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Case: An Auditors Dilemma

Case Summary

After understanding how the jam and jelly division offsets their production costs at the Ace Glass
Company to help meet their incentive quotas, if Alison Lloyd were to look the other way in this
situation then she would not be making a sound ethical decision?

In the case study, she has already given several reasons why the decision not to report correctly
would be wrong. Alison agreed to abide by the Institute of Internal Auditors code of ethics. By
not reporting correctly, she would be breaking that agreement. In addition, by not reporting
correctly, it would cause the company financials and that of Ace Glass to be act unethical. Lloyd
can ignore the activity and just shuffle the expenditure paperwork but for employer loyalty it is
against her role and the IIA ethical code. Moreover, it may bring possible negative outcomes in
the near future.

On the other hand, proper procedures for reporting the illegal activities to corporate should be
taken. If she reports the activity, it would bring respect and self-fulfillment of her duties as the
internal auditor, respect and fulfillment of her membership in the IIA, and give corporate the
opportunity to take the appropriate actions, perhaps reforming their ethics code or procedures.

Recommendation

Lloyd should report the illegal activity of the division to corporate. Because, in the
Kantian view, Lloyd should report behavior because it is right and just to disclose illegal
activities, even if she is breaking loyalty to the employer.
In the utilitarian view, if Lloyd were to report the wrongdoings she is ultimately creating
more overall utility as the corporation, most stakeholders, and society would benefit
most.
Reporting illegal activity is part of Lloyds job.
It would promote proper financial efficiency of the corporation.
Provides new opportunities for ethical improvement.
Case: Executive Compensation
Case Summary

In the single biggest payday for an executive in history, Walt Disney Chairman Michael Eisner
on Wednesday exercised stock options at a profit of about $565 million that he had accumulated
as head of the entertainment giant. Eisner exercised options for 7.3 million shares of stock that he
has been accumulating since they were awarded him in contract negotiations in January 1989.
The huge value reflects in part a Disney stock that has soared lately. Eisner's pretax payout is his
second gigantic one within the past five years. In 1992, he reaped $202 million, nearly all of that
from options he exercised. That action triggered intense debate over lucrative stock option
packages for executives, as some experts believe this is likely to do once again. In a statement,
Eisner acknowledged that his action "will undoubtedly provoke much discussion. The profits
reflect the remarkable growth of our company which our shareholders and I have been fortunate
to enjoy over the past 13 1/2 years, which I hope and expect to continue."