M3

• Business Ethics


  Principles of conduct that individuals use in making choices and guiding their behavior in situations that involve the concepts of right and wrong
• Ethical issues in business

  • Equity
  • Rights
  • Honesty
  • Exercise of corporate power
• Making Ethical Decisions


  Business organizations have conflicting responsibilities to their employees, shareholders, customers, and the public. Every major decision has consequences that potentially harm or benefit these constituents.
• Proportionality


  The benefit from a decision must outweigh the risks. Furthermore, there must be no alternative decision that provides the same or greater benefit with less risk.
• Justice


  The benefits of the decision should be distributed fairly to those who share the risks. Those who do not benefit should not carry the burden of risk.
• Minimize risk


  Even if judged acceptable by the principles, the decision should be implemented so as to minimize all of the risks and avoid any unnecessary risks.
• Computer Ethics


  The analysis of the nature and social impact of computer technology and the corresponding formulation and justification of policies for the ethical use of such technology
• Levels of computer ethics

  • Pop
  • Para
  • Theoretical
• Where computers present new twists on old problems, we need only to understand the generic values that are at stake and the principles that should then apply
• Privacy


  People desire to be in full control of what and how much information about themselves is available to others, and to whom it is available
• Security (Accuracy and Confidentiality)

  Computer security is an attempt to avoid such undesirable events as a loss of confidentiality or data integrity. Security systems attempt to prevent fraud and other misuse of computer systems; they act to protect and further the legitimate interests of the system's constituencies.
• Ownership of Property


  Laws designed to preserve real property rights have been extended to cover what is referred to as intellectual property, that is, software. The question here becomes what an individual (or organization) can own.
• Equity in Access


  Some barriers to access are intrinsic to the technology of information systems, but some are avoidable through careful system design.
• Environmental Issues


  Computers with high-speed printers allow for the production of printed documents faster than ever before. It is probably easier just to print a document than to consider whether it should be printed and how many copies really need to be made.
• Artificial Intelligence


  A new set of social and ethical issues has arisen out of the popularity of expert systems. Because of the way these systems have been marketed—that is, as decision makers or replacements for experts—some people rely on them significantly.
• Unemployment and Displacement


  Many jobs have been and are being changed as a result of the availability of computer technology. People unable or unprepared to change are displaced.
• Misuse of Computers


  Computers can be misused in many ways. Copying proprietary software, using a company's computer for personal benefit, and snooping through other people's files are just a few obvious examples.
• Fraud


  A false representation of a material fact made by one party to another party with the intent to deceive and induce the other party to justifiably rely on the fact to his or her detriment
• Conditions for fraud


  • False representation
  • Material fact
  • Intent
  • Justifiable reliance
  • Injury or loss
• Employee fraud


  Fraud by nonmanagement employees, generally designed to directly convert cash or other assets to the employee's personal benefit
• Management fraud


  More insidious than employee fraud because it often escapes detection until the organization has suffered irreparable damage or loss. Management fraud usually does not involve the direct theft of assets.
• Fraud Triangle


  Three factors that contribute to or are associated with management and employee fraud: situational pressure, opportunity, and ethics
• Red flag checklist for fraud

  • Do key executives have unusually high personal debt?
  • Do key executives appear to be living beyond their means?
  • Do key executives engage in habitual gambling?
  • Do key executives appear to lack personal codes of ethics?
  • Are economic conditions unfavorable within the company's industry?
  • Does the company use several different banks, none of which sees the company's entire financial picture?
  • Do any key executives have close associations with suppliers?
  • Is the company experiencing a rapid turnover of key employees, either through resignation or termination?
  • Do one or two individuals dominate the company?
• Fraudulent Statements


  Associated with management fraud, where the statement itself must bring direct or indirect financial benefit to the perpetrator
• Are economic conditions unfavorable within the company's industry?
• Does the company use several different banks, none of which sees the company's entire financial picture?
• Do any key executives have close associations with suppliers?
• Is the company experiencing a rapid turnover of key employees, either through resignation or termination?
• Do one or two individuals dominate the company?
• Misstating the cash account balance to cover the theft of cash is not financial statement fraud
• Understating liabilities to present a more favorable financial picture of the organization to drive up stock prices does fall under financial statement fraud
• Underlying problems at the root of concerns about financial disclosures

  • Lack of auditor independence
  • Lack of director independence
  • Questionable executive compensation schemes
  • Inappropriate accounting practices
• Lack of auditor independence


  Auditing firms that are also engaged by their clients to perform non accounting activities lack independence, as they are essentially auditing their own work
• Lack of director independence


  Directors who have a personal, business, financial, or operational relationship with the company
• Questionable executive compensation schemes

  Excessive use of short-term stock options may result in short-term thinking and strategies aimed at driving up stock prices at the expense of the firm's long-term health
• Inappropriate accounting practices


  Use of techniques like special-purpose entities to hide liabilities and income-inflating methods
• Corruption


  Involves an executive, manager, or employee of the organization in collusion with an outsider
• Types of corruption


  • Bribery
  • Illegal gratuities
  • Conflicts of interest
  • Economic extortion
• Bribery


  Giving, offering, soliciting, or receiving things of value to influence an official in the performance of their duties
• Illegal gratuities


  Giving, receiving, offering, or soliciting something of value because of an official act that has been taken