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11. Is there a difference between cheating on a math test, lying about your age to purchase a cheaper
ticket at a movie theatre, and using someone else’s ID to get a drink at a bar?
All are examples of lying and affect one’s character through honesty and integrity. Many will use many
rationalizations to justify the lying. Virtue ethics would want doing the right thing to become
a habit. Deontology would emphasize the duty of doing the right thing and telling the
12 . Assume you have been hired by the head of a tobacco industry group to do a cost–benefit
analysis of whether the tobacco firms should disclose that nicotine is addictive. Assume this is
before the federal government required such disclosure on all packages of cigarettes. Explain
how you would go about determining what are the potential harms and potential benefits of
disclosing this information voluntarily. Is there any information you feel cannot be included in
the evaluation? What is it? Why can’t you include it? If you could include it, would it impact
your recommendation to the head of the industry group? Analyze the situation from a rights
perspective, justice, and virtue theory. How might these considerations affect your
recommendation to the head of the industry group?
Remind Students that the Cost/benefit analysis of this very question was actually considered by tobacco
companies and that cost/benefit analysis of tobacco taxation is still being done. Three steps of cost benefit
Listing the benefits of revealing the information is easier than assigning dollar numbers to the information.
Two big benefits to consider are: (i) benefits to potential smokers who would read the warning and choose
Putting dollar figures on smokers’ illness or death is difficult but it must be done. Whether to include what
Listing costs of revealing the addiction potential include the out-of-pocket cost of warnings, the loss of
sales profits for any smokers who take heed, and the outrage of betrayal by consumers to the other tobacco
Most critical to the cost benefit analysis is the present value discounting. In the case of smoking dangers,
the health risks are discovered and measured after years of smoking or living with smokers. Dead former
Five key rights ought to be considered: Truth, Promises, Personal Property, and Personal Bodily Health and
Privacy. Respect for Smokers’ autonomy requires that we let intelligent and rational adults make up their
own mind one cigarette at a time. Chemical addiction provides an argument for taking away the free choice
of even adults, so we often outlaw addictions even from adults. If your body belongs to you and your
Justice is often measured as fairness. We might compare tobacco to other products in safety market freedom
and requirements of disclosure. Cars might be an example of products, which might be partly analogous to
tobacco. Cars kill and while we rarely call driving an addiction, it is certainly a habit, which on any one
occasion is by percentages safe but across large numbers and across time deadly. We argue by fairness that
We ought to treat tobacco fairly compared to other drugs or compared to other addictions. We regulate
The key virtues of a disclosure decision are truthfulness, kindness and diligence. Disclosing the
consequences of the addictive property of a deadly product is the legal liability that results from admitting
that the secret had been kept for years. People smoking because the secret was revealed will lead to more
The key moral issue is: Respect for autonomy requires that we allow adults to hurt (only) themselves, but
An interesting current societal issue about warnings, restrictions, and the right to make personal choices is
the controversy over banning sugary drinks over a certain size. New York City’s ban on large-size soda
drinks was adopted by the Board of Health in September 2012 and approved by Mayor Michael
Bloomberg. The plan was to limit the size of sugary soft drinks sold in restaurants, movie theaters, stadiums
Groups opposing the large-size soda drink ban said the decision by the Board of Health to approve the ban
was overreaching and ignored the rights of New Yorkers to make their own choices. Thus, should soda
Students might be asked to read an ethics blog by Steve Mintz on this matter at:
13. How does virtue theory apply to both the decision maker and the act under consideration by that
party? Explain.
Virtue theory basically says you are what you do. Goodness is habitual practice of good choices. One might
decide what a desired virtue is by looking at people to emulate that virtue or a person might decide what to
Aristotle’s virtue was success based. Therefore, his virtues are those traits which, when combined with
good fortune, allow and promote success. Benjamin Franklin’s virtue list is written as if instructions for
becoming what he valued becoming. Virtues are defined as success promoting traits that change across time
14. Distinguish between ethical rights and obligations from the perspective of accountants and
auditors.
Ethical rights describe how a person is entitled to be treated by another person. Ethical obligations are the
duties to treat others in an ethical manner. Ask students what they think are their rights. Now which of
those rights have ethical basis? Have the students make a list of their ethical rights. If a student’s ethical
15. Assume in the DigitPrint case that the venture capitalists do not provide additional financing to
the company even though the accrued expense adjustments have not been made. The company
hires an audit firm to conduct an audit of its financial statements to take to a local bank for a
loan. The auditors become aware of the unrecorded $1 million in accrued expenses. Liza Doolittle
pressures them to delay recording the expenses until after the loan is secured. The auditors do not
know whether Henry Higgins is aware of all the facts. Identify the stakeholders in this case. What
alternatives are available to the auditors? Use the AICPA Code of Professional Conduct and
Josephson’s Six Pillars of Character to evaluate the ethics of the alternative courses of action.
The stakeholders in the DigitPrint case are the stockholders and employees of the company, the local bank,
suppliers and customers of the company. The auditors may try to get Ms. Doolittle and Mr. Higgins to
record the expenses; tell the board of directors of the situation; issue a qualified or adverse opinion if the
expenses are not recorded; or they could do as Ms. Doolittle is pressuring them to do. Caving into the
16. IFAC, the global organization for the accountancy profession dedicated to serving the public
interest, issued IFAC Policy Position Paper #4, titled A Public Interest Framework for the
Accountancy Profession, on November 4, 2010. In that paper IFAC identifies three criteria for the
accounting profession serving the public interest:
Consideration of costs and benefits for society as a whole
Adherence to democratic principles and processes
Respect for cultural and ethical diversity
Review the policy statement and any changes since it was first issued and explain how these three
criteria enable us to assess whether or not (and the degree to which) any policy, action, process or
condition is in the public interest.
The IFAC Policy Paper #4, now titled Public Sector Financial Management Transparency and
Accountability: The Use of International Public Sector Accounting Standards, was issued March 19, 2012.
The IFAC Policy Paper #5, titled A Definition of Public Interest, was issued June 2012, continues the
discussion of public interest from the previous policy position paper #4. The paper may be found at
The Policy Position Paper #5 sets up assessments (instead criteria) to judge whether an action or policy
aids the public interest as follows:
“The Assessment of Costs/Benefits – The extent to which, for society, as a whole the benefits of
The Assessment of Process – The extent to which the manner of considering the action, decision
In addition for institutions operating internationally, differences in cultures, societal values and ethical
systems should be considered in the assessments. “Culture and ethics vary from one society to another and
17. The 2011 National Business Ethics Survey, Workplace Ethics in Transition, issued by the Ethics
Resource Center (ERC) reports the following resultsi:
The percentage of employees who witnessed misconduct at work fell to a new low of 45
percent, compared to 49 percent in 2009 and well below the record high of 55 percent in
2007.
Those who reported bad behavior reached a record high of 65 percent, up from 64 percent in
2009 and the record low of 53 percent in 2005.
Retaliation against whistleblowers rose with 22 percent who reported misconduct saying
they experienced some form of retaliation compared to 15 percent in 2009 and 12 percent in
2007.
The percentage of employees who perceived pressure to compromise standards in order to
do their jobs climbed five points to 13 percent, just shy of the all-time high of 14 percent in
2000.
These results show a declining rate of instances of misconduct in workplace behavior, and
increase in reporting it, and increase in retaliation against whistleblowers, and an increase in
pressure to compromise standards. How should we interpret these somewhat contradictory
findings with respect to corporate culture and ethics in the workplace?
The results may likely be driven by a weak economy and the use of social networking at work. Often
companies behave differently during economic difficulties (hopefully more ethically). During economic
downturns there may be less pressure to commit financial statement fraud as the analysts expect a downturn
The full report indicates that the increase in retaliation may be due to employees who conduct social
networking in their workplaces. These social networking employees show a higher tolerance for
18. In the discussion of loyalty in this chapter a statement is made that “your ethical obligation is to
report what you have observed to your supervisor and let her take the appropriate action.” We
point out that you may want to take your concerns to others. The IMA Statement of Ethical
Professional Practice includes a Confidentiality standard that requires members to “keep
information confidential except when disclosure is authorized or legally required.”
Do you think there are any circumstances when you should go outside the company to report
financial wrongdoing? If so, to what person/organization would you go? Why? If not, why would
you not take the information outside the company?
Whistle blowing has had a bad name since before Rolf chose his duty to Nazi youth over his affection for
the Von Trapp family in the “Sound of Music.” Telling to get someone in trouble is called tattling. Tattling
often has the bad reputation due its mean-spirited motivation. Telling to prevent serious harm to someone is
Whistle-blowing is different for Accountants because it violates client trust and break promises the
profession has made on behalf of each of its members. Accountants, as professionals, have access to truth
and knowledge BECAUSE we as a profession promise that clients can absolutely count on the Accountants
While there are situations where Professional Accountants have to go outside their chain of command, the
whole profession’s reputation for reliability is damaged whenever that promise of confidentiality is broken.
Whistle blowing for a Professional Accountant is promise breaking. The best justification for breaking
There are circumstances where future harm to people who deserve our protection is so great that
professional duty is superseded by duty as a human being. There are also circumstances where individual
accountants are the only one person who can prevent or reduce that harm by acting. Accountants can almost
There are times that accountants are expected to report wrongdoing to the authorities, such as under the
Dodd-Frank Financial Reform Act that will be discussed in subsequent chapters. This would be the case if
19. Assume that a corporate officer or other executive asks you, as the accountant for the company,
to omit or leave out certain financial figures from the balance sheet that may paint the business
in a bad light to the public and investors. Because the request does not involve a direct
manipulation of numbers or records, would you agree to go along with the request? What ethical
considerations exist for you in deciding on a course of action?
Would the omission of the information be misleading to investors and the public? If so, then the SEC would
consider that information material and then should be disclosed. Many may consider the omission of
information as a form of a lie. One may mislead by stating a lie or by keeping quiet about some
20. Sir Walter Scott (1771–1832), the Scottish novelist and poet, wrote: “Oh what a tangled web we
weave, when first we practice to deceive.” Comment on what you think Scott meant by this
phrase.
Lies often require stories which seem simple, but if examined, may call for further
lies. In some cases, merely remembering a lie is more difficult than remembering the
truth. Fiction is filled with stories of one lie leading to others. You might collect a list
i
