Egregious Business Behavior
Q.3. Is there anything else that can be done to curtail this sort of egregious business behaviour (scandals) other than legislation? Legislation is a good method to guide and regulate the business behavior. Besides, the education is very important. If the whole society and the whole business world can have the good consciousness and ethical environment, the legislation may not so important.
Q.4. In each case discussed at some length in this chapter – Enron, Arthur Andersen, WorldCom, and Bernie Madoff – the problems were known to whistle-blowers. Should those whistle-blowers each have made more effort to be heard? How?
In each of the case, there are whistle-blowers.
For example, Carl Bass was a whistle-blower to Arthur Andersen. After ignoring by the partner David Duncan, he took no deep action to prevent the wrong-doing. The whistle-blowers advices or warnings are always ignored, even though the whistle-blowers knew the problems and tried to prevent them.
Actually, they could have made more effort to be heard. For example, they could go the Board of Director, go out to the higher organization, go to the public, or even go to the media. All those might prevent the lost.
Case: WorldCom (Pages 112 – 118)
1. Describe the mechanisms that WorldCom’s management used to transfer profit from other time periods to inflate the current period.
WorldCom’s management transferred approximately $771 million from certain line expense accounts to a PP&E capital expenditure account.
2. Why did Arthur Andersen go along with each of these mechanisms?
There were driven by revenue
They wanted to maintain WorldCom as a client
There were arrogant by thinking they would be caught and punished
Conflict of interest, they felt more responsible to the client rather than the upholding their fiduciary responsibilities
Not adhering to their internal controls
3. How should WorldCom’s board of directors have prevented the manipulations that management used?
They need to improve their
Q.4. In each case discussed at some length in this chapter – Enron, Arthur Andersen, WorldCom, and Bernie Madoff – the problems were known to whistle-blowers. Should those whistle-blowers each have made more effort to be heard? How?
In each of the case, there are whistle-blowers.
For example, Carl Bass was a whistle-blower to Arthur Andersen. After ignoring by the partner David Duncan, he took no deep action to prevent the wrong-doing. The whistle-blowers advices or warnings are always ignored, even though the whistle-blowers knew the problems and tried to prevent them.
Actually, they could have made more effort to be heard. For example, they could go the Board of Director, go out to the higher organization, go to the public, or even go to the media. All those might prevent the lost.
Case: WorldCom (Pages 112 – 118)
1. Describe the mechanisms that WorldCom’s management used to transfer profit from other time periods to inflate the current period.
WorldCom’s management transferred approximately $771 million from certain line expense accounts to a PP&E capital expenditure account.
2. Why did Arthur Andersen go along with each of these mechanisms?
There were driven by revenue
They wanted to maintain WorldCom as a client
There were arrogant by thinking they would be caught and punished
Conflict of interest, they felt more responsible to the client rather than the upholding their fiduciary responsibilities
Not adhering to their internal controls
3. How should WorldCom’s board of directors have prevented the manipulations that management used?
They need to improve their