ACCTG 116: MANAGEMENT CONSULTANCY

BS in Accounting Technology IV
Case Study on Business Ethics

Present the following cases of ethical malpractice using this outline:
I. Summary of the facts of the Case
II. Ethical issues what ethical problem arose? What particular situations caused such problems?
a. Using the IMA Statement of Ethical Professional Practice, discuss which of the ethical standards contained therein
are violated (competence, integrity, confidentiality, credibility).
b. You may frame your issues through questions, e.g. whether or not the firm should disclose the drop in share price.
c. State the decision of the company.
d. Comment on the decision.
III. Discuss how the international and domestic business community reacted to the scandal, e.g, the passage of the
Sarbanes-Oxley (SOX) Act, the addition of another set of standards, etc.

Requirements:
1. 7-minute presentation per group (+ 3-minute class interaction Q&A)
a. Use ppt presentation, max of 10 slides. Dont flash the whole paragraph, use multimedia instead (photos, videos. etc.)
2. Softcopy of report (max of 3 pages). Use Arial Narrow, 11pt. Send them via gmail randelldandalire@gmail.com. To be sent
before the scheduled report. Use Ethics Case BSAT IV; ACCTG 116 in the subject line.
3. Scheduled report: for MWF schedule, August 15 (Friday). August 14 (Thursday) for TTh sched.



SCHEDULE GROUP
NUMBER
NAME OF COMPANY BRIEF DESCRIPTION
MWF 1-2
202 CL
1 WorldCom


The companys assets were inflated by around $11 billion with
$3.8 billion in fraudulent accounts. While the company was
purchased by Verizon Communications and was renamed
Verizon Business division, this scandal has actually had a
positive effect as the Sarbanes-Oxley Act was approved by the
senate to introduce the most sweeping new business
regulations since the 1930s.
2 Volkswagen Volkswagen was not spared after a criminal case with
Schuster, but was again in the headlines because of its
personnel manager, Klaus-Joachim Gebauer, who procured
prostitutes for the firms labor representatives under the guise
that it was in the interest of the company.
3 Siemens Siemens AG and the Greek government went under fire for
corruption and bribery, which involved the deal for the security
systems for the 2004 Summer Olympic Games in Athens and
other purchases by OTE in the 1990s. While no serious
charges have been made, it has been claimed that the bribes
may have been up to 100 million Euros.
4 Hewlett-Packard The Hewlett-Packard spying scandal was purportedly at the
behest of HP Chairwoman, Patricia Dunn. This was in
connection with an information leak where she had contracted
a team of independent security experts to investigate some
board members and several journalists by obtaining their phone
records. However, this backfired and resulted in Dunns
resignation and she was succeeded by HP CEO Mark Hurd.
5 Barings Bank Barings Bank is the oldest merchant bank in the city of London,
which was founded by the German-born Baring family. This
bank handled the Queens personal bank and was once the
financier of the Napoleonic Wars. However, the bank collapsed
in 1995 when one of its bank employees, Nick Leeson
squandered and lost 827 million ($1.3 billion) through
speculative investing, specifically in futures contracts, at the
banks Singapore office over a period of three years, which was
masked by manipulated records.







TTh 1-2:30 1 Bre-X Bre-X is a Canadian mining company that bought a purported
gold mine in Busang, Indonesia in March 1993. In 1995, the
company announced the discovery of a veritable treasure chest
that soared the companys stock prices to CAD $286.50 on the
Toronto Stock Exchange (TSX). However, this turned out to be
the worst mining scandal of all time, when it was discovered
that workers and miners falsified crushed core samples by
salting them with placer or supergene gold constitutes.
Because of this, Bre-X fell down the mine shaft after its stocks
become worthless.
2 Barclays Barclays, one of the worlds largest banks, was hammered by a
scandal involving the Libor manipulation, where banks lend
each other money at high rates. The company owned up to the
allegation that it manipulated the London Interbank Offered
Rate, which was tied to trillions of dollars worth of financial
contracts and derivatives. The issue led to the resignation of
the companys CEO, Bob Diamond, and the company was
asked to pay $450 million. Other banks like UBS were also
under investigation for the Libor-rate rigging.
3 Socit Gnrale Jerome Kerviel is a rogue trader who tripped up the worlds
financial market when his unauthorized trading in the securities
markets using the banks computers resulted in 4.9 billion
losses to the Socit Gnrale funds. The worst part of the
issue came when the banks executive tried to mask the fraud
by unwinding his trades. This resulted in trading panic all over
the Atlantic causing a decline in European markets.
4 Urban Bank This was one of the largest banks in the Philippines until it was
closed down on the basis of liquidity by the Philippine Deposit
Insurance Corp. (PDIC). However, the liquidation grounds were
not the issue here as some of Urban Banks officers were later
criminally charged with economic sabotage due to their falsified
supervision and examination sector (SES) reports to the
Monetary Board.
5 Deutsche Bank Deutsche Bank AG is a German global banking and financial
services company that was caught spying not only on its board
members, but also on the personal life of some of its investors.
This scandal hit the bank as it is was not only Germanys
largest bank, but also the largest foreign dealer in the world
with a presence in Europe, USA, Asia-Pacific, and the
emerging markets. In 2006, the bank succumbed to paranoia
when it hired an external detective agency to snoop on contacts
between board members and the Munich-based media
magnate, Leo Kirch and his associates, whom they have
litigation with. Due to the scandal, the German government
vowed to have a new privacy-protection law for workers.
6


The Bernie Madoff
Ponzi Scheme
This made the list not only for the sheer amount of money
involved (at least $65 billion in clients accounts) but because
the people he conned are some of the smartest people in the
world. People entrusted him with their charitable funds but they
were instead used for his luxurious lifestyle and personal gain.


















TTh 2:30-4 1 The Stanford
Financial Fallout
This was a case of trust misplaced as Allen Stanford gained $8
billion. Stanford coaxed his clients to invest in safe Certificate of
Deposits, but the money was instead used in hedge funds that
could (and did) lose money.
2 Enron Corp. Enron was the it company at the turn of the century as it
oozed with wealth, smarts, and power. However, this Houston-
based energy company toppled into a spectacular bankruptcy
due to a painstakingly-planned accounting fraud made by its
accounting firm, Arthur Andersen. Once considered a blue-chip
stock, Enron shares dropped from $90 to $0.50, which spelled
disaster in the financial world, where thousands of employees
and investors saw their savings vanish with the company as it
filed for an earnings restatement in October 2001.
3 Arthur Andersen This Chicago-based company voluntarily relinquished its
licenses to practice as Certified Public Accountants (CPAs) in
the USA due to the Enron accounting scandal. This was a blow
considering that it is one of the worlds top five accounting firms
prior to the scandal, which resulted in the loss of 85,000 jobs
and corporate rebranding.
4 HIH Insurance Its corporate downfall can be considered the largest in
Australias history. HIH Insurance was Australias second-
largest insurance company until it entered into provisional
liquidation in 2001. It incurred losses totaling $5.3 billion where
its director, Rodney Adler, was sentenced to four and half years
of jail time due to obtaining money by false or misleading
statements, and failure to discharge his duties as a director in
good faith and in the best interests of the company.


Research further:
http://list25.com/25-biggest-corporate-scandals-ever/


Summary:

MWF Groups TTh Groups
Quiz II: Statement of Cash Flows
10items, 50points
August 8, 2014 (Friday, 2:00 PM)

Room Assignment: TBA
August 8, 2014 (Friday, 2:00 PM)

Room Assignment: TBA
Quiz III: Ethics
Application:
Individual Case Study (2 situations)

Theory:
Identification and/or Enumeration and/or
T/F
August 13, 2014 (Wednesday) August 12, 2014 (Tuesday)
Ethics Report August 15, 2014 (Friday) August 14, 2014 (Thursday)