Ethical Obligations and Decision Making in Accounting: Text and Cases 6th Edition, ISBN-13: 978-1264135943

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Ethical Obligations and Decision Making in Accounting: Text and Cases 6th Edition, ISBN-13: 978-1264135943

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• Publisher: ‎ McGraw Hill; 6th edition (February 11, 2022)
• Language: ‎ English
• ISBN-10: ‎ 1264135947
• ISBN-13: ‎ 978-1264135943

This text provides comprehensive coverage of the ethical and professional issues that accounting professionals encounter, and helps students cultivate the ethical commitment needed to ensure that their work meets the highest standards of integrity, independence, and objectivity. Ethical Obligations and Decision Making in Accounting is designed to provide instructors with the best flexibility and pedagogical effectiveness of any book on the market. To that end, it includes numerous features designed to make both learning and teaching easier.

Table of Contents:

Table of Contents and Preface

Title Page

Copyright Page

Praise for Ethical Obligations and Decision Making in Accounting

Dedication

About the Authors

Foreword

Preface

Ethics Education

Overview of Sixth Edition

What’s New in the Sixth Edition?

Connect

End-of-Chapter Assignments

Suggestions for Classroom Discussion

Ethics IQ Test

Chapter-by-Chapter Enhancements

Acknowledgments

Connect

Instructors: Student Success Starts with You

Students: Get Learning that Fits You

Case Descriptions

Brief Contents

Table of Contents

Chapter 1: Ethical Reasoning: Implications for Accounting

Introduction

Integrity: The Basis of Accounting

Religious and Philosophical Foundations of Ethics

Greek Ethics

The Language of Ethics

Difference between Morals and Ethics

Difference between Values and Morals

Ethics and Laws

Laws and Ethical Obligations

The Moral Point of View

Student Cheating

Social Networking

The Six Pillars of Character

Virtues or Character Traits

Trustworthiness

Respect

Responsibility

Fairness

Caring

Citizenship

Reputation

Moral Courage

Modern Moral Philosophies

Teleology

Deontology

Justice

Virtue Ethics

Moral Relativism

The Public Interest in Accounting

Regulation of the Accounting Profession

The Public Interest in Accounting

Ethics and Professionalism

AICPA Code of Conduct

Application of Ethical Reasoning in Accounting

3D Printing Case Study

Scope and Organization of the Text

Concluding Thoughts

Ethics IQ Test

Discussion Questions

Comprehensive Questions

Endnotes

Chapter 1 Cases

Case 1-1Operation Varsity Blues

Case 1-2 Giles and Regas

Case 1-3 Unintended Consequences

Case 1-4 Lone Star School District

Case 1-5Lottery Bonanza

Case 1-6 Capitalization versus Expensing

Case 1-7 Eating Time

Case 1-8Section 179 Deduction for Equipment Purchases

Case 1-9 Cleveland Custom Cabinets

Case 1-10Getting Called-Out on Social Media

Chapter 2: Cognitive Processes and Ethical Decision Making in Accounting

Introduction

Behavioral Ethics

System 1 Versus System 2 Thinking

Cognitive Biases

Additional Factors Impacting Our Decisions

Kohlberg and the Cognitive Development Approach

Heinz and the Drug

Rest’s Four-Component Model of Ethical Decision Making

Moral Reasoning and Moral Behavior

Moral Sensitivity

Moral Judgment

Moral Focus

Moral Character

Aligning Ethical Behavior and Ethical Intent

What Makes for an Ethical Organization?

Organizational Influences on Ethical Decision Making

Ethical Culture

Ethical Climate

Equity, Diversity, and Inclusion

Diversity Versus Inclusion

Equality Versus Equity

Components of EDI Initiatives

Sexual Harassment

Uber Sexual Harassment Case

Factors That Influence Ethical Decision Making

Individual Factors

Organizational Factors

Ethical Dissonance Model

Opportunity

Business Ethics Intentions, Behavior, and Evaluations

Ethical Decision-Making Models

Ethical Decision Making in Accounting and Auditing

Components of the Model

Integrated Ethical Decision-Making Process

Application of the Integrated Ethical Decision-Making Model: Ace Manufacturing

Giving Voice to Values

Reasons and Rationalizations

Levers

Application of GVV Methodology: Ace Manufacturing

Concluding Thoughts

Discussion Questions

Comprehensive Questions

Endnotes

Chapter 2 Cases

Case 2-1 A Team Player? (a GVV case)

Case 2-2 FDA Liability Concerns (a GVV case)

Case 2-3 Taxes and the Cannabis Business (a GVV case)

Case 2-4 A Faulty Budget (a GVV Case)

Case 2-5 Not so Diverse, Equitable or Inclusive (a GVV Case)

Case 2-6 The Normalization of Unethical Behavior: The Harvey Weinstein Case

Case 2-7 Milton Manufacturing Company

Case 2-8 Chefs Delight: That Slope Looks Slippery (a GVV case)

Case 2-9 Racially Charged Language Inhibits Inclusive Cultures

Case 2-10 WorldCom

Chapter 3: Organizational Ethics and Corporate Governance

Introduction

Fraud in Organizations

Occupational Fraud

Financial Statement Fraud

Seven Signs of Ethical Collapse

Pressure to Maintain the Numbers

Fear of Reprisals

Loyalty to the Boss

Conflicts of Interest and the Board of Directors

Innovations

Goodness in Some Areas Atones for Evil in Others

Ethics in the Workplace

Compliance Function

Integrity: The Basis for Trust in the Workplace

Employees Perceptions of Ethics in the Workplace

Using Social Media to Criticize the Employer18

Foundation of Corporate Governance Systems

Ethical and Legal Responsibilities of Officers and Directors

Components of Corporate Governance Systems

Executive Compensation

Corporate Governance Oversight and Regulation

Corporate Governance Responsibilities

Corporate Social Responsibilities

Sustainability

Triple Bottom Line (TBL)

Views ofMillennials

Conscious Capitalism

Models of CSR

Examples of CSR

Impact of Governmental Regulations

Corporate Governance Structures and Relationships

Relationships between Audit Committee, Internal Auditors, and External Auditors

Internal Controls as a Monitoring Device

Equifax Data Breach

Whistleblowing

Morality of Whistleblowing

Rights and Duties

Anthony Menendez v. Halliburton, Inc.73

Dodd-Frank Provisions

Whistleblowing Payouts

Implications of Supreme Court Decision in Digital Realty Trust, Inc. v. Somers

Whistleblowers Can Use Confidential Company Documents to Expose Fraud

Concluding Thoughts

Discussion Questions

Comprehensive Questions

Endnotes

Chapter 3 Cases

Case 3-1 The Parable of the Sadhu

Case 3-2 Rite Aid Inventory Surplus Fraud

Case 3-3 United Thermostatic Controls (a GVV case)

Case 3-4 Franklin Industries’ Whistleblowing (a GVV Case)

Case 3-5 Theranos: A Cautionary Tale for Silicon Valley

Case 3-6 Blow the Whistle or Don’t Blow the Whistle

Case 3-7 Wells Fargo—A Toxic Sales Culture

Case 3-8 Accountant Takes on Halliburton and Wins!

Case 3-9 Expense or Capitalize Research and Development Costs(a GVV Case)

Case 3-10 Cheating on Internal Training Exams at KPMG

Chapter 4: AICPA Code of Professional Conduct

Introduction

What is Professional Judgment in Accounting?

KPMG Professional Judgment Framework

Link between Professional Judgment and Cognitive Processes

Link between Professional Judgment and AICPA Code of Professional Conduct

AICPA Code: Independence Considerations for Members in Public Practice

Introduction to Revised Code

Conceptual Framework for AICPA Independence Standards

Safeguards to Counteract Threats

Sarbanes-Oxley Act(SOX): Nonaudit Services

Relationships That May Impair Independence

SEC Actions on Auditor Independence

SEC Actions against Big Four Audit Firms

Emerging Issues

AICPA Code: Ethical Conflicts

AICPA Code: Conceptual Framework for Members in Business

Threats and Safeguards

Link between Conceptual Framework and Giving Voice to Values

Rules for the Performance of Professional Services

General Standards Rule

Acts Discreditable

Contingent Fees

Commissions and Referral Fees

Advertising and Other Forms of Solicitation

Confidential Information

Form of Organization and Name

The Spirit of the Rules

Ethics and Tax Services

Statements on Standards for Tax Services (SSTS)

Treasury Circular 230

Tax Shelters

PCAOB Rules

Rule 3520—Auditor Independence

Rule 3521—Contingent Fees

Rule 3522—Tax Transactions

Rule 3523—Tax Services for Persons in Financial Reporting Oversight Roles

Rule 3524—Audit Committee Preapproval of Certain Tax Services

Rule 3525—Audit Committee Preapproval of Nonauditing Services Related to Internal Control over Financial Reporting

Rule 3526—Communication with Audit Committees Concerning Independence

PCAOB Inspections

Concluding Thoughts

Discussion Questions

Comprehensive Questions

Endnotes

Chapter 4 Cases

Case 4-1 KBC Solutions

Case 4-2 Beauda Medical Center

Case 4-3 Family Games, Inc. (a GVV case)

Case 4-4 Threats to Audit Independence

Case 4-5 Han, Kang & Lee, LLC (a GVV case)

Case 4-6 Tax Shelters

Case 4-7 Sexual Harassment at EY

Case 4-8 Marcum LLP

Case 4-9 PwC Mischaracterizes Nonaudit Services

Case 4-10 Johnson Pharmaceuticals (a GVV case)

Chapter 5: Fraud in Financial Statements and Auditor Responsibilities

Introduction

Fraud in Financial Statements

Introduction

Nature and Causes of Misstatements

Errors, Fraud, and Illegal Acts

The Fraud Triangle and AU-C 240

Incentives/Pressures to Commit Fraud

Opportunity to Commit Fraud

Rationalization for the Fraud

Frisch’s Restaurant: Trust but Verify

Fraud Considerations and Risk Assessment

Fraud Risk Assessment

Assessing Management: Red Flags

Is There a Dark Triad Personality Risk?

Tyco Fraud

Internal Controls Over Financial Reporting

Audit Committee Responsibilities for Fraud Risk Assessment

Auditor’s Communication with Those Charged with Governance

Management Representations and Financial Statement Certifications

Qwest Communications International Inc.

Audit Report and Auditing Standards

Background

Audit Report

PCAOB AS 1301: Communications with Audit Committees27

PCAOB AS 3101: The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion28

Audit Opinions

Limitations of the Audit Report and the Future of the Auditing Profession

Limitations of the Audit Report

Generally Accepted Auditing Standards (GAAS)

The Future of the Auditing Profession

Concluding Thoughts

Discussion Questions

Comprehensive Questions

Endnotes

Chapter 5 Cases

Case 5-1 Loyalty and Fraud Reporting (a GVV case)

Case 5-2 ZZZZ Best1

Case 5-3 Reauditing Financial Statements

Case 5-4 GE Multibillion Insurance Charge

Case 5-5 Audit Planning Gone Awry

Case 5-6 EY Target of German Regulators Over Suspected Audit Deficiencies at Wirecard

Case 5-7 Diamond Foods: Accounting for Nuts1

Case 5-8 Critical Audit Matters or Potentially Damaging Disclosure?

Case 5-9 Weatherford International

Case 5-10 Potential Fraud at EP Sports

Chapter 6: Motivation for Fraudulent Financial Reporting

Introduction

Characteristics of Earnings Management

Motivation for Earnings Management

Income Smoothing

Ethical Choices

Acceptability of Earnings Management

How Managers and Accountants Perceive Earnings Management

Ethics of Earnings Management

Earnings Guidance

Audit Committee Responsibilities

Pull-In Sales

Using Social Media to Report Earnings Guidance and Financial Results

Red Flags

Earnings Quality

Financial Statement Analysis

Green Mountain Coffee Roasters

Revenue Recognition

Financial Shenanigans

Financial Statement Effects

Examples of Shenanigans

Non-GAAP Financial Metrics

Non-GAAP Financial Metrics

Revisiting Financial Shenanigans

Concluding Thoughts

Discussion Questions

Comprehensive Questions

Endnotes

Chapter 6 Cases

Case 6-1 Winners & Losers, Inc.

Case 6-2 Solutions Network, Inc. (a GVV case)

Case 6-3 Allergan: Mind the GAAP

Case 6-4 The Potential Darkside of Using Non-GAAP Metrics (a GVV case)

Case 6-5 Harrison Industries

Case 6-6 TierOne Bank

Case 6-7 Non-GAAP Metric Disclosure by General Electric: Value Added, Red Herring, or Red Flag?

Case 6-8BMW’s Sales ReportingPractices

Case 6-9 The North Face, Inc.

Case 6-10 Beazer Homes

Chapter 7: Consequences of Earnings Management: The Need for Ethical Leadership in Accounting

Introduction

Characteristics of Financial Statement Restatements

Summary Reporting of Accounting Restatements

Restatements Due to Errors in Accounting and Reporting

Restatements Due to Operational Issues

MagnaChip Semiconductor, Ltd

SEC Clawback for Accounting Violations

Corporate Governance and Earnings Management

What is Ethical Leadership?

Types of Leaders

Social Learning Theory

Ethical Skills of Leaders in Accounting Firms

Leadership Failures in the Accounting Profession

Ethical Leadership in the Accounting Profession

Concluding Thoughts

Discussion Questions

Comprehensive Questions

End Notes

Chapter 7 Cases

Case 7-1 Should the Financial Statements be Reissued or Revised?

Case 7-2 PPP Loans: Free Money at a Cost (a GVV case)

Case 7-3 Managing Earnings and Putting Ethical Leadership to the Test

Case 7-4 Monsanto Company Roundup

Case 7-5 Kraft Heinz

Case 7-6 New Leadership at General Electric

Case 7-7 Krispy Kreme Doughnuts Inc.

Case 7-8 Sunbeam Corporation

Case 7-9 KPMG Tax Shelter Scandal

Case 7-10 Theranos: Accounting for Bad Blood

Chapter 8: Auditors’ Legal Liabilities and Defenses

Introduction

Legal Liabilities of Auditors: An Overview

Common-Law Liability

Liability to Clients—Privity Relationship

Professional Negligence

Defending Audit-Malpractice Cases

Recklessness

Negligent Misrepresentation

Liability to Third Parties

Actually Foreseen Third Parties

Reasonably Foreseeable Third Parties

Common-Law Liability For Fraud

Statutory Law Liability for Fraud

Liability for Fraudulent Misrepresentation

Income Tax Fraud versus Tax Negligence

Auditor Defenses to Negligence and Fraud

Auditor Defenses to Negligence

Auditor Defenses to Negligent Misrepresentation

Auditor Defenses to Fraud

Consideration of Fraud in a Financial Statement Audit

Statutory Liability

Securities Act of 1933

Section 11 Liability Under Securities Act of 1933

Section 11 Liability Standard for Auditors

Section 11 Auditors’ “Opinion” Statements

Securities Exchange Act of 1934

Private Securities Litigation Reform Act (PSLRA)

Proportionate Liability

Establishing Scienter

SOX and Auditor Legal Liabilities

Section 404. Internal Control over Financial Reporting

Section 302. Corporate Responsibility for Financial Reports

Foreign Corrupt Practices Act (FCPA)

Concluding Thoughts

Discussion Questions

Comprehensive Questions

Endnotes

Chapter 8 Cases

Case 8-1 Your Tax Client

Case 8-2 Joker & Wild LLC

Case 8-3 QSGI, Inc.

Case 8-4 Anjoorian et al.: Third-Party Liability

Case 8-5 Vertical Pharmaceuticals Inc. et al. v. Deloitte & Touche LLP1

Case 8-6 Kay & Lee, LLP

Case 8-7 Alexion

Case 8-8 Disclosing Material Weaknesses in ICFR or Protecting the Firm from Litigation? (A GVV case)

Case 8-9 Miller Energy Resources, Inc.

Case 8-10 Biotechnologies

Cases

Introduction

Major Case 1: Colonial Bank

Colonial Bank

Major Case 2: Logitech International

Logitech International

Major Case 3: Kiley Nolan’s Ethical Dilemma (a GVV Case)

Kiley Nolan’s Ethical Dilemma (a GVV Case)

Major Case 4: Cendant Corporation

Cendant Corporation1

Major Case 5: Vivendi Universal

Vivendi Universal

Major Case 6: Luckin Coffee

Luckin Coffee

Name Index

Name Index

Subject Index

Subject Index

Additional Student Resources

Additional Student Resources

Accessibility Content: Text Alternatives for Images

Road to Making Ethical Decisions Text Alternative (Chapter 2)

Exhibit 2.1 Text Alternative (Chapter 2)

Exhibit 3.1 Text Alternative (Chapter 3)

Exhibit 3.10 Text Alternative (Chapter 3)

Exhibit 3.16 Text Alternative (Chapter 3)

Exhibit 1 Text Alternative (Chapter 3)

Exhibit 4.3 Text Alternative (Chapter 4)

Exhibit 6.6 Text Alternative (Chapter 6)

Exhibit 7.1 Text Alternative (Chapter 7)

Exhibit 8.7 Text Alternative (Chapter 8)

William F. Miller, EdD, CPA, CGMA, is a professor of accounting in the Accounting and Finance Department at the College of Business, University of Wisconsin, Eau Claire. Dr. Miller received his EdD from the University of Saint Thomas, Saint Paul, Minnesota. He also has over 23 years of professional accounting experience and maintains an active consulting practice. He has authored or co-authored over 20 publications, including a book on Giving Voice to Values in Accounting, and has won the Institute of Management Accountants Carl Menconi Ethics Case writing competition three times (2011, 2012, and 2015), and won the American Accounting Association’s Public Interest Section best contribution to teaching award in 2015.

Steven M. Mintz, DBA, CPA, is a professor of accounting in the Orfalea College of Business at the California Polytechnic State University–San Luis Obsipo. Dr. Mintz received his DBA from George Washington University. His first book, titled Cases in Accounting Ethics and Professionalism, was also published by McGraw-Hill. Dr. Mintz has recently been acknowledged by accounting researchers as one of the top publishers in accounting ethics and in accounting education. He was selected for the 2014 Max Block Distinguished Article Award in the “Technical Analysis” category by The CPA Journal. Dr. Mintz received the 2015 Accounting Exemplar Award of the Public Interest Section of the American Accounting Association. He also has received the Faculty Excellence Award of the California Society of CPAs. Dr. Mintz writes two popular ethics blogs under the names “Ethics Sage” and “Workplace Ethics Advice.”

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