Ohio University
Team Members: Elise Yinger, Jessica Buckosh, Mary Paltza, Brandon Schaedlich, Paul Bilderback Advisor:
R.G. Milter Executive Summary The Ohio University team will be acting as board members of the Public Company Accounting Oversight Board (PCAOB) and the judges will take on the roles of CEO’s of top accounting firms. The PCAOB is a corporation created to oversee the auditors of public companies in order to protect the interests of investors and improve the quality of financial reporting. PricewaterhouseCoopers, KPMG and Ernst & Young were named in the suit filed in Arkansas by shopping-mall operator Warmack-Muskogee Limited Partnership alleging that they overcharged clients millions of dollars in travel expenses from1991 through 2001. The suit further alleged that the firms colluded with each other to negotiate better terms from travel operators. PricewaterhouseCoopers LLP agreed to a settlement of $54.5 million to resolve its portion of the lawsuit. Their settlement was based on calculations by that it retained $72.4 million in rebates on client-related travel from 1991 through 2001. The settlement value represents about 75% of that amount. Ernst and Young retained $98.8 million in rebates on airline tickets from 1995-2000, and of that $37million (37%) came in 2000. PricewaterhouseCoopers retained $72.4 million in rebates from 1991-2001, and of that $45 million (62%) came in 2000. Between the two firms, over $171 million in rebates was collected from 1991-2001, and $82 million (48%) was collected in 2000. As the firms grew in size and negotiated discounts grew, the rebates surpassed the costs of the travel programs. Causes of the increase in rebates were the increased travel due to the merger, the firms’ combined volume, Y2K consulting, and changes in airline-ticketing discount policies. The total cost for Settlement/Discovery/Fines between the three firms totaled about $110 million. Determining whether something is ethical or not has been an important issue facing many companies today. There are numerous theories to which one can turn in order to make these pressing decisions. Many of these can easily relate to business cases such as this; however, our team has decided that Virtue Ethics holds particularly close to the situation. Within the scope of virtue ethics falls integrity; both of which should be integrated into the attitudes of all businessmen and women. The American Institute for Corporate Public Accountants (AICPA) holds practitioners to a code of conduct. Although this set of rules is not the law, they are guidelines that lead to what should be done. Further more, these guidelines hold no value unless each individual puts forth an effort to support them and carry out their own ethical standards. When ethical values are disregarded it can snowball into even more problems that stem from the original issue, which is what happened with PwC. In order to
help prevent problems like this in the future, certain steps should
be taken to improve regulations and policies of the organization,
as well as the checks and balance system that your company enforces.
The primary recommendation is to revise the code of conduct of
your organization. There are certain steps to be followed in order
to revise and implement your new code. The second recommendation
is to employ a department specifically to handle ethical problems
within the workplace. If these steps are taken, the legalities
and ethical problems in question should cease.
Cases/Surveys
| Discussion
| Toolbox
| Case
Competition | Store
| Links |
|||
