Ethical control frameworks: In December 2002, Time magazine named Cynthia Cooper

Question

Ethical control frameworks: In December 2002, Time magazine named Cynthia Cooper, Coleen Rowley, and Sherron Watkins as its Persons of the Year. Cynthia Cooper was vice president of internal audit for WorldCom and informed the firm's audit committee that the firm had improperly treated billions of dollars as capital expenditures rather than properly treating them as period expenses. Coleen Rowley was an FBI attorney who wrote a 13- page memo describing deficiencies in the FBI. Sherron Watkins was vice president at Enron and inmformed chair man Kenneth Lay of her serious concerns about Enron's financial reporting.

Select one of the two accoiunting-related situations (WorldCom or Enron) to answer the following questions on the basis of the Time magazine Person of the Year articles or other articles.

A) How did Cooper and Watkins become aware of financial reporting problems within their companies?
B) Which of the nine alternatives listed on page 348 (or other variation) did Cooper or Watkins take? How did the public become aware of their concerns?
C) What pressures did Cooper or Watkins face to suspend their ethical judgments or drop their concerns? Who would have benefited if Cooper or Watkins had dropped their concerns?
D) What information is reported in the article about WorldCom's or Enron's code of ethics, communication of the code, and system of reporting violations of the code?
E) What role did personal norms play in Cooper's and Watkin's decisions to report the problems they had discovered?
F) What consequences did Cooper and Watkins face for reporting the problems?
G) If your had been in Watkin's or Cooper's place, what would you have done?

Explanation / Answer

a) How did Cooper and Watkins become aware of financial reporting problems within their companies? Both Cooper and Watkins became aware of the financial reporting problems in their company through observing the questionable items while in the course of their regular employment activities. b) Which of the nine alternatives listed on page 348 ( or other variations) did Cooper or Watkins take? How did the public become aware of their concerns? Cooper and Watkins talked directly to executive management about the findings. They even wrote memos! They never went to the public - the memos were leaked after everything fell apart. Actually, they could have gotten in trouble if they would have leaked the information out of the corporation. c) What pressures did Cooper or Watkins face to suspend their ethical judgments or drop their concerns? Who would have benefited if Cooper or Watkins had dropped their concerns? Both Cooper and Watkins were faced with the possibility of losing their jobs. After coming forward, Watkins left Enron after she wasn't given much work to do. If they wouldn't have come forward, employees, Arthur Anderson, and investors would have benefited in the short term, as the companies wouldn't have collapsed. However in the long term the companies couldn't keep doing what they were doing. Something had to give. d) What information is reported in the article about WorldCom

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