Professional Ethics Paper

Instructions – please read carefully:
Here are the essay questions for your final exam, as we discussed in class.  Choose 4 of the 6 questions to answer.
For each question you choose to answer, do the following:

• Start each essay on a new page
• Put the number of the essay you are answering at the top of the page, and then restate the question verbatim.
• Each essay should be at least 1000 words in length. At the bottom of each essay, write how many words your essay is, and circle it (you may include the restatement of the question in your word count).
• These are integrative essays, therefore you must refer to at least 2-3 sources for each question. These may be from class notes you have taken based on class discussion, lectures, videos we have watched, or articles/cases you have read.  No additional outside sources are necessary, but if you do choose to use them, reference them in your paper and cite the outside source in a bibliographical note at the bottom of your essay.
• Be sure your name is on your exam. Please proofread very carefully. I will grade more strictly on grammatical mistakes in your final essays than I have during the semester.

ESSAYS

1. Independence has been a topic that we’ve discussed in different contexts during the semester, but in this question I want you to focus on the importance of independence to the standard setting function. Discuss how independence evolved during the tenure of our consecutive standard setting bodies (CAP, APB and FASB), and discuss the threats to FASB’s independence that occurred during the debates over accounting for stock options. (remember this is relative to the independence of the standard setters and the FASB)
2. Independence has been a topic that we’ve discussed in different contexts during the semester, but in this question I want you to focus on the importance of independence to the independent (external) auditor function. Specifically, discuss how (a) the deregulation of the accounting profession and (b) the growth of consulting services, impacted auditor independence.
3. The articles that you read about GE gave examples of earnings management that were legal, and examples that were illegal. Describe some examples of both.  Beyond the GE examples, give two more examples of ways to manage earnings which would be legal, and two more examples of ways to manage earnings which would be illegal.
4. You work for a CPA firm and are on an assignment for a client. During the course of your work, you become aware of circumstances that lead you to believe that the client is going to become much more profitable (or much more unprofitable) in the foreseeable future.  In what circumstances could you legally trade on that information?  Can you share the information with friends, family or acquaintances?  What are the gray areas that might occur in this situation?
5. Tell me what you’ve learned about the financial crisis. Please organize your thoughts before beginning to write.
6. Tell me what you’ve learned about the “Tone at the Top” and how it impacts the culture of a firm. Give examples.

Resources:
” “The Evolution of U.S. GAAP: The Political Forces Behind Professional Standards (Part I)”, by Stephen A. Zeff.     http://archives.cpajournal.com/2005/105/infocus/p18.htm
” “The Evolution of U.S.GAAP: The Political Forces Behind Professional Standards (Part II), by Stephen A. Zeff.     http://archives.cpajournal.com/2005/205/infocus/p18.htm
” “BP to Pay Record $18.7 Billion to Settle Gulf Oil Spill Claims”, Frontline website, July 2, 2015  https://www.pbs.org/wgbh/frontline/article/bp-to-pay-record-18-7-billion-to-settle-gulf-oil-spill-claims/
” “Accounting Professionalism – They Just Don’t Get It” , by Arthur Wyatt (speech – 2003)  https://archives.library.illinois.edu/archon/?p=digitallibrary/getfile&id=6902
”  “The Numbers Game”, by Arthur Levitt (speech – 1998)  https://www.sec.gov/news/speech/speecharchive/1998/spch220.txt
” ” A Mountain or a Molehill”, by Walter Schuetze (speech – 1994)
http://3197d6d14b5f19f2f440-5e13d29c4c016cf96cbbfd197c579b45.r81.cf1.rackcdn.com/collection/papers/1990/1994_0111_SchuetzeMountain.pdf
” “The Gray Art of Insider Trading”, Fortune Magazine, September 2, 2013  http://fortune.com/2013/08/15/the-gray-art-of-not-quite-insider-trading/
” “Senator Warren Slams  Wall Street’s Top Cop”, Frontline website, April 21, 2016 https://www.pbs.org/wgbh/frontline/article/senator-warren-slams-wall-streets-top-cop/
“The Valeant Meltdown and Wall Street’s Major Drug Problem”, by Bethany McLean, Vanity Fair, Summer, 2016
https://www.vanityfair.com/news/2016/06/the-valeant-meltdown-and-wall-streets-major-drug-problem
“Four Reasons Executives Manipulate Earnings”,  David Trainor, Forbes, December 7, 2015
https://www.forbes.com/sites/greatspeculations/2015/12/07/four-reasons-executives-manipulate-earnings/#2402b8d5f9ee
” “Ban Lifted, Steven Cohen May Soon Be Investing For Clients Again”, Frontline website, January 8, 2018  https://www.pbs.org/wgbh/frontline/article/ban-lifted-steven-cohen-may-soon-be-investing-for-clients-again/
” “Is Jack Grubman the Worst Analyst Ever?”  CNN MONEY April 25, 2002  http://money.cnn.com/2002/04/25/pf/investing/grubman/
” “Jack Grubman: SEC Targeted Me and Other Top Analysts” by Matthew Belvedere, CNBC May 31, 2013
https://www.cnbc.com/id/100780232
” Read the article, “All I Want In Life is an Unfair Advantage”,from Fortune magazine on August 8, 2005, which you can find at:
http://archive.fortune.com/magazines/fortune/fortune_archive/2005/08/08/8267642/index.htm
” Read the article, “Hank’s Last Stand” from Fortune Magazine on September 26, 2008, which you can find it: Read the article, “All I Want In Life is an Unfair Advantage”,from Fortune magazine on August 8, 2005, which you can find at:  www.money.cnn.com/2008/09/26/magazines/fortune/bandler_greenberg.fortune/index.htm
 
” Read the article, “What Went Wrong at AIG?” by Robert McDonald and Anna Paulson – Kellogg Insight, August 3, 2015  https://insight.kellogg.northwestern.edu/article/what-went-wrong-at-aig
” “Is Enron Overpriced?” , by Bethany McLean, Fortune Magazine 3-5-2001.
http://money.cnn.com/2006/01/13/news/companies/enronoriginal_fortune
” “The Rise and Fall of Enron”, by C. William Thomas, Journal of Accountancy, April 1, 2002. https://www.journalofaccountancy.com/issues/2002/apr/theriseandfallofenron.html
” Read the article, “All I Want In Life is an Unfair Advantage”,from Fortune magazine on August 8, 2005, which you can find at: http://archive.fortune.com/magazines/fortune/fortune_archive/2005/08/08/8267642/index.htm
” Read the article, “Hank’s Last Stand” from Fortune Magazine on September 26, 2008, which you can find it: Read the article, “All I Want In Life is an Unfair Advantage”,from Fortune magazine on August 8, 2005, which you can find at: www.money.cnn.com/2008/09/26/magazines/fortune/bandler_greenberg.fortune/index.htm
” Read the article, “What Went Wrong at AIG?” by Robert McDonald and Anna Paulson – Kellogg Insight, August 3, 2015 https://insight.kellogg.northwestern.edu/article/what-went-wrong-at-aig
” “Riders on the Storm” (from Fortune in April, 2009) http://archive.fortune.com/2009/04/19/news/companies/lashinsky_wells.fortune/index.htm
” Wells Fargo: The Bank That Works” (from Forbes in January, 2012) http://www.forbes.com/sites/halahtouryalai/2012/01/25/wells-fargo-the-bank-that-works/#775877b6ae24
” “How Wells Fargo’s Cutthroat Corporate Culture Allegedly Drove Bankers to Fraud”, Vanity Fair, May, 2017. https://www.vanityfair.com/news/2017/05/wells-fargo-corporate-culture-fraud
” This Is What Life Without Retirement Savings Looks Like
https://www.theatlantic.com/business/archive/2018/02/pensions-safety-net-california/553970/
” John Bogle: The “Train Wreck” Awaiting American Retirement
https://www.pbs.org/wgbh/frontline/article/john-bogle-the-train-wreck-awaiting-american-retirement/
*GE article and Mattel article I will upload them in pdf files separately.
All of videos (You may also choose videos as sources for the paper):
The Spill
http://www.pbs.org/video/frontline-the-spill/
Bigger Than Enron
https://www.youtube.com/watch?v=PXjcNrOH7AQ
To Catch A Trader
https://www.youtube.com/watch?v=5jnihc4rzFw
The wall street fix
https://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/etc/script.html
(We watched this video in class, I only can find the transcription online. I am sorry about that, I hope this transcription works for you.)
The smartest guys in the room
http://watchdocumentaries.com/enron-the-smartest-guys-in-the-room/
Money, Power and Wall Street (This video include 4 parts, make sure to watch all of parts)
https://www.pbs.org/wgbh/frontline/film/money-power-wall-street/
The movie “The big short”.  (The source of this movie is a Chinese website, at the beginning you will watch 1 minutes advertising. Please wait patiently. Thank you!)
https://www.dnvod.tv/Movie/play.aspx?id=ZhC2Bl1G3tg%3d
The Retirement Gamble
https://www.pbs.org/wgbh/frontline/film/retirement-gamble/
Video: Phar-Mor   https://vimeo.com/64592343