Term
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Definition
| The study of what constitutes right or wrong behavior. It is the branch of philosophy that focuses on morality and the way in which moral principles are derived or the way in which a given set of moral principles applies to one’s conduct in daily life |
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Term
| 5 Ways businesses can promote ethical behavior by their employees, officers, and directors |
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Definition
- Attitude of top management – employees will emulate their behavior.
- Investigate and deal with perceived ethical violations.
- Set realistic goals for employees.
- Annual performance review – make ethics one of the categories employees are evaluated on.
- Create an ethical code of conduct, and provide training on it.
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Term
| How do SOX requirements encourage ethical business behavior? |
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Definition
| SOX requires companies to set up confidential systems so that employees and others may “raise red flags” about suspected illegal or unethical auditing and accounting practices |
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Term
| Connection between the law and ethical business decision-making? |
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Definition
| The law is the ethical minimum. Companies may be stricter than the law requires them to be. |
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Term
| Duty-based ethical decision-making |
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Definition
| Derived from revealed truths, such as religious precepts |
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Term
| Kant's philosphy of ethical decision-making |
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Definition
| Based on what Immanuel Kant believed to be the fundamental nature of human beings. A central postulate in Kantian ethics is that individuals should evaluate their actions in light of the consequences that would follow if everyone in society acted in the same way. |
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Term
| Natural rights philosophy of ethical decision-making? |
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Definition
| Asserts that a key factor in determining whether a business decision is ethical is how that decision affects the rights of others. John Locke; you owe a duty to others not to act in a way that violates their natural rights. |
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Term
| Utilitarian model of ethical decision-making? |
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Definition
| Outcome oriented. It focuses on the consequences of an action, not on the nature of the action itself or on any set of pre-established moral values or religious beliefs. |
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Term
| Steps to making an ethical decision |
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Definition
| i. Define the dilemma ii. Identify the stakeholders and the impact of consequences to the decision on them iii. Identify and prioritize values iv. Be able to articulate the reasoning behind the decision |
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Term
| What is an attorney's legal duty to his client? |
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Definition
| To provide competent and diligent representation. |
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Term
| How is a lawyer's ethical duty different from his legal duty? |
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Definition
| An attorney’s ethical duty is in record-keeping, money handling, avoiding conflicts of interest; to operate transparently, and avoid even the appearance of impropriety. |
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Term
| What is the standard of care for an accountant to avoid malpractice? |
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Definition
| To exercise generally accepted accounting principles (GAAP) and generally accepted auditing standards (GAAS). |
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Term
| Who sets the standard of care for accountants? |
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Definition
| The Financial Accounting Standards Board determines what accounting conventions, rules, and procedures constitute GAAP at a given point in time. GAAS are established by the American Institute of Certified Public Accountants. |
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Term
| What is covered by the 1933 Securities Act? |
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Definition
| The 1933 Act governs initial sales of stock by businesses. It requires that all essential information concerning the issuance of securities are registered with the Securities and Exchange Commission. Companies must disclose corporate financial information, meet standards of due diligence, and if they don’t they are liable to every investor and stock purchaser. |
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Term
| What is covered by the 1934 Securities Act? |
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Definition
| The 1934 Act regulates the markets in which securities are sold by maintaining a continuous disclosure system for all corporations with securities on the securities exchanges. |
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Term
| When is an accountant liable under the 1933/1934 Acts? |
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Definition
| An accountant is liable under the 1933 act if they do not use due diligence in the preparation of financial statements; this requires following GAAP and GAAS. Under the antifraud provisions of the 1934 act they may face liability for false or deceptive statements, reports, or other documents. |
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Term
| What liability is imposed on accountants by the IRS code? |
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Definition
| The Internal Revenue Code makes aiding or assisting in the preparation of a false tax return a felony punishable by a fine of $100,000 ($500,000 for a corporation) and imprisonment for up to three years. They are liable for understating a client’s tax liability or aiding and abetting another’s understatement of tax liability. |
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Term
| What are the duties of the Public Company Accounting Oversight Board to protect investors from false or misleading audit information? |
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Definition
The duties of the Public Company Accounting Oversight Board are:
- To oversee the audit of companies whose securities are sold to public investors in order to protect the interests of investors and the public interest
- To register public accounting firms that prepare audit reports for issuers
- To inspect registered public accounting firms, investigate firms that violate the act’s provisions, and discipline those firms by imposing sanctions.
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Term
| What are some of the ethical issues that arise when companies do business in foreign countries? |
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Definition
| Ethical issues that may arise when companies do business in foreign countries are sweatshops, environmental damage, bribery, gender roles, etc. |
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Term
| What is prohibited by the Foreign Corrupt Practices Act? |
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Definition
| It prohibits US businesspersons from bribing foreign officials to secure advantageous contracts. It does not prohibit payments to “grease” the wheels, and permits payments to foreign officials if payments are lawful within the foreign country. |
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