophical approaches to ethical decision making relevant to modern corporations and
professional accountants?
The philosophical approaches to ethical decision making (utilitarianism, deontology, and
virtue ethics) are relevant because of the greater and growing ethical awareness,
sensitivity and power of stakeholders that can make a difference to the reputations and
fortunes of companies and of professional accountants. Their support is needed now
more than ever.
12. What are the common elements of the three approaches to ethical decision making which are
briefly outlined in the chapter?
The common elements are measures of well-offness, fairness, right(ness), and virtues
expected.
13. Is a professional accountant a businessperson pursuing a profit or a fiduciary that is to act in the
public interest?
Both, but when there is a conflict between these roles, the professional accountant
must place fiduciary duty above personal profit. Otherwise the public interest will not
be protected (which is the primary goal of a professional – see later chapters for
discussion).
14. Why is it important for a professional accountant to understand the ethical trends discussed in
this chapter?
So that the expectations for business can be understood and advice given or actions
screened with regard to what might be acceptable and desirable, now and in the future
with regard to operations as well as financial matters. Also, the accounting profession is
subject to the same set of expectations, and is expected to rise to higher standards of
performance than business.
15. Why should a professional accountant be aware of the Ethics Code of the International
Business & Professional Ethics for Directors, Executives & Accountants, 7e
L.J. Brooks & P. Dunn, Cengage Learning, 2015
, Page |4
Federation of Accountants (IFAC)?
Because the IFAC Code is the newly defined standard to which all IFAC members
including the AICPA, CICA and ICAEW, IMA and SMAC have pledged to harmonize their
Codes to during the next 5 years. The IFAC Code contains the common elements to
which all professional accountants will adhere.
16. Why is an ethical corporate culture important?
An ethical corporate culture is considered to be one of the most important aspects by
which behavioral guidance in the form of corporate policies and compliance therewith
can be passed on to employees and agents. Developing and maintaining an ethical
corporate culture is now an expected facet of good governance, and therefore part of
what directors and senior executives must ensure as part of their responsibilities and
duties.
Business & Professional Ethics for Directors, Executives & Accountants, 7e
L.J. Brooks & P. Dunn, Cengage Learning, 2015
