8. According to the IIA Code of Ethics, internal auditors should make a
balanced assessment of all the relevant circumstances and should not be unduly
influenced by their own interests or by others in forming judgments. Which interests
are being referred to in that statement and how might they influence the ethical
decisions of a member of the IIA?
IIA members as internal auditors are supposed to act as independent reviewers of a firm’s
operations; even though they are employed and paid by the firm. This statement means that they
The WorldCom case and Cynthia Cooper provide a good working example of this statement. As
Cynthia Copper tried to determine the facts in the WorldCom, she was often discouraged, led
astray and suffered interference from Scott Sullivan. As she became surer that fraudulent
As a single mother, Cynthia could have decided that it was easier to ignore the facts that she
found. She was raised in Clinton and she knew everyone; it would have been easier to selectively
forget about the fraud. She knew it was possible that disclosing the fraud could cost friends in
9. In the accounting fraud at the cable company Adelphia, top management had
established a “cash management” system that enabled the founder of Adelphia and
former CEO and chair of the board of directors, John Rigas, to dip into the fund for
personal expenses whenever he wanted. The final approval for such expenditures
rested with Timothy Rigas, the son of John Rigas and Adelphia’s CEO during the
final years that fraud had occurred. What’s wrong with the founder of a company,
its former CEO and board chair, utilizing corporate assets for personal reasons?
Can you think of any circumstances where it would be permissible? That is, what
would have to happen for this to be acceptable?
Public Company assets belong to the stockholders and compensation of executives should be
performance based and board authorized. In addition to the assets poorly managed and
squandered on unproductive unauthorized executive compensation, the effect of such a fund on
other employees should be considered. Lower level employees, who see “help yourself” as the
If one shareholder is using corporate assets without the knowledge and approval of the other
shareholders, it brings into question the fairness and equity of such situations. Such use of assets
could be counteractive to the corporation’s mission and the reason other shareholders invested in
If the use of funds was due to medical reasons or other emergency needs of the shareholder, then
the Board of Directors (BOD), as representatives of all shareholders, should approve a loan with
10. The 2011 National Business Ethics Survey defines “active social networkers” as
people who spend more than 30 percent of the workday participating on social
networking sites. Such employees are much more likely to view their current jobs as
temporary; 72 percent of active social networkers polled said they plan to change
employers within the next five years, compared to 39 percent of non-active social
networkers.
That feeling of transience may lead to such workers feeling like it’s no big deal to
swipe a few things from the office supply cabinet: 46 percent of active social
networkers said they thought it was acceptable to take a copy of work software
home and use it on their personal computer, while just seven percent of non-active
social networkers said the same.
Why do you think there is a difference in responses with respect to the use of
company software at home on personal computers between active and non-active
social networkers? Do you believe it is an ethics failing to take the software home
without asking for the company’s permission? What about simply checking your
Facebook page once a day?
The difference in responses between “active social networkers” and non-active social networkers
may be the difference between those who are “wired” into utilizing the computer for work,
personal and social purposes, and those who tend to utilize the computer in connection only with
their work duties. (Note, this is not an age or generational divide but a divide on how extensively
a computer is used in daily life.) Thus, those that utilize a computer in all aspects of their life
A company has the right to limit social websites, porn, company email usage, and other non-
work related activities on company owed equipment or on company provided Internet services.
The company also has the right to limit personal calls on company time. A company is paying a
11. How do the concepts of cognitive dissonance, organizational dissonance, and ethical
dissonance relate to whether an accountant might choose to blow the whistle on
corporate wrongdoing?
Cognitive dissonance refers to the thought process followed in making ethical decisions. In other
words, an accountant who reasons at stage 3 might be overly affected by the interests of the
Organizational dissonance refers to the divide that sometimes exists between the level of ethics
within an organization and an individual’s own ethics. In other words, when working in an
organization with low ethics when an accountant has high-ethics, the likelihood is there may be a
Whistleblowing is unlikely to occur when an individual has low ethics but is a possibility when
the organizational fit is low-high (individual). Still, the accountant should take her concerns up
the chain of command before even considering whistleblowing and then, consider it, only when
12. According to the Business Roundtable, “Effective corporate governance requires a
clear understanding of the respective roles of the board and senior management and
their relationships with others in the corporate structure. The relationships of the
board and management with stockholders should be characterized with candor;
their relationships with employees should be characterized by fairness; their
relationships with communities in which they operate should be characterized by
good citizenship; and their relationships with government should be characterized
by a commitment to compliance.” Discuss what is meant by each element of the
statement with respect to creating an ethical organization environment.
From the Business Roundtable statements, the goal is to align corporate decisions with
stakeholder concerns. A firm should clarify the relationships of those in the governance system
and each party’s responsibilities to the organization and its stakeholders. These relationships
should be marked by candor, fairness, good citizenship, and compliance with regulations. These
13. Explain the components of Burchard’s Ethical Dissonance Model and how it
describes the ethical person-organization fit at various stages of the contractual
relationship in each potential fit scenario. Assume a Low Organizational Ethics, High
Individual Ethics (Low-High) fit. How might this relationship influence your
motivation to blow the whistle on corporate wrongdoing?
The components of Burchard’s model are the moral intensity of the organization and the
individual. Moral intensity may be considered high or low. High moral intensity is higher risk or
salient issues because the magnitude of consequences is greater, their effects stand out, and their
effects involve others significantly (greater social, cultural, psychological or physical proximity).
Low moral intensity is lower risk or least salient issues because the magnitude of consequences
is minimum and consequences on others is negligible. When an organizational has low moral
intensity and the employee or individual has high moral intensity, a reduction in job satisfaction
is likely if an employee striving to be ethical perceives little top management support for
14. Brief and Motowidlo define prosocial behavior
within the organizational setting as:
behavior which is (a) performed by a member of an organization, (b)
directed toward an individual, group, or
organization with whom she
interacts while carrying
out her organizational role, and (c) performed with
the intention of promoting the welfare of the individual, group, or
organization toward which it is directed.
The research on whistle-blowing that has used this
model has generally argued
that stages 5 and 6 represent
cognitive moral development consistent with
prosocial
behavior. Discuss why stages 5 and 6 of Kohlberg’s model are more likely
to be associated with prosocial behavior than lower stages of moral development.
The Preconventional level, stages 1 and 2, are very self-centered for the individual, or reasoning
using egoism. The Conventional level, stages 3 and 4, are the individual becoming aware of the
interests of others and duty to society while still self-centered for the individual, or more
reasoning using enlightened egoism. The Postconventional level, stages 5 and 6, includes
15. Compare the role of Sherron Watkins as a whistle-blower in the Enron case to that
of Leyla Wydler in the Allen Stanford Ponzi scheme in terms of the nature of the
whistle-blowing and the motivation to blow the whistle.
Watkins identified the ethical issues in the Enron debacle. She was motivated to do the right
thing by self-interest and possibly enlightened egoism; this implies that Watkins was at
Kohlberg’s stage 2 (satisfying one’s own needs). It is hard to judge whether she was at stage 3
In determining whether Watkins went far enough to bring her concerns out in the open is a bit
like being a Monday morning quarterback. She did bring her concerns to the chair of the board.
Should she have taken the concerns to the audit committee, independent member of the board,
Leyla Wydler identified the ethical issues in the R. Allen Stanford Ponzi Scheme. She was
motivated to do the right thing out concern for her clients; this implies that Wydler was at least at
Kohlberg’s stage 3 (fairness to others). She refused to sell certificates of deposit that she
suspected were being advertised in a misleadingly way to investors. After being fired from
In the comparison of Watkins and Wydler, Watkins was motivated by self-interest while Wydler
was motivated by preventing harm to all potential investors. Wydler was personally harmed by
losing her job and required to repay her $100,000 signing bonus by the securities arbitrator. The
