What makes an issue an ethical dilemma?
You are torn between conflicting values
What are the 4 major values conflicts?
Long term v. short term
Truth v. loyalty
Individual rights v. community interest
Justice v. mercy
What are the four steps of ethical decision making (according to Rest)? How can ethics breakdown in any
step?
Sensitivity – interpret ambiguous clues to identify dilemmas in real life;
recognizing there is an ethical issue
you don’t recognize that there is an issue; ethical fading, ethics fade into the background
Judgement – analyze moral issues and provide justification for decisions;
analysis of that issue
you don’t analyze the issue properly
Motivation – internalize and give priority to professional values;
Intent, deciding what you want to do after internalizing and thinking about your values
You lack the appropriate motivation, you don’t think it is your problem
Character – do what is necessary, even when uncomfortable or unpopular;
Action, follow through and make the decision
You are unable to make a difficult decision
Where do ethics come from? Are we born with them? Do they vary across cultures?
Born with ingrained sense of justice, but also a bias toward people like us.
What are hypernorms? In general?
Universally accepted values
Honesty
Compassion
Fairness
Integrity
Responsibility
Even though they are universally accepted, people and cultures attach different weights to them
Hypernorms for the accounting profession?
Maintain the good reputation of the profession and its ability to serve the public interest
Perform with: Competence
Transparency
Skepticism
Confidentiality
Integrity
Independence and objectivity
ACC 360
Final Exam Review Questions
Never be associated with misleading information
Rationalizing: Made the decision, then thought about it
Reasoning: Though about it, then made the decision
What are the 8 categories of rationalizations? Define and give examples of each.
Moral justification: Reframing an unethical act as having a moral purpose;
Stealing from the rich to give to the poor
Advantageous Comparison: Comparing your unethical act to something worse, make it look good by
comparison It’s not as bad as…
Denying or blaming the Victim: They deserved it, making them seem less human, placing blame on them
They had it coming, they have enough money as it is, they shouldn’t have left the
register open if they didn’t want me to steal it. It is their fault that I did this.
Minimizing the act: minimizing the consequence of the act, its not that big of a deal
No one was hurt, it was an immaterial amount, no harm no foul
Diffusing responsibility: Sharing responsibility with everyone
Everyone does it, its common industry practice
Displacing responsibility: Placing or shifting responsibility to someone else
My boss pressured me to do it, I was just doing what they told me to do
Entitlement: Feeling you deserve something, even if you don’t
I’m working harder than them I deserve to be paid more, I went through the trouble
of stealing so I deserve to have fun with it.
Euphemistic Labeling: Using language to make something sound better than it is
I only told a little white lie, cook the books
Explain how the following can lead to ethical failures or breakdowns?
What some potential remedies for each?
Ill-conceived goals – we set goals/incentives to promote a behavior, but they encourage a
negative one.
The pressure to maximize hours leads to unconscious padding.
Brainstorm unintended consequences, consider alternative goals
Motivated blindness – we overlook unethical behavior in others when its in our best interest to
remain ignorant. We are motivated to stay blind because it is in our best interest.
Sports officials failed to notice they created conditions that encouraged steroid use
Root out conflicts of interest, not just being aware of them.
Indirect blindness – We hold others less accountable of unethical behavior when its carried out
by third parties. Letting others take the blame, so that I am held less accountable.
A drug company deflects attention of a price increase by selling rights to another company who
imposes the increase.
When handing off work, take ownership of the implications
Slippery slope – We are less likely to see unethical behavior when it develops gradually
Auditors more likely to accept questionable statements if infractions accrued over time.
Be alert of trivial ethical infractions, address them immediately.
Overvaluing outcomes – We give a pass to unethical behavior if the outcomes are good.
A fraudulent clinical trial that saves lives is seen as better than a fraudulent trial that leads to
deaths.
Reward solid decision processes not just good outcomes.
Explain the 3 structural elements of the accounting/auditing environment that may cause “good
accountants to do bad audits”. What do they mean?
Attachment – the financial agreement between auditor and client. The client can hire and fire
so the auditor has a bias toward things that are favorable towards to client.
Ambiguity – there are grey areas in accounting and our bias can subconsciously exploit the
ambiguity towards our best interest. We can utilize the fact that it is not black and white to
serve our self interest without realizing we are doing it.
Approval – It is easier to approve the unethical behavior of someone else than to commit the
unethical act ourselves.
Explain the 3 mental elements of the accounting environment that may cause “good accountants to do
bad audits”. What do they mean? (how we process information)
Familiarity – When a person or thing is familiar, we tend to have a bias toward them. The closer
we are to someone/thing the easier it is to develop a bias toward them subconsciously
Discounting – Time element; Over weighting the short term instead of the long term. We
unintentionally pay more attention the immediate effects at the expense of the longer-term
effects. Creates an incentive to keep client happy in the short term even though there are long
term consequences.
Escalation – Slippery slope; Inability to see small changes and let them escalate over time. A
cognitive bias that allows us to overlook minor issues, until they get bigger.
What are the 3 elements of the fraud triangle? How did these influence the various characters in the
cases we examined?
Pressure
Opportunity
Rationalization
From ELI Exam:
What are the “values in tension” that create the ELI?
Rationality(Head) / Sensibility(Heart)
Autonomy(Individual) / Equality(Community)
Head: reasoned approach, well thought out, systematic process oriented, system of
rules/laws.
Heart: Sensibility, not as easy to rationalize
What are the four quadrants of the ELI?
Rights/Responsibility - autonomy/rationality I was just following the rules
What are my obligations?
I was doing my duty
I am responsible
Seek: self-knowledge
Act: from guiding principles
Celebrate: being accountable
Task: principles
Treat people as fully functional adults
Relationship - equality/rationality Who are the weakest in society
Does everyone have a voice?
I wanted to make sure everyone was treated the
same.
It is only fair
Seek: justice and fairness
Act: from concern for the least advantaged
Celebrate: healthy institutions
Task: justice
Make sure the process has a fulfills that purpose
Reputation - equality/sensibility Who is looking up to me
It was a hard call but as a leader I had no choice.
I make virtuous choices
Seek: wisdom
Act: from principled leadership
Celebrate: moral courage
Task: Virtues
Consider the role of individuals and the company
What do people expect of me?
Not what do the rules say, but what does my gut
tell me to do?
Results - autonomy/sensibility How would others expect to be treated
How will others be affected?
I make choices that are good for everyone
I make people happy
It’s a win-win solution that respects everyone
Seek: harmonized goal
Act: from free will
Celebrate: creative change
Task: Ideal goals
Hold people accountable for their choices
All about consequences
What defines “ethical behavior” for each quadrant of the ELI? (Does the ethical act…)
R/R – Fulfill your rights and responsibilities
Done with care and concern for the other individual concerns
Allows you to delight in your work as you carry out your duties
Relationship – Create a fair system for resolution of disputes
Cares for all members and institutions of the community especially in
the allocation of resources and power
Contribute to each member of the community knowing that they are a
part of “all that is”
Reputation – Consistent with a good character for the particular role
Made with an awareness of the interplay of mind and emotions
Support and enhance the meaning your have given your life
Results – Has good results
Creates the greatest happiness for the greatest number of people
Serves the greater good resulting in harmony and satisfaction for many
What are the 3 foundational questions for each quadrant of the ELI?
R/R – What are my rights/responsibilties?
What are the rules?
How do I act in a caring way?
Relationship – What is equal?
What is a fair process?
Is power appropriately balance?
Reputation – What action would set a good example?
What virtues do my roles require?
What does my conscience tell me to do?
Results – What will make me happy?
What consequences am I willing to tolerate?
What are mutually good results?
Who are the primary stakeholders for each quadrant of the ELI?
R/R – Who am I accountable to?
Primary stakeholders; who I have a responsibility to
Relationship – Who are those without power?
Those who wouldn’t get considered otherwise; weakest link
Reputation – Who looks to me for guidance?
Who is looking at me as a role model/at me in my role
Results – Who will be most affected?
Who are those that have something to gain or lose; who will feel the
result of the decision the most
What are the blindspots and vices of each quadrant of the ELI?
R/R – The motive justifies the method
Being judgmental
Criticizing everyone for their ethics
Relationship – Overconfidence in the process
Being overbearing/authoritarian
Becoming an ambitious elitist
Reputation – Unrealistic role expectation
Being self-righteous (I can do the job better than everyone)
Becoming hard-hearted
Results – Satisfied with too little good
Reducing decisions to cost-benefit analysis
Becoming greedy
Baird 5 Steps:
1. Be attentive; notice facts and assumptions
identify vales in conflict
2. Be intelligent; identify stakeholders and their goals
3. Be reasonable; answer foundational questions for each lens
4. Be responsible; come up with the best option/plan of action for each lens based on priorities
(might have the same option for each lens, but different reasoning)
5. Communicate final decison
Other:
Philosophies:
R/R Deontology
Relationship Justice theory
Reputation Virtue ethics
Results Consequentialism
Milgram: Obedience to authority; we can reduce those with authority, we will follow others example, if
someone else stands up and disobeys, we are more likely to do so as well.
Red Flag Mania: importance of internal controls, segregation of duties, trust is not an internal control
Cases: (big picture, how it relates to course concepts)
Panalba – It depends on what lens or perspective you have, stakeholder view impacts how you
approach the dilemma
Nathan and Diann – rationalizations
Health South – pressure from boss to sign sox
All the queen’s horses – fraud in Dixon
Harold – minor role but held to a higher standard because he was a CPA
Jackie – found a way to navigate through an ethical dilemma
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