The case study is based on the events that have been shared by Cynthia Cooper who was an internal auditor at the company WorldCom and was able to uncover a fraud that would shut down the company. The Chief Financial Officer (CFO) of WorldCom, Scott Sullivan discussed the issue with David Myers, the Financial Controller of the company before embarking on a fraudulent activity regarding the vulnerability of the accounts which would finally bankrupt the company. The money that is paid by WorldCom to other companies for the use of the telephone infrastructure is known as line rental cost. The increase in this line rental cost meant that there was a decrease in the earnings of the company which would damage the share price of the company and there would be an increase in the cost of future capital rising. Scott instructs David to change the numbers so that there would be a reduction in the line cost expense and it would be balanced with the earnings of the company. To make this changes they would need the help and support of the inner circle of the company who actually makes the changes in the accounting entries. For this they approach Buddy who is the accounting director and also his friend whom he trusts. Though uncomfortable with the instruction, they followed through with it since they had to be loyal to their boss and save their job as well. This case depicts the change that would have occurred if these people would have taken the action and finally landed in jail. If they had trusted their own conscience and supported their ethical thinking they would have been in a much better situation. In the following sections different scenarios of the case would be discussed on the basis of ethical and fundamental theories.
The theories that would be used for David and Buddy are the Utilitarianism and Egoism respectively. Utilitarianism theory states that an action is good if it results in the benefit and the satisfaction of many people who would have be affected by the action (Hayry, 2013). This means that any action is justified if it is done for the benefit of a large number of people (Mill, 2016). Egoism theory states that an action is good if it benefits the person’s self-interest even at the expense of others (Arnold, 2014). This theory takes into consideration the fact that thinking about personal interest is a moral action. The theory is depicted as being self-centred and only performs those actions which are done to maximize the personal interests (Levit, 2014). Both of these theories explains that an action is considered right or wrong by seeing the consequences that is derived from those actions. The actions are done to satisfy either personal needs or the needs of others but both these actions might be wrong or even right and that depends on the results that is derived from the action.
The actions of David have been aligned with the Utilitarianism theory because the action that he was about to take would result in the benefit of the whole company as primarily being thought by them (Mulgan, 2014). When Scott instructed him to change the numbers so that they might not face bankruptcy, he accepted the instructions because he thought that this action would save the company from getting bankrupt and would save the job of the people who are working in the company. Moreover, he was a loyal employee who did not want to do anything that would harm the future of the company. This is why the theory applied to him because he took his actions thinking about the benefit of the company. On the other hand, the actions of Buddy have been aligned with the Egoism theory because the action that he was about to take would be simply based on his personal interest (Ivaniva & Bikeeva, 2016). When David told him about the task at hand, David was uncomfortable to do so because he knew that it was illegal. However, he finally accepted because he thought about himself and derived that since he was the sole earning member of his family, not agreeing to do the task would mean that he would be laid off from the company and he would have to find another job which would be difficult to find. This is why the theory applied to him because he took his actions thinking only about his benefit.
Both these theories were good at describing the actions that have been taken by Buddy and David, since both these theories were aligned to the actions that have been taken by them. The theories widely explained the ethics that have been violated due to the course of actions of both these employees of the company. Even though both of them did the same thing, their reasons have been vastly different which is why both of their actions aligned to different theories.
The seven steps of the American Accounting Association (AAA) model which can be used to make the decision is as follows:
This is the first step of the ethical decision making process. This step means that at the beginning of the decision making process, the facts of the case are not ambiguous and are to be established by the decision maker. In this step the decision maker takes into account the facts that needs to be considered at the beginning of the case and make sure that the original facts are understood properly before starting the process (Kanagaretnam, Lim & Lobo, 2013). This is the most crucial case since the whole process would depend on the fact that the case suggests. In this step the fact of the case is that I have been told to make vast changes in the financial adjustment of the company. However, this defies the ethical values that I follow in the course of my employment.
This is the second step of the decision making process. In this step the fact of the case is considered and the ethical values are identified which are at stake. Understanding the ethical values which might create an issue is an important aspect of the decision making process. These ethical issues will help to understand the options that I have. The major ethical issue that I have in the case is that of lying and making creating false data to hide a mistake that had been made by the company (Ettredge, Xu & Yi, 2014). I would be involved in the falsification of data and would have to lie to the public otherwise the reputation of the company would be in jeopardy. Lying to me is one of the biggest issues that I face ethically. Moreover, not just I, the employees who work under me would also have to lie since a wide range of trusted employees is needed to make the desired changes in the accounting system.
This step would places the decision in the ethical, social and even professional behavioural context. The professional context depends on the norms, values and principles (Goza, 2013). It depicts the actions that should be taken that would determine the decision is correct. The norms in this case would be that as an employee I should support the decisions of the company and give them my support regarding the actions that they are taking. However, the action taken would not be right as falsifying accounts is a crime and this should be explained to the company so that no further harm is being done.
This is the fourth step of the decision-making process. This step explain the other actions that could be adopted so that it would ensure that a right decision is being taken by me. The alternative courses of actions that could be taken by me in this case would be many (Collier, 2015). Firstly, I could accept the orders of the company and act accordingly by changing the data in the financial records and help the company to hide their wrongdoing by doing something even more wrong. Secondly, I might not support the company, in which case it could cost me my job and I would be unemployed for the time being. However, it would save me from committing a crime and also let me have a clear conscience. Thirdly, I could report the fraud to the right authorities which would anyway enable me to be fired from the job and will also land the company in problem with the authorities. However, this would be the right thing to do, since it is the duty of every citizen to report every wrongdoing.
This is the fifth step of the decision making process. In this step the alternative options that have been selected by me would be compared to the norms, values and principles that have been established in the earlier step. This step is established to see which of the alternative options align with the mentioned norms, values or principles (Cianci et al., 2014). The norm that I have mentioned earlier is that as an employee it is my duty to support the decisions of the company no matter right or wrong. They should be able to trust me with the actions that they are taking since I have been working with them for quite some time now. This norm aligns with my first option which states that I would help the company to hide their wrong actions and make the necessary changes in the financial data that are being told by them. Moreover, I have to bring the people working under me into confidence since a large number of people are needed to hide the wrong doing that the company is planning to do.
This is the sixth step of the decision making process. In this step the consequences of the decision has to be first considered. The consequences will have a great impact on the final decision. The consequence of the outcome of my decision will be very legal (Nobes, 2014). This means that if the authorities find any trace of the fraudulent actions that are being taken by me and the company, then strict legal actions will be taken by all the employees who are involved in this scam and the management of the company as well. Hence, the action that the company is telling me to take is a criminal offense which could make me go to jail.
This is the final step of the decision making process (Graham et al., 2013). In this step the decision will be taken based on the previous steps. The decision that I have taken by considering all the other steps is that I would have to support the company to keep my job as finding a new job at this stage is really hard and I would have to do everything to retain my job.
The APES 110 Code of Ethics for Professional Accountants had been issued by the Accounting Professional and Ethical Standards Board (APESB). The accountants who practice in Australia or aboard have to comply with this code unless they have been advised or prevented from complying by the any other laws or regulations of the company. There are three parts to this code (Han Fan, Woodbine & Cheng, 2013). The part A applies to all the members. The part B applies to the members who are into public practice. The part C applies to the members who are in business, however the members who are in public practice might find some relevance to it. The part A is of the utmost importance to David and to understand the threats and the safeguards that could help him to mitigate the threats. The most important responsibility of professional accountants is the interest of the public. The code specifies that a special quality of a professional accountant is accepting the responsibility to act according to the interest of the public. Therefore, the responsibility of a member is not to cater to the demands of needs of any individual employer or client. The fundamental principles of the code are as follows. These are the fundamental principles that David and his staff must uphold at all times. Firstly, integrity means to be clear and straightforward to all the business relationships and professionals (Van Akkeren & Tarr, 2014). Secondly, objectivity means that there should be no biasness, undue influence or any conflict of interest which could override the professional judgements. Thirdly, professional competence and due care means that the member should possess the required professional knowledge and skill so that they are able to cater to the demands of the client or employer and provide them the best professional services which are based on the recent practical developments, techniques and legislations and act according to the standards of technical and professional duties (Szczepankiewicz, 2013). Fourthly, confidentiality means that the member should respect the confidentiality of the provided information which is given by the business due to the professional relationship that is formed and hence should not disclose any information to any third party without the sanction of a proper authority and unless there is any legal or professional compliance to do so or even use the information for any personal advantage of any third party or even the member. Lastly, professional behaviour means that the member has to comply with the set rules, regulations and laws of the code to avoid any kind of action that might discredit the profession of the member. The framework of the code depends on the professional judgement of the members. The professional judgement is required so that the member can identify any threats that might occur to compliance with the fundamental principles. They have to evaluate the importance of those threats and finally, apply the necessary safeguards that would be required to eradicate those threats or to at least reduce them to a level that would be considered acceptable (Wilson-Rogers, Morgan & Pinto, 2014). If a threat occurs which cannot be reduced to an acceptable level or even be eradicated, as those threats are too notable or the proper safeguards are not available or those safeguards cannot be applied to the threats, then the scenario or circumstances which create the threats have to be avoided as a priority. In such instances, the member will have either decline or discontinue the service.
There are many threats that would be faced by David which can be created by a wide range of circumstance and relationships. There are different categories that a threat might fall into. Firstly, self-interest threat means that the threat is financial or the other interests will influence the judgement or behaviour of the members. Secondly, self-review threat is a threat which will not be appropriately evaluated by the member, the results of the previous judgements will also be not evaluated or the services that have been performed by the member or by any other individual who work in the member’s firm or the employing organization, on whom the member might be able to trust while forming the judgement which is part of the current service that the member is providing (Wu & Ying, 2016). Thirdly, advocacy threat means the threat which will occur if the member promotes the position of an employer or a client to the point that the objectivity of the member is compromised. Fourthly, familiarity threat is the threat that occurs due to a close relationship with the employer or the client and this makes the member sympathetic to the interests of the employer or too accepting of their work (George, Jones & Harvey, 2014). Lastly, familiarity threat is the threat which occurs when a member is discouraged from working unprejudiced because of the pressures both actual and perceived, including the attempts that are made over the members to exert undue influence on them.
To eradicate these threats that are faced by David to the fundamental principles there are certain safeguards that could be put in place. Safeguards are the actions or measures that are taken by the members to eradicate the threats or reduce them to a level which can be said acceptable (Walpole & Salter, 2014). Safeguards have two broad categories. The first is the safeguards that are created by the profession, regulation or legislation. The second category is the safeguard that is present in the work environment. These safeguards are important when the member decides that the threats are not positioned at an acceptable level. Acceptable level means that the level which is reasonable to the third party and they would like to conclude by considering all the facts and instances that is available to the member at the time, and also keeping in mind that the fundamental principles are not compromised. Examples of certain safeguards are to seek legal advice from a legal professional, using a dispute resolution process which is formal inside the employing organization and seeking advice from the employing organization or any other professional body. Hence, David should keep this advices in his mind so that he might not face any dire consequences in the future.
Hence it can be concluded from the above case that ethics is a berry important part of a business and should be followed at all times. By not following the proper ethics and taking unlawful actions, people could end up in more legal trouble and finally harm their own lives. There are various theories of ethics which if followed can help a person to stay on the right track and avert any threats.
Arnold, D. G. (2014). Ethical theory and business. T. L. Beauchamp, & N. E. Bowie (Eds.). Pearson.
Cianci, A. M., Hannah, S. T., Roberts, R. P., & Tsakumis, G. T. (2014). The effects of authentic leadership on followers’ ethical decision-making in the face of temptation: An experimental study. The Leadership Quarterly, 25(3), 581-594.
Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.
Ettredge, M. L., Xu, Y., & Yi, H. S. (2014). Fair value measurements and audit fees: Evidence from the banking industry. Auditing: A Journal of Practice & Theory, 33(3), 33-58.
George, G., Jones, A., & Harvey, J. (2014). Analysis of the language used within codes of ethical conduct. Journal of Academic and Business Ethics, 8, 1.
Goza, R. (2013). The ethics of record destruction. Journal of Management Policy and Practice, 14(6), 107-115.
Graham, J. R., Hanlon, M., Shevlin, T., & Shroff, N. (2013). Incentives for tax planning and avoidance: Evidence from the field. The Accounting Review, 89(3), 991-1023.
Han Fan, Y., Woodbine, G., & Cheng, W. (2013). A study of Australian and Chinese accountants’ attitudes towards independence issues and the impact on ethical judgements. Asian Review of Accounting, 21(3), 205-222.
Hayry, M. (2013). Liberal utilitarianism and applied ethics. Routledge.
Ivanova, I. A., & Bikeeva, M. V. (2016). Corporate Social Responsibility: Specificity, Formation Mechanism, Estimation of Management Efficiency. European Research Studies, 19, 167.
Kanagaretnam, K., Lim, C. Y., & Lobo, G. J. (2013). Influence of national culture on accounting conservatism and risk-taking in the banking industry. The Accounting Review, 89(3), 1115-1149.
Levit, L. Z. (2014). Egoism and Altruism: the “Antagonists” or the “Brothers”?. Journal of Studies in Social Sciences, 7(2).
Mill, J. S. (2016). Utilitarianism. In Seven Masterpieces of Philosophy (pp. 337-383). Routledge.
Mulgan, T. (2014). Understanding utilitarianism. Routledge.
Nobes, C. (2014). International classification of financial reporting. Routledge.
Szczepankiewicz, E. I. (2013). Global unification of Business Valuation Standards. Management, 17(2), 154-165.
Van Akkeren, J., & Tarr, J. A. (2014). Regulation, compliance and the Australian forensic accounting profession. Journal of Forensic and Investigative Accounting, 6(3), 1-26.
Walpole, M., & Salter, D. (2014). Regulation of tax agents in Australia. eJournal of Tax Research, 12(2), 335.
Wilson-Rogers, N., Morgan, A., & Pinto, D. (2014). The primacy of client privilege: designing a statutory tax advice privilege for accredited non-lawyer tax advisors. Austl. Tax F., 29, 517.
Wu, H., & Ying, X. S. (2016). Realizing auditor independence in China: insights from the local context. Contemporary Management Research, 12(2), 245-272.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download