The Ethics of Accounting and Finance: Trust, Responsibility, and Control (National Conference on Business Ethics Proceedings)

254 Pages·1996·14.87 MB·English

by  W. Michael Hoffman

The Ethics of
Accounting and Finance
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The Ethics of
Accounting and Finance
Trust, Responsibility, and Control
Edited by W. Michael Hoffman,
Judith Brown Kamm, Robert E. Frederick,
and Edward S. Petry
From the Tenth National Conference on Business Ethics
Sponsored by the Center for Business Ethics at Bentley College
Q
QUORUM BOOKS
Westport, Connecticut • London
Library of Congress Cataloging-in-Publication Data
National Conference on Business Ethics (10th : 1994 : Bentley College)
The ethics of accounting and finance : trust, responsibility, and
control / edited by W. Michael Hoffman . . . [et al.].
p. cm.
Held Oct. 17 and 18, 1994.
"From the Tenth National Conference on Business Ethics sponsored
by the Center for Business Ethics at Bentley College."
"This volume contains the best of the conference papers"—Introd.
Includes bibliographical references and index.
ISBN 0-89930-997-6 (alk. paper)
1. Business ethics—Congresses. 2. Accounting—Moral and ethical
aspects—Congresses. 3. Finance—Moral and ethical aspects—
Congresses. I. Hoffman, W. Michael. II. Title.
HF5387.N37 1996
174'.4—dc20 95-50746
British Library Cataloguing in Publication Data is available.
Copyright © 1996 by The Center for Business Ethics, Bentley College
All rights reserved. No portion of this book may be
reproduced, by any process or technique, without the
express written consent of the publisher.
Library of Congress Catalog Card Number: 95-50746
ISBN: 0-89930-997-6
First published in 1996
Quorum Books, 88 Post Road West, Westport, CT 06881
An imprint of Greenwood Publishing Group, Inc.
Printed in the United States of America
The paper used in this book complies with the
Permanent Paper Standard issued by the National
Information Standards Organization (Z39.48-1984).
10 9 8 7 6 6 5 4 32
Contents
Figures and Tables vii
Acknowledgments ix
Introduction xi
Robert E. Frederick and Judith Brown Kamm
I. Ethics, Fiduciary Responsibilities, and Conflicts of Interest
1. Defining Trust in Fiduciary Responsibilities 3
Richard N. Ottaway
2. In Defense of Finance: Understanding Fiduciary
Responsibility and Conflicts of Interest 10
Elaine Sternberg
3. Should Mutual Fund Managers Be Banned from Personal
Trading? 18
Ronald F. Duska
4. Fiduciary Responsibility and the Duty to Account for
Clients' Funds 28
Franklyn P. Salimbene and Gerald R. Ferrera
5. Some Ethical Issues in Financial Markets 42
Patricia H. Werhane
II. Ethics and Financial Disclosure
6. Ethical Issues in Financial Reporting for Nonprofit
Healthcare Organizations 53
Nancy M. Kane
vi Contents
7. The Ethical Implications of Financial Derivatives 61
David Mosso
8. Confidentiality in a Professional Context with Especial
Reference to the Accounting Profession in Australia 67
P. B. Jubb
HI. Trust, Responsibility, and Control: Cases and Analyses
9. Accounting for Fraud: Auditors' Ethical Dilemmas in the
BCCI Affair 85
Nikos Pass as
10. Was Maintaining the Executive Payroll at PTL an Example
of Auditor Independence? 100
Gary L. Tidwell
11. From Monitor to Master? Ethical Comments on the
Regulation of Fraud Notification by Accountants 111
H. ). L. van Luijk
12. Unique Ethics Challenges in Defense Industry Auditing 122
Harry W. Britt
13. The Critical Oversight Role of the Audit Committee 132
Curtis C. Verschoor
14. Why Banks Fail 149
Mark Cheffers
IV. Lessons from the Past and a Look toward the Future
15. The Ethics of Financial Derivatives in the History of
Economic Thought 165
Jay C. La eke
16. Accounting Ethics and the Traditional Jewish Perspective 180
Rabbi Gordon M. Cohn
17. The Development of Moral Reasoning and Professional
Judgment of Auditors in Public Practice 191
Daniel Brugman and Marcelle E.W. Weisfelt
18. Trust Is Good Business 211
Christopher S. Eklund
Index 221
About the Editors and Contributors 227
Figures and Tables
Figures
8.1 A Model of Person-to-Person Confidentiality 70
8.2 A Model of Client/Professional Confidentiality 73
17.1 Principled Level of Moral Reasoning by Size of Firm 199
17.2 Principled Level of Moral Reasoning by Responsibility
toward the Society 200
17.3 Principled Level of Moral Reasoning by Region of the
Country 202
17.4 Principled Level of Moral Reasoning and Duration of
Registration 203
Tables
10.1 Actual Compensation versus Reasonable Compensation 104
10.2 Salaries, Bonuses, and MBA Contributions Paid by PTL to
or on Behalf of the Bakkers 106
13.1 Public Disclosure of Selected Audit Committee Functions 144
14.1 Banking Controls 154
17.1 Average P-score in Hypothetical Moral Dilemmas (DIT) 196
17.2 Effects of Background Characteristics on Hypothetical and
Professional Principled Reasoning (univariate analyses) 198
18.1 A Question of Trust 213
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Acknowledgments
"Trust, Responsibility, and Control: The Ethics of Accounting and Fi
nance," the Tenth National Conference on Business Ethics, was hosted with
the assistance of the Bentley College Department of Accountancy. The con
ference was supported in part by generous donations from the Bath Iron
Works Company and the Dun &C Bradstreet Corporation. Conferences an
other activities of the Center for Business Ethics are also supported by
grants from the following: Arvin Industries, Stephen Baker, Harold P.
Brown, Robert W. Brown, M.D., Champion International, Chase Manhat
tan Foundation, Bruce Coles, The Council for Philosophical Studies (spon
sored by the National Endowment for the Humanities), Keith Darcy,
Dawn-Marie Driscoll, Exxon Education Foundation, The General Electric
Corporation, The General Mills Foundation, The General Motors Corpo
ration, Goodyear Tire and Rubber Company, Liberty Mutual Group, Mid
land-Ross, Inc., Monsanto Company, The Motorola Foundation, Robert
K. Mueller, Norton Company, NYNEX Corporation, Northrop-Grumman
Corporation, Polaroid Corporation, Primerica Corporation, The Raytheon
Charitable Foundation, Raytheon Company, Rexnord, Inc., Richardson-
Merrill, Inc., The Rockefeller Foundation, Semline, Inc., Mark Skaletsky,
Stone & Webster, Inc., Stop and Shop Manufacturing Companies, The
Whitehead Foundation, and F. W. Woolworth and Company. On behalf
of the Center, we wish to thank these contributors and all of the partici
pants of the Tenth Conference for sharing their support and ideas with us.
We also wish to thank Kerrin Carter, Peter Doherty, Vickie Iwasa, Kimberly
Smith, Katherine Sullivan, and especially Sheryl Morrissette for all their
help with the conference and this book. As always, Mary Chiasson, the