Learning Center

Course Summary: This course addresses some of the accounting and finance profession's key ethical concerns. The first part of the course compares the perceptions of accounting students and accounting professionals in regards to the ethics of earnings management. The perspective of students and professionals are considered from both before and after the passage of the Sarbanes-Oxley Act of 2002 (SOX). The authors provide an overview of the extensive pre-SOX research and then offer the results of their recent survey, which provided post-SOX data. Among other things, the results suggest that professionals and students in the era following the passage of SOX find earnings management more questionable and less ethical than their pre-SOX counterparts. The implications of these findings are then discussed, particularly with respect to what they mean for the need for additional legislation and more effective risk management. The second part of the course features a case that won the 2010 Carl Menconi Case Writing Competition. This competition recognizes a business ethics case with specific application to management accounting and finance issues and that uses the IMA Statement of Ethical Professional Practice as a reference or guidance tool. The problem presented in this case involves the economic, legal, and moral issues surrounding a lumber company and whether it should continue to release creosote and PCP chemicals into a neighboring river. Learning Objectives: After completing this course, you will be able to: 1. Summarize the findings of the major pre-SOX surveys, including those conducted by Merchant and Bruns, as well as Merchant and Rockness. 2. Identify the factors suggested by Merchant and Bruns as those affecting judgments about the acceptability of earnings management practices. 3. Summarize the central hypotheses of the Grasso, Tilley, and White post-SOX survey. 4. Compare and contrast some of the key differences between the responses of professional and student respondents to the pre- and post-SOX surveys. 5. Point out the behaviors that are considered most unethical by professionals and students in pre- and post-SOX surveys. 6. Explain Ben Watson's estimate of the costs, time frame, and economic effects of refitting the Lorman Lumber plant. 7. Identify the individuals who expressed support of Ben Watson's proposal. 8. Provide a definition of the IMA Statement of Ethical Professional Practice. 9. Give examples of the kinds of behavior outlined in the four standards of the IMA Statement of Ethical Professional Practice.