Solutions Manual
For
Business & Professional
Ethics for Directors,
Executives & Accountants, 8e
Leonard J. Brooks and Paul Dunn
.
All Chapters Solutions Manual Supplement files download link at the end of this file.
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, 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 chance, 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 on codes of conduct to provide guidance;
training to provide awareness and 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, they should, if the executives and directors act negligently or without engaging in due
diligence procedures which are designed to ensure that reasonable and proper actions are
taken.
Business & Professional Ethics for Directors, Executives & Accountants, 8e
L.J. Brooks & P. Dunn, Cengage Learning, 2018
, Page |3
8. Why are the expectations of a corporation’s stakeholders important to the reputation of the
corporation and to its profitability?
Without the support of key or primary stakeholders such as customers and employees,
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 between the interests of 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 discussed in Chapter 4. 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 – see Chapters 3 & 4) are relevant because of stakeholders’ greater and growing ethical
awareness, sensitivity, and power. 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 that 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 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, particularly Chapter 6 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 so that advice can be given or
actions can be screened according to what might be acceptable and desirable, now and in the
Business & Professional Ethics for Directors, Executives & Accountants, 8e
L.J. Brooks & P. Dunn, Cengage Learning, 2018
, Page |4
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 Federation
of Accountants (IFAC)?
Because the IFAC Code is the newly defined standard to which all IFAC member organizations,
including the AICPA, PA (formerly CICA) and ICAEW, IMA and SMAC have pledged to harmonize
their Codes. The IFAC Code contains the common elements to which all professional
accountants will adhere worldwide. (See also Chapter 6.)
16. Why is an ethical corporate culture important?
An ethical corporate culture—also called a culture of integrity--is one in which ethical behavior
is considered normal and expected. This behavior is supported by codes, policies, and
compliance that can be passed on to employees and agents. Developing and maintaining an
ethical corporate culture are now expected aspects of good governance and are, therefore, part
of what directors and senior executives must ensure are included in their responsibilities and
duties.
Business & Professional Ethics for Directors, Executives & Accountants, 8e
L.J. Brooks & P. Dunn, Cengage Learning, 2018
For
Business & Professional
Ethics for Directors,
Executives & Accountants, 8e
Leonard J. Brooks and Paul Dunn
.
All Chapters Solutions Manual Supplement files download link at the end of this file.
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, 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 chance, 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 on codes of conduct to provide guidance;
training to provide awareness and 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, they should, if the executives and directors act negligently or without engaging in due
diligence procedures which are designed to ensure that reasonable and proper actions are
taken.
Business & Professional Ethics for Directors, Executives & Accountants, 8e
L.J. Brooks & P. Dunn, Cengage Learning, 2018
, Page |3
8. Why are the expectations of a corporation’s stakeholders important to the reputation of the
corporation and to its profitability?
Without the support of key or primary stakeholders such as customers and employees,
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 between the interests of 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 discussed in Chapter 4. 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 – see Chapters 3 & 4) are relevant because of stakeholders’ greater and growing ethical
awareness, sensitivity, and power. 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 that 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 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, particularly Chapter 6 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 so that advice can be given or
actions can be screened according to what might be acceptable and desirable, now and in the
Business & Professional Ethics for Directors, Executives & Accountants, 8e
L.J. Brooks & P. Dunn, Cengage Learning, 2018
, Page |4
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 Federation
of Accountants (IFAC)?
Because the IFAC Code is the newly defined standard to which all IFAC member organizations,
including the AICPA, PA (formerly CICA) and ICAEW, IMA and SMAC have pledged to harmonize
their Codes. The IFAC Code contains the common elements to which all professional
accountants will adhere worldwide. (See also Chapter 6.)
16. Why is an ethical corporate culture important?
An ethical corporate culture—also called a culture of integrity--is one in which ethical behavior
is considered normal and expected. This behavior is supported by codes, policies, and
compliance that can be passed on to employees and agents. Developing and maintaining an
ethical corporate culture are now expected aspects of good governance and are, therefore, part
of what directors and senior executives must ensure are included in their responsibilities and
duties.
Business & Professional Ethics for Directors, Executives & Accountants, 8e
L.J. Brooks & P. Dunn, Cengage Learning, 2018
