Formatting Exercise Paper, business and finance homework help

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Use attached The Student Guide to Writing a High Quality Academic Paper guide to complete attached Module 1 SLP Assignment - Formatting Exercise Paper.

Required Reading

Please review The Student Guide to Writing a High Quality Academic Paper.

In addition to reviewing The Student Guide to Writing a High Quality Academic Paper, I would like you to briefly review attached Dr. Drummond McNaughton's guide for writing high-quality paper.

Assignment

Complete attached Module 1 SLP ( PAY ATTENTION TO  TEXT IN RED COLOR)using The Student Guide to Writing a High Quality Academic Paper.

requirement to the Assignment

complete attached Module 1 SLP – Formatting Exercise paper. Then, using The Student Guide to Writing a High Quality Academic Paper as a guide, do the following:

  1. Complete the Cover Page.
  2. After you have read the paper, write an introductory paragraph.
  3. Insert appropriate titled section heading where requested.
  4. Provide in-text citations where requested.
  5. Write a concluding paragraph.
  6. Properly format your end references, placing them in the correct sequence.
  7. Be sure to look for other formatting errors not noted above!
  8. Save your completed paper, and upload your assignment before the due date.
  9. APA Format

Optional Reading

APA Sample Paper. (2015). Purdue OWL. Retrieved fromhttps://owl.english.purdue.edu/media/pdf/20090212013008_560.pdf


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Student Guide to Writing a High-Quality Academic Paper Follow these guidelines when writing academic papers, including your University Case and SLP assignments.  An effective academic writing style is an essential part of a university education.  Poorly written papers detract from your ability to effectively share your knowledge and ideas with others, including your professors.  This guide will help you prepare high-quality papers that are:  Logically argued  Clearly structured and formatted  Written in a professional, academic style 2 The basic structure of an academic paper includes: 1. Cover page 2. Introduction 3. Body of the paper (which may have subsections) 4. Conclusion 5. Reference page 3  The cover page of an academic paper should include the: ▪ University name ▪ Student’s name ▪ Assignment title ▪ Course number and name ▪ Professor’s name ▪ Date  Note: Some professors recommend adding the assignment instructions (tasks and/or questions) to the bottom of the cover page to help students make sure they have addressed each part of the assignment. 4 University Student’s Name Module 1 Case Assignment Course Number: Course Name Professor’s Name Date 5 In the introduction, provide a brief, clear overview of: 1. Each problem or issue that you will discuss 2. The solution to the problem(s) or your response to the issue(s) 3. How you will prove or demonstrate that your solution or response is correct Tip: Try writing the body of your paper first. Then come back and write the introduction once you know what your paper is about. 6  The body of the paper is where you discuss the solution to the problem(s) or your response to the issue(s) raised in the assignment.  After you have read the materials related to the assignment, begin by creating a quick outline:  What are the main points of your argument? Jot them down. ▪ Depending on the length of the paper, 3–6 main points should be plenty. ▪ If a point is complex, it may have 2 or 3 sub-points. Jot those down as well.  Now arrange those points in a logical sequence. ▪ Which point needs to be made first because it provides a basis for the points that follow? ▪ For example, “Point A leads to point B, which leads to point C, and when A, B, and C are considered together they mean that the solution is point D.” 7 Example of the structure of a Case Assignment that requires 4 pages of text (not including the cover page, and not including a reference page for assignments that require one): Main Sections Points Sub-points Page # # of Paragraphs 1 1 Point A 1 1 Point B 2 1 Cover Page Introduction Body of Paper " " Sub-point 1 2 1 " Sub-point 2 3 1 " Point C 3 1 " Point D 4 2 4 1 Conclusion Reference Page 8 In the body of your paper:  Use headings and subheadings to help your reader follow the points and sub-points in your discussion and to better organize sections and subsections.  Give each point and sub-point a short name that tells your reader what that section is about. Use those names for your headings.  Here is a quick “how-to” guide to headings with links to examples and instructions: http://blog.apastyle.org/apastyle/2011/04/how-to-use-fivelevels-of-heading-in-an-apa-style-paper.html  Now you are ready to begin writing the body of your paper.  Discuss one point at a time and explain each point clearly.  Discuss one point or sub-point in each paragraph.  As you advance to writing more complex papers (e.g., upper-division undergraduate or master’s-level assignments), it may take 2 or 3 paragraphs to fully develop and support a point. 9 In the body of your paper:  Each paragraph should be made up of approximately 3–5 sentences. (Note: A single sentence is not a paragraph. Break long sentences into 2 or 3 shorter ones.)  Each paragraph should include:   The point or focus of that paragraph in the first sentence  Additional sentences in which you explain, elaborate, and support your point (see section on Supporting Your Points that begins on the next slide)  A conclusion/transition to the next point and paragraph Each point should be supported by citing and referencing the sources that provide the foundation for your solutions and/or responses. How to do this will be discussed on the next slide. 10 Supporting Your Points  What makes an academic paper “academic”? How does an academic paper differ from other types of writing—for example, a short story, a blog, a newspaper article, a business letter, or an e-mail message?  In an academic paper:  You must provide support for each idea, statement, or point that you make that is based on someone else’s ideas.  Support is provided through citations and references. (References are discussed beginning on Slide 17.) Citations appear within the paper itself wherever you draw upon another person’s ideas or another source of information. References are listed on a separate page at the end of your paper.  Each citation refers to a specific reference so that your reader can look up the sources of your support and read them for himself or herself.  Citations are short and usually only include the author’s last name and the date of publication of the author’s work, for example, “In a study of K–12 education, Jones (2013) found that…” 11 Citation Examples   You can cite at the beginning or ending of a sentence:  According to Jones (2007), a reason for poor student performance is large classroom size.  Student performance decreases as classroom size increases (Jones, 2007). When multiple sources support your point, cite them together in alphabetical order at the end of the sentence:  Educators agree that large classroom size decreases student performance (Adams, 2005; Jones, 2007; Smith, 2008).  When a source is written by more than one person, give their last names in the citation at the end of the sentence, like this: (Smith, Adams, & Jones, 2006).  When there is no author and/or no date (e.g., a Web page), see this example: http://www.apastyle.org/learn/faqs/web-page-no-author.aspx 12 Do not spell out the titles and publication details of your sources in the body of your paper. Instead, provide a short citation, and add a full reference with the publication details in your reference list. Interested readers can then find the details about the article in your reference list at the end of your paper. Wrong:  The first article that will be discussed is called “The Very Separate Worlds of Academic and Practitioner Periodicals in Human Resource Management” written by Sara Rynes, Tamara Giluk, and Kenneth Brown, which was published in the Academy of Management Journal (2007) Vol 50, No.5, 987-1008. They studied the gap between academic and practitioner knowledge.  Note: Do not spell out the title and publication details of your sources in the text. Right (two different ways): 1. Rynes, Giluk, and Brown (2007) found a gap between academic and practitioner knowledge.  2. Note: The authors are the subject of the sentence. This is referred to as an “in-text citation” and includes just the authors’ last names and year of publication. A gap was found between academic and practitioner knowledge (Rynes, Giluk, & Brown, 2007).  Note: The citation is placed at the end of a sentence in parentheses. This is called a “parenthetical citation.” In this type of citation, use an ampersand (&) instead of “and.” 13 When should you cite a source?  When you use your own words in referring to the ideas or concepts of others  When you use the exact words that are written in one of the sources that you read  Using someone else’s exact words is called a “quotation.”  For quotes of less than 40 words, use quotation marks and follow the quote with a parenthetical citation that includes: ▪ The name(s) of the author(s) ▪ The year of publication ▪ The page number the quote was taken from in the original source— for example: “Academic and practitioner periodicals in human resource management are worlds apart” (Rynes, Giluk, & Brown, 2010, p. 992).  Any phrase or quote of 40 or more words should be separated from the text of your report by single spacing and by indenting from the both right and left margin. This is called an “offset quote.” 14 Provide Support for Each of Your Points  Scholarly academic work builds on previous knowledge and recognizes the contributions that others have made to knowledge.  Providing a citation for each source of information that you use is necessary for at least four reasons:   To help your reader understand the foundational information that you used to support your points.  To give credit to sources of knowledge and the work of others.  To protect the source. If you make a good point but don’t cite your sources or indicate direct quotes with quotation marks, the reader will attribute it to you by default.  To avoid plagiarism. Incorporating material from outside sources (whether direct quotes or paraphrasing) without proper identification or citation is a form of plagiarism. Never represent the work of another as your own. Here is an excellent guide to help you understand plagiarism and how to avoid it (students are strongly encouraged to study it carefully): University Libraries, University of Missouri (n.d.). Plagiarism Tutorial. Retrieved March 1, 2013, at http://lib.usm.edu/legacy/plag/plagiarismtutorial.php 15  In your conclusion:  Summarize your argument regarding the solutions/responses that you discussed in the body of your paper, including the most important points you made and how they relate to your overall conclusion.  Do not discuss or raise new issues in the conclusion.  Limit the conclusion to 1 or 2 paragraphs. 16  The reference section, found at the end of the paper, is an alphabetical list of the sources that you used to write your paper.  Center the word “References” at the top of a new page.  Starting on the same page, enter a full reference for each citation in your paper. Provide only one reference for each source no matter how many times you cite it in your paper.  Each reference should include the following information (so readers can find the source): ▪ Author’s last name, first initial, middle initial ▪ Year of publication ▪ Title of the article, book, or Web page ▪ Title of the publication where the article was found (If the article is from a journal or newspaper, include the volume and issue number, and the pages where the article is located.) 17 Reference section formats for different types of sources:  Article on a Web page with no date:  Author last name, first initial, middle initial (publication date). Title of the article. Retrieved X date from http://  Example (note that the second line of the reference is indented five spaces): Dvoretsky, D. P. (n.d.). History: Pavlov Institute of Physiology of the Russian Academy of Sciences. Retrieved March 1, 2013, from http://www.infran.ru/history_eng.htm  Online newspaper article:  Author name (year, month, day of publication). Article title. Newspaper Title. Retrieved X date from http://  Example (note that the second line of the reference is indented five spaces): Hilts, P. J. (1999, February 16). In forecasting their emotions, most people flunk out. The New York Times. Retrieved March 1, 2013, from http://www.nytimes.com  Academic Journal Article:  Author name, first initial, middle initial (publication year). Article title. Journal Title, vol. #(issue #), page numbers where the article was found.  Example (note that the second and third lines of the reference are indented five spaces): Shapiro, D., Kirkman, B., & Courtney, H. (2007). Perceived causes and solutions of the translation problem in management research. Academy of Management Journal, 50(2), 249-266.  Book: Author name (publication year). Book Title. Location: Publisher.  Example: Fitzgerald, S. P. (2002). Decision Making. London: Capstone Publishing, Ltd. 18 Reference Page Example References Allen, G. (1998). Motivating Supervision. Retrieved March 1, 2013, from: http://www.businessballs.com/mcgregoryxytheorydiagrm.pdf Chapman, A. (n.d.). Adam’s Equity Theory. Retrieved March 1, 2013, from: http://www.businessballs.com/adamsequitytheory.htm Chapman, A. (n.d.). Herzberg’s Motivation Theory. Retrieved June 1, 2009, from: http://www.businessballs.com/herzberg.htm Dreyfack, R. (2004, May). Personalizing productivity. Supervision, 65(5), 20-22. Shapiro, D., Kirkman, B., & Courtney, H. (2007). Perceived causes and solutions of the translation problem in management research. Academy of Management Journal, 50(2), 249-266. Notes:  “n.d.” = no date. Use this for the date when there is no publication date available.  First line of each reference is at the left margin, and each subsequent line in that same reference is indented 5 spaces (one tab stop).  Arrange references alphabetically based on last name of the first author of each 19 work.  Add an appendix after the reference page when you have supplemental material (e.g., a chart, table, diagram, or picture) that you refer to in your paper.  Appendices are optional and depend upon the nature of the assignment.  Appendices (if any) should be placed at the end of the paper and identified with capital letters (e.g., Appendix A).  The title of the appendix should be placed immediately below the appendix label.  The appendix label and title should be centered at the top of the page, as in the example below: Appendix A Workflow Diagram 20  When professors ask you to “follow APA style” or “use APA format,” they are referring to the Publication Manual of the American Psychological Association, Sixth Edition.  APA is one of several styles that is used for writing academic papers (MLA is another) and includes extensive details about how to format citations and references.  APA format is required for TUI doctoral students and recommended for Trident University master’s and undergraduate students.  APA helps to provide a common, standard format for academic scholars to follow.  For additional information and guidance on APA style, here are two excellent resources:  The APA Style website at http://www.apastyle.org (see the links and tutorials at the bottom of the Web page)  The Purdue Online Writing Lab (http://owl.english.purdue.edu/owl/resource/560/01/) contains extensive, detailed guidance not only on APA format, but also on general writing, job search writing, and research writing (see the tabs at the top of the Web page). 21 Set up your paper as follows:  Set 1-inch margins on all four sides.  Use 12-point type throughout; don’t use different type sizes.  Double-space the text throughout the paper, including the reference page.  Do not put extra spaces between paragraphs or between headings and paragraphs.  Use italics or bold for emphasis, but use them sparingly or it becomes too distracting for your reader. 22 Before you submit your assignment:  Re-read the assignment instructions and make sure you addressed each one in your paper.  Always run spelling and grammar check in MS Word before submitting your assignment.  If you struggle with grammar, or have trouble with sentence and paragraph structure, invite a classmate or colleague with strong English writing skills to proofread your work prior to submission. This process will improve your writing skills.  Also, consult the Purdue Online Writing Lab (OWL) for writing guidance and examples.  Don’t expect overnight miracles. Writing and editing are iterative processes that take ongoing practice, feedback, refinement, and attention to detail— even for the best writers. Your writing will improve as you advance through the program! 23 24 [Submit Cover Page] Introduction Organizations that behave ethically are more apt to earn the trust of their customers, employees, and stockholders… [Complete “Introduction” paragraph] Background As a publicly-traded corporation, Adelphia, Inc. was one of the largest providers of cable services in the United States. After the company went public, it was learned that the company had materially misrepresented its audited financial statements by failing to disclose billions of dollars in debt. To make matters worse, the company’s independent auditors were found to have been complicit in the fraudulent activity, helping the company to conceal the lavish personal expenditures of the Rigas family. [Insert section heading here] The first major ethical problem raised by the Adelphia case relates to the manipulation of Adelphia’s financial statements. John Rigas and his sons routinely “cooked the books,” purposefully inflating earnings in an effort to meet shareholders’ earnings expectations, and to demonstrate the company’s earnings power to prospective investors. Fearful of a plunge in stock price or defaulting on its creditor agreements, Adelphia executives would hold secret meetings at the end of each quarter to discuss the company’s financial results (Grant, 2004). When Adelphia’s quarterly numbers were out of line with creditors’ covenants, employees were tasked with making arbitrary adjustments to the accounting records, inflating the company’s revenues and reducing its expenses, ultimately bringing the numbers back into alignment with creditors’ expectations (insert Meier in-text citation). Unfortunately, Adelphia’s fraudulent accounting practices went undetected by the company’s auditors, who failed to ensure that the company’s financial statements accurately reflected the company’s true financial position (Barlaup – insert in-text citation). For instance, the funds owed the company by the Rigas family went undisclosed in the statements, because the management at Adelphia deemed such disclosure as being “unnecessary” (Barlaup et al., 2009). Given that Adelphia was a publicly traded company, the purposeful non-disclosure caused potential investors to rely on financial records that were grossly misleading. The inevitable result was the investors continued to inject money into a company that had all the appearances of profitability and sustained growth, but that was, in reality, rapidly becoming insolvent. Moreover, lending institutions also relied on the “independently-audited” financial statements, and they were more than eager to loan the company money, given Adelphia’s presumed state of financial “profitability.” [Insert section heading here] The second ethical problem in this case relates to the Rigas family’s use of publicly-held corporate funds as a personal “piggy bank.” The Rigases used the company jet for personal reasons (without approval of the Board of Directors), on one occasion flying to Africa for a safari (Markon & Frank, 2002). On another, one of John Rigas’ sons used a corporate jet to pick up an actress friend of his (Grant, Young, & Nuzum, 2004). The former CFO claimed that Adelphia’s funds were used by one of Rigas’ sons to buy a condominium, and to build a $13M golf course (Grant et al., 2004). In another incident, the corporate jet was used to ship a Christmas tree from Pennsylvania to New York. The tree was not the right size, and a second tree was jetted to the daughter – the cost of the two trips to Adelphia shareholders was $10,000 (Stern - insert in-text citation). [Insert section heading here] In duty ethics, it is the action or behavior itself that determines whether that action or behavior is right or wrong – and not the outcome or consequences of that action (Alexander & Moore – insert in-text citation). For example, most would agree that people have a duty not to steal. In duty ethics, is the act of stealing that is deemed to be unethical – and not the outcome or consequences that may arise because someone has stolen something. Beyond the nature of the act itself, duty ethics is also focused on the rights of other individuals – that is, the rights of individuals take precedence no matter how good the outcome may be (Alexander & Moore, 2012). For example, while an individual has a duty not to steal from a property owner, the property owner has a reciprocal – and inherent – right not to be stolen from. The renowned philosopher Immanuel Kant is well known for his Categorical Imperative, which generally states that a given act is ethical only if we can will that act to be universallyacceptable (Johnson, 2008). In other words, if we cannot say that we would want everyone to act or behave in a certain way – and at all times – then that act or behavior is not ethical. Stealing is wrong because none of us would want to live in a world in which stealing was universally acceptable, simply because such a world would be filled with chaos and unpredictability (nor could anyone safely own property). For this reason, duty ethics would consider stealing to be wrong – because stealing is universally held to be wrong. [Insert section heading here] If we are to apply duty ethics to the Adelphia case, we will find that the Rigas family acted unethically. First, Rigas had a duty to safeguard the money invested by the company’s shareholders. Conversely, the shareholders at Adelphia had a right to expect that Rigas would use their money only for purposes of running the business. Kant’s Categorical Imperative would say Rigas’ use of company money for personal use was unethical, simply because we would not wish to live in a world in which company executives could freely use stockholders’ money for personal use. Of course, had Rigas truthfully disclosed the magnitude of the company’s debt, potential investors would have been apt to invest their funds elsewhere. As is true of Rigas’ use of company funds for his personal use, Rigas’ lack of disclosure was unethical because he chose to contravene his duty to disclose all of the company’s debt, and to hide the true value of the company from possible investors. Immanuel Kant would say that Rigas acted unethically because we would not want to live in a world in which the falsification of the accounting records of publicly-held companies was universally-held to be an acceptable practice. Conclusion [Write Conclusion paragraph] In summary… References Grant, P., Young, S., & Nuzum, C. (2004, March 2). Executives on trial: Prosecutors say Rigases stole from Adelphia; Founding family is accused of a long list of abuses as the fraud case begins. Wall Street Journal, C.4. Retrieved from ProQuest. Markon, J., & Frank, R. (2002, July 25). Adelphia officials are arrested, charged with ‘massive’ fraud – three in the Rigas family, two other executives held, accused of mass looting. The Wall Street Journal, A.3. Retrieved from ProQuest. Alexander, L., & Moore, M. (2012). Deontological ethics. Stanford Encyclopedia of Philosophy. Retrieved from http://plato.stanford.edu/entries/ethics-deontological/ Stern, C. (2004, Mar 02).Fraud trial begins for Adelphia's founding family. The Washington Post. Retrieved from ProQuest. Barlaup, K., Hanne, I.D., & Stuart, I. (2009). Restoring trust in auditing: Ethical discernment and the Adelphia scandal. Managerial Auditing Journal, 24(2), 183-203. Retrieved from ProQuest. Johnson, R. (2008, April 6). Kant’s moral philosophy. Stanford Encyclopedia of Philosophy. Retrieved from http://plato.stanford.edu/entries/kant-moral/#CatHypImp Grant, P. (2004, May 19). Adelphia insider tells of culture of lies at firm; Government's star witness says manipulation of reports began soon after company went public. Wall Street Journal, C.1. Retrieved from ProQuest. Meier, B. (2004, May 05). Witness tells of dual accounting at Adelphia. New York Times, C.4. Retrieved from ProQuest. _______________________________________________________________ _______________________________________________________________ Report Information from ProQuest September 19 2016 15:03 _______________________________________________________________ 19 September 2016 ProQuest Table of contents 1. Executives on Trial: Prosecutors Say Rigases Stole From Adelphia; Founding Family Is Accused Of a Long List of Abuses As the Fraud Case Begins.............................................................................................. 19 September 2016 ii 1 ProQuest Document 1 of 1 Executives on Trial: Prosecutors Say Rigases Stole From Adelphia; Founding Family Is Accused Of a Long List of Abuses As the Fraud Case Begins Author: Peter Grant, Shawn Young and Christine Nuzum ProQuest document link Abstract (Abstract): Peter Fleming, an attorney for [John Rigas], maintained the Rigases didn't loot the cable company they controlled, as the U.S. government has alleged, but borrowed money they planned to repay. "If you borrow money with the intent and ability to repay, is that looting, or is that borrowing money?" Mr. Fleming asked the jury. "The evidence will show that all debt will be repaid 100%." Mr. Fleming said that while Adelphia continues to operate, "John Rigas, in his 80th year, has lost all that he built, including his wealth," and faces criminal and civil proceedings. He noted that John Rigas never sold any shares of Adelphia. "This isn't a case where John Rigas or any of the Rigases walked off with millions and left Adelphia or any of its employees high and dry," said Mr. Fleming. Mr. Owens provided the most detail on purchases allegedly made by [Timothy Rigas], formerly Adelphia's chief financial officer. Mr. Owens alleged that Timothy Rigas used $1 million from Adelphia funds to purchase a condominium and had Mr. [Michael Mulcahey] wire him $700,000 from company funds to cover the cost of a golf-club membership. In fact, Timothy Rigas "liked golf so much that he had Adelphia pay $13 million to build his own golf course," Mr. [Richard Owens] said. Defense attorneys contend such expenses were company property. Links: Linking Service Full text: NEW YORK -- Prosecutors and the defense presented starkly different portrayals of the Rigas family of Adelphia Communications Corp. on the first day of the criminal trial against the family that founded the nation's fifth-largest cable company. U.S. prosecutors opened their fraud case against the founding Rigas family by outlining a long list of alleged abuses that ranged from highly complex financial improprieties to such mundane crimes as charging the company for 100 pairs of bedroom slippers. In a 90-minute opening statement, Assistant U.S. Attorney Richard Owens contended the defendants "used Adelphia as a private piggy bank," by stealing more than $100 million from the company. "It's a case about lies and greed, about a huge financial fraud that drove a big company into bankruptcy," said Mr. Owens. "They took whatever they wanted of the company's money, whether they were entitled to it or not," he said. John Rigas, sons Michael Rigas and Timothy Rigas, and Michael Mulcahey, Adelphia's former director of internal reporting, have been charged with conspiracy, securities fraud, wire fraud and bank fraud. The most serious count -- bank fraud -- carries a maximum sentence of 30 years. Peter Fleming, an attorney for John Rigas, maintained the Rigases didn't loot the cable company they controlled, as the U.S. government has alleged, but borrowed money they planned to repay. "If you borrow money with the intent and ability to repay, is that looting, or is that borrowing money?" Mr. Fleming asked the jury. "The evidence will show that all debt will be repaid 100%." Mr. Fleming said that while Adelphia continues to operate, "John Rigas, in his 80th year, has lost all that he built, including his wealth," and faces criminal and civil proceedings. He noted that John Rigas never sold any shares of Adelphia. "This isn't a case where John Rigas or any of the Rigases walked off with millions and left Adelphia or any of its employees high and dry," said Mr. Fleming. Attorneys for John and Timothy Rigas said both men were unaware of the details of the company's accounting. 19 September 2016 Page 1 of 3 ProQuest Karen Chrosniak, a former director of investor relations who is expected to testify, had sent a message to Timothy Werth, a former director in the accounting department, "You know about ten thousand times more than Mr. Rigas. He is basically in the dark," said Mr. Fleming. Paul Grand, an attorney for Timothy Rigas, charged that the prosecution's key witnesses cut deals with the government to avoid prison sentences of their own. "This case is based on the most suspect kind of testimony, witnesses who are accusing the Rigases in order to save their own necks," said Mr. Grand. Prosecutors contended that the defendants lied to investors and used fraudulent bookkeeping to hide more than $3 billion in debt. As Mr. Owens described the more complicated charges, he cited other alleged abuses that were more trivial in dollar terms but will likely be easier for the jury to grasp. He told the jury that John Rigas improperly charged Adelphia for use of his condominiums in Cancun, Mexico, and that Timothy Rigas sent a company plane to the Caribbean to pick up Peta Wilson, an actress friend of his. But Mr. Owens provided the most detail on purchases allegedly made by Timothy Rigas, formerly Adelphia's chief financial officer. Mr. Owens alleged that Timothy Rigas used $1 million from Adelphia funds to purchase a condominium and had Mr. Mulcahey wire him $700,000 from company funds to cover the cost of a golf-club membership. In fact, Timothy Rigas "liked golf so much that he had Adelphia pay $13 million to build his own golf course," Mr. Owens said. Defense attorneys contend such expenses were company property. In another incident, Timothy Rigas once returned from a business trip and told an assistant to buy a pair of hotel slippers he liked with company funds. When it turned out that the slippers were only sold in packages of 100, Mr. Rigas told her to buy an entire package, Mr. Owens said. Mr. Grand later said the slippers, bought directly from the importer, cost $268. Subject: Trials; Testimony; Fraud; Location: New York City New York People: Rigas, John J Company / organization: Name: Adelphia Communications Corp; Ticker: ADLAC; NAICS: 517510, 517110, 518111; DUNS: 06-365-2341; Classification: 9190: United States; 8330: Broadcasting & telecommunications industry; 2130: Executives Publication title: Wall Street Journal, Eastern edition Pages: C.4 Publication year: 2004 Publication date: Mar 2, 2004 Place of publication: New York, N.Y. Publication subject: Business And Economics--Banking And Finance ISSN: 00999660 Source type: Newspapers Language of publication: English Document type: News ProQuest document ID: 398907669 Document URL: http://search.proquest.com/docview/398907669?accountid=28844 Copyright: Copyright (c) 2004, Dow Jones & Company Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission. 19 September 2016 Page 2 of 3 ProQuest Last updated: 2010-06-26 Database: ProQuest Central _______________________________________________________________ Contact ProQuest Copyright  2016 ProQuest LLC. All rights reserved. - Terms and Conditions 19 September 2016 Page 3 of 3 ProQuest _______________________________________________________________ _______________________________________________________________ Report Information from ProQuest September 19 2016 15:23 _______________________________________________________________ 19 September 2016 ProQuest Table of contents 1. Restoring trust in auditing: ethical discernment and the Adelphia scandal.................................................. 19 September 2016 ii 1 ProQuest Document 1 of 1 Restoring trust in auditing: ethical discernment and the Adelphia scandal Author: Barlaup, Kristine; Drønen, Hanne Iren; Stuart, Iris ProQuest document link Abstract: The purpose of this paper is to encourage ethical discernment as a dimension of business decision-making. Development of ethical discernment and a process of ethical evaluation in the analysis of decisions made by the auditors and management in the Adelphia accounting scandal. The paper finds that accounting may benefit from an increased focus on ethical discernment and ethical behavior. Ethical behavior may help restore trust and confidence in the capital market system and reduce fraudulent financial reporting. This paper presents an alternative to regulation for restoring trust in the financial oversight function. [PUBLICATION ABSTRACT] Links: Linking Service Full text: The future of the external auditing function Edited by Chris Pong and Ian Fraser Introduction Trust and confidence is essential to the functioning of capital markets. Recent accounting scandals, where companies prepared fraudulent financial statements, and auditors issued clean opinions on the fraudulent statements, have eroded trust among participants in the financial markets. New regulations have been imposed to restore confidence in the corporate governance system and the oversight role in this system, but we question whether increased regulation is the only solution to fraudulent financial reporting. Increased emphasis on ethical discernment might be equally important to reduce fraud and support conscientious oversight of financial reporting by the auditing profession. External auditors face enormous pressure today to respond to challenges from stakeholders about their oversight role in the financial reporting process. Audit failures have led stakeholders to question the importance of the audit process. Stakeholders wonder about the independence of auditors when management fraud occurs and question whether auditors improve the value of information available to outsiders. Outsiders perceive a general relaxation of ethical standards, a loosening of values, and wonder about the ability of external auditors to perform their function of independent oversight in an environment lacking a moral framework. In this paper, we focus on the implications for the auditing profession of the increased focus on its role as an independent oversight group, and we propose an increased emphasis on ethical discernment in the audit process to reduce fraud and improve the quality of financial reporting. We focus on the Adelphia scandal to examine conditions associated with fraudulent financial reporting. Adelphia is a public corporation registered in the United States. It was the sixth largest provider of cable services in the United States in 2002 when its major accounting scandal was reported. Adelphia's management prepared financial statements that failed to represent the economic reality of the company, by excluding billions of dollars of debt from the financial statements. Auditors failed to uncover fraud in the financial statements. Key parties involved in the scandal appear to have acted unethically, lacking fundamental concern for ethical behavior. This paper develops an ethical analysis to emphasize the importance of appropriate ethical decision-making in financial reporting. The paper assumes the importance of trust and confidence for the efficiency of the market. In view of the Adelphia scandal, we offer an ethical analysis of management decision-making and address the failure of the auditors to prevent fraudulent financial reporting. Employing features of three ethical theories, we encourage ethical reasoning and moral judgment, "the development of an ethical framework", to reduce the 19 September 2016 Page 1 of 18 ProQuest likelihood that such accounting fraud occurs in the future. The importance of trust and confidence to the efficiency of the capital market Along with regulations and contracts, trust and confidence guide interactions in the market. [14] Fukuyama (1995, p. 26) defines trust as the expectation that arises within a community of regular, honest, and cooperative behavior, based on commonly shared norms. Cconfidence is a state of trust. If you have confidence in someone, you believe he will act in a proper and effective way. Financial markets where people trust and have confidence will operate more efficiently than low-trust markets and are therefore desirable. Modern society and its economy could not function without a minimum level of trust. Often trust and honesty are taken for granted, and people forget that these qualities are crucial foundations for a smooth functioning economy. Consider restaurant owners and taxicab drivers. They put trust in customers, expecting them to pay the bill after service is provided. That customers typically do not run away from their bills demonstrates a basic level of honesty that is fairly widespread throughout society ([14] Fukuyama, 1995). That modern economies are shaped through interaction among rational, utility-maximizing individuals is incontestable. "But rational, utility maximization is not enough to give a full satisfying account of why successful economies prosper or unsuccessful ones stagnate and decline" ([14] Fukuyama, 1995, p. 351). The degree to which people value work, respect education, and trust one another also has direct impact on economic life. Empirical evidence suggests that people do not care only about their own material wellbeing but also consider others' interests. They are capable of trusting others and acting in a trustworthy manner themselves. Trust and confidence have always been important but are even more important in today's complex, changing business environment. Development in information and communication technology has transformed how businesses organize and individuals function. Today's business environment calls for flexible organizational forms, responsive to shifting demands. Advancement in technology has led to increased globalization, some businesses that once had simple structures have grown into multinational conglomerates, and many companies struggle to compete. While the consequences of these changes are often positive, the "new" world generates immense pressure on organizations and individuals; in this context, trust, and confidence are difficult to maintain ([18] Krasna, 2005). Businesses have increased their demands for technical knowledge and complex skills within their work force (human capital). [14] Fukuyama (1995) argues that a distinctive portion of this human capital is people's crucial ability to associate with each other. The ability to associate depends on how communities share norms and values and whether they can subordinate individual interests to those of groups. Such shared values create trust and the necessary confidence for economic activity, but maintaining such trust is difficult in contemporary circumstances. Changes in the business world make it harder for people to trust. Decline in confidence is evident in Western society. This can be seen in the rise of violent crime, increased civil litigation, the breakdown of family structures, and the weakening of intermediate social structures like neighborhoods, unions, charities, and churches. In recent decades, widespread cultural change has undermined shared values and reduced community solidarity ([14] Fukuyama, 1995). Various incidents in the recent past have lowered the level of trust in capital markets. Accounting scandals in Enron, WorldCom, and Parmalat have undermined people's reliance on financial information, shaken their confidence in the market. Capital markets need to restore trust in order to function well. While a strong regulatory system is also important, we believe that a well functioning market can be supported through greater emphasis on ethical discernment and ethical behavior. Ethical systems support moral communities through shared ideology concerning good and evil, providing citizens with a framework for common morality. Any community will create a degree of trust among its members. But ethical codes and shared values tend to promote a wide radius of trust by emphasizing the importance of honesty, charity, and compassion among community members. We do not think that business organizations will jeopardize profits by emphasizing ethical behavior. Being 19 September 2016 Page 2 of 18 ProQuest profitable is essential for the survival of business organizations and must therefore be granted high priority. Companies create the greatest value for stockholders when they have a long-term perspective concerning investments and operating decisions. But we think that to stay credible and to increase long-term profit, a business organization has to foster ethical conduct. Organizations that act unethically will likely be unattractive to investors. Investors prefer companies that are managed by trustworthy people. Participants in the financial markets - investors, managers, auditors, and analysts - ought to be interested in ethics. Attention should be given to educating people on the importance of fostering ethical ideals, developing explicit ethical guides, and supporting trustworthy employees. An increased focus on ethical decision-making will have positive effects on the level of trust in society and the necessary confidence to support market functions. Professional accounting bodies (for example, The International Federation of Accountants and the American Institute of Certified Public Accountants) have ethics codes that guide members in the performance of their professional duties. In recent years, professional accounting bodies have also promoted ethical thinking and practice among their members by issuing research monographs with an ethical theme ([20] Lovell, 2005; [22] Molyneaux, 2008). This paper contributes to the dialogue among accountants about the importance of professional ethics for the future of the profession. The ethics standards of the International Federation of Accountants are discussed briefly below to illustrate ethics codes currently found in professional accounting bodies. Fundamental ethics principles proscribed by the International Ethics Standards Board for accountants who are members of the International Federation of Accountants include the following five principles: Integrity . An accountant should be straightforward and honest in performing professional services. Objectivity . An accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgments. Professional competence and due care . An accountant has a duty to maintain professional knowledge and skill at the level required to ensure that competent professional service is given to clients. An accountant should act diligently and in accordance with technical and professional standards when performing professional services. Confidentiality . A professional accountant should not disclose confidential client information to third parties. Professional behavior . A professional accountant should comply with relevant laws and regulations and avoid any action that discredits the profession (International Ethics Standards Board for Accountants, Fundamental Principles). Ethics Ethics may be described as a systematic attempt to understand moral concepts and to propose and defend principles and theories regarding right and wrong behavior. The Merriam Webster Collegiate Dictionary presents four basic meanings of the word "ethics": The discipline dealing with what is good and bad and with moral duty and obligation. A set of moral principles or values. A theory or system of moral values. The principles of conduct governing an individual or group. Philosophers often make a distinction between ethics and morality, where ethics is the theory of right action and the greater good, and morality denotes their practice. We will not make such a distinction. When we use the terms ethics or morality, we refer both to theory and practice. Ethics, for its part, tries to find the answer of what ought to be and how to accomplish this. Two key questions are posed as one seeks what ought to be: What is a good way to live my life? and What is the right thing to do in this situation? ([24] Pojman, 1989, p. 2). In some situations, a reason to act in a certain way is offset by other reasons not to act in that way: this is an ethical dilemma. Decisions in such circumstances attempt to resolve right-versus-right conflicts, where there is 19 September 2016 Page 3 of 18 ProQuest no obvious choice of action. Such decisions involve individual versus community conflicts, short-term versus long-term trade-offs, truth versus loyalty, and justice versus mercy. Management evaluates these differing goals and seeks solutions that best protect the company and society ([26] Rohde, 2006). There are many different ethical theories, with dissimilar interpretations of appropriate ways to live and act. Knowledge of these ethical theories and their potential to provide guidelines in difficult situations can facilitate those who struggle with the complex dilemmas of contemporary business. An ethical theory expresses the principles that give reasons for choosing to act in specific ways. An ethical framework is a set of norms and principles that serves as guidance for individual actions. Behind every social action there is a purpose. Individuals act to achieve something they contemplate as good, something valued. To frame an ethical theory one has to identify a purpose. It is of utmost importance to consider this carefully because one will get different theories depending on the purpose. If the purpose is to serve society, you get one kind of ethics; but if the purpose is to perform a duty, one has another kind of ethics. Normative ethics is oriented to the practical side of ethics. It develops moral standards to regulate conduct. This might involve articulating a set of principles regarding habits, duties, and "correct" ways to behave. Applied ethics is the use of ethical values. The area of applied ethics examines specific controversial issues, such as abortion, homosexuality, capital punishment, environmental concerns, and, of course, some business practices. By using the conceptual tools of normative ethics, applied ethics tries to resolve controversial issues ([9] Fieser, 2006). We focus on normative ethics since we find this area to be most relevant for business dilemmas faced by management and auditors. Within normative ethics we identify three ethical theories for their utility in restoring trust in contemporary business. Three different ethical theories We consider egoism, utilitarianism, and deontology. Each theory has a distinctive approach for determining ethical conduct. In egoism, the right thing to do is that which benefits the individual. In a utilitarian perspective the individual chooses the action that brings the most joy to the greatest number of people, seeking what is best for society. As a deontologist, the individual chooses the right and fair thing to do regardless of the consequences to himself or others ([8] Duska and Duska, 2003). Egoism "One ought always to act in one's own best interest" ([8] Duska and Duska, 2003, p. 45). This is the guiding principle for egoists. Can it really be ethical to be concerned only with one's own best interest? As a general rule, egoists say: "yes." Followers of this ethical direction make a key qualification. They argue that it is crucial to distinguish selfishness from self-interest. The difference between the two is substantial. The Merriam Webster Collegiate Dictionary defines selfishness as being "concerned excessively or exclusively with oneself. One only seeks or concentrates on one's own advantage, pleasure, or well-being without regard for others." Self-interest is defined as a concern for one's own advantage and well-being. (The Merriam Webster Collegiate Dictionary) Selfishness is a more negatively loaded phrase than self-interest. It suggests an absorption in oneself that makes a person neglect others, while self-interest expresses a primary concern for one's own wellbeing. For someone to follow his self-interest is usually perceived as a good thing, for if a person is not responsible to make himself happy, who then should be? Following one's self-interest is often complicated; problems arise when what is good for the individual collides with what may be good for someone else. If the individual then chooses to follow the egoistic guiding principle, the individual is not only following his self-interest, but may also be acting selfishly ([8] Duska and Duska, 2003). This would be the case if the individual chooses to eat the only apple though he knew that someone else wanted it. Eating the apple would manifest his self-interest. The individual might be starving or he just might want the apple. But this action may also be selfish, whenever the individual totally neglects the well-being of others. To act unselfishly in this situation, the individual should either share the apple or let the other person eat 19 September 2016 Page 4 of 18 ProQuest it. But how does one act in one's own interest without also being selfish? This can be applicable for business leaders. They are hired to make decisions in the company's best interest, but such decisions may collide with the leader's own interests. Consider when a business leader has a decision about acquiring a company. The acquisition could strengthen the company's strategic position, but it might reduce the bottom line this year. Such a reduction might eliminate this year's bonus for the decision maker. If he chooses not to purchase the new company, this would not only be a decision made on a principle of selfinterest, but also a selfish decision. He has not sought to optimize the best interest. A reduced competitive situation might be the consequence for the company. This example illustrates a crucial problem with this ethical theory, for when the pursuit of self-interest is only at the expense of others, you no longer can make an ethical decision, in accordance with the theory. For many occupations a philosophy of self-interest would be incompatible with that line of work. A financial advisor has a professional responsibility to look out for his client's best interest. For this work "egoism is inadequate as a theory ([8] Duska and Duska, 2003, p. 51)." Consider: would you trust a financial advisor who acted only in accordance with his self-interest (not considering your own)? If egoism is inadequate as a theory of ethical behavior in the business life, can either of the other two theories provide us with better guidance? Utilitarianism Utilitarianism is divided into two separate ethical approaches, one that emphasizes the use of rules, and another that emphasizes an action aspect. The rule category of utilitarianism emphasizes the importance of following specific rules that are public and universal. Rule utilitarians see the principles as having instrumental value to shape specific actions. Both the act and the rule approaches emphasize that one should strive to "do that action which will bring about the greatest good for the greatest number of people ([8] Duska and Duska, 2003, p. 52)." In this theory, an act's outcome determines its morality. One acts to bring about as much pleasure to as many people as possible, meaning that an act that brings pain to people would be immoral. ([8] Duska and Duska, 2003). One might expect this to be the ethical theory with the greatest appeal to business leaders since it is the only theory that includes a cost-benefit analysis. When a big decision is to be made, for instance, moving a company out of the country, there are many considerations. To understand the consequences of such a decision, leaders make an ethical cost-benefit analysis. But if they make such an analysis, they may encounter unresolved questions. The first problem is there is nothing in this theory that prioritizes values. Should one primarily be concerned about making the greatest number of people happy, or should one be concerned for the greatest amount of joy ([8] Duska and Duska, 2003)? In the decision to move the company, one has to weigh the consequences for employees who might lose their jobs against the improved competitive strength that the company might gain. What should be more valued: the happiness of investors who might make more money if the company moved, or the happiness of people who keep their jobs if the company stays? The second dilemma is whether an action should be taken just because the outcome is beneficial. For example, are there situations that justify breaking the law in order to achieve good? Consider a business leader who knows the financial position of a company is too weak to be granted a bank loan. If the company does not get this loan, the leader may have to fire employees. The leader believes the company will increase its profitability soon and not have problems in repayment. Is it then acceptable for the leader to misstate the numbers in hope of rescuing the exposed employees? According to act utilitarian theory, this would be the right thing if the action maximizes utility. Breaking the law is permitted, if it provides more happiness than not breaking the law. The rule utilitarian theory, on the other hand, would not permit breaking the law. From the bank's perspective, it would not be desirable that a client provide misleading information in order to obtain a loan ([8] Duska and Duska, 2003). [8] Duska and Duska (2003) note a further quandary with utilitarianism, the problem of predicting the future. In order to bring the maximum of joy to the maximum of people, you need to know consequences before you act, 19 September 2016 Page 5 of 18 ProQuest and this is seldom possible. With the business leader who considers whether to misstate the financial statements to get a loan: there is no way that he can be certain the company will be able to repay it. It is therefore impossible for him to make a definitive conclusion regarding whether misstating the financial situation will be an action that brings the most utility. If utilitarianism does not always work as an ethical guideline for economic life, might the third ethical theory provide us with sure guidelines? Deontology The essence of deontological ethics is that an action's moral value is independent of its consequences. An action's moral value depends on whether the motivation was to do one's duty. ([8] Duska and Duska, 2003) According to this theory, there is only one possible action, the fair thing to do. Everybody has a duty to take the right action. This is the main difference between deontology and the other ethical theories. A deontologist sees an act as morally wrong whenever it maximizes good but is not properly motivated; its principles of right and good are further distinguished from the utilitarian view that essentially considers an act to be right because it maximizes good. According to deontology, one should always tell the truth even it someone is hurt. Under no circumstance is lying justifiable. Deontology is divided into two categories: act and rule deontology. An act deontologist views every act as a separate ethical occasion and believes that by consulting our conscience or intuition, we should be able to determine the right in a given situation. There is no need for a set of rules; one's intuition or conscience guides the way. Rule-deontology is much more common than act-deontology. Rule-deontologists believe that there are universal rules that provide standards of right and wrong. They accept the principle of universalizability, in addition to the notion that in making moral judgments one appeals to universal principles. The precise meaning of universalizability is debated, but the most common interpretation is that if you would want everybody to act in the same way that you act in a given situation, then you express a universal principle of morality. Promise-keeping, truth-telling and justice are perhaps the most common examples of such principles ([24] Pojman, 1989). Consider again the leader who may misstate financial numbers to secure a loan. To determine whether the act of lying to secure a loan is moral, one must try to universalize it. If everyone lied to secure loans, the practice of promising and lending would fall apart. In other words, it is not possible to universalize such an act. Retrieved from http://en.wikipedia.org/wiki/Universalizability The German philosopher, Immanuel Kant, designed imperatives, or rules of duty, for everyone to follow. Kant's principal imperative is expressed: "Act only on that maxim[1] whereby thou canst at the same time will that it would become a universal law" ([24] Pojman, 1989). If we want everyone to act as we act in a situation meaning that the action could be universalized - then this is a morally acceptable action. If you do not want everyone to act as you act, then the action is not moral. You could very well prefer not to tell the truth when asked a revealing question, but if you do not want others to lie to you, then lying is unethical ([24] Pojman, 1989). Deontological theory raises an interesting question with important implications for business life. The question is whether a decision is ethical if the motivation for the decision is that it benefit you, or whether a decision is ethical only if its motivation is appropriate; that is, universalizable. According to Kant, only the latter makes for an ethical decision. If your motivation is not ethical, then the action will not be ethical either ([24] Pojman, 1989). A company that chooses not to use child labor because this will give it a bad reputation and damage sales is not acting ethically. To be ethical, it would have to refuse the use of child labor solely because it is wrong. Can it, however, really be expected of companies that they consider only the ethical right or wrong of an action, rather than its financial consequences? One cannot hold such an expectation, given the basic financial nature of business. Then, perhaps, deontology is not an adequate ethical theory for the business world. It might seem as though we have already rejected ethics as a solution for restoring confidence within capital markets. This is not the case, we have merely pointed out some problems with each ethical theory. None of the ethical theories provide business leaders with answers to all dilemmas they face. But through study and 19 September 2016 Page 6 of 18 ProQuest reflection, these theories can inform an ethical framework and be valuable tools for decision-making. Business leaders who use such a framework when they have difficult decisions will make better, more rational, and fairer decisions. Better decisions help improve company earnings, more rational decisions are less time consuming, hence they save the business both time and money. And fairer decisions make a better foundation for consensus when a company implements its plans. These effects are beneficial to companies as they operate in a competitive world. An ethics framework adds a critical dimension in business leaders' decision-making. Ethical decision-making framework Everyday a person faces many decisions. Not all are important, and many are easily made. One does not need an ethics framework or decision-making model to make most decisions. But some everyday questions may pose ethical dilemmas. Should you consider the labor conditions of those who made your clothing or the environmental impact of growing a food you eat? Facing a dilemma may have serious consequences, so how does a person decide? Are there rules, what it is important to emphasize? Study of ethics can provide a framework for deciding what is right in these circumstances. There are various decision-making processes, but some basic issues to consider. First, one ought to have a basic grasp of ethics and what it implies to be ethical. Sophisticated knowledge of every ethical theory is not essential, but some awareness of several can be helpful. Each theory has a distinct approach for determining right from wrong, so acquaintance with several theories broadens one's perspective, providing insight on the nature of ethical conduct, on ethical decision-making. Specific decisions will emerge from choices on ethical purposes and from different ethical sentiments. For example, if you follow the deontological approach, in order to be ethical you must do your duty. If you select a utilitarian approach, you must seek to maximize happiness for as many people as possible. One must next consider priorities among values that may collide with each other and ask whether guiding principles may help in selecting the most important value for the circumstance. These principles will influence the ethical decision. Awareness of one's own ethical motivation is also important. Your motivation may be linked to your personal understanding of ethics and the ethical theory you follow. A person emphasizing his own selfinterest (an egoist) will prioritize actions and follow a principle of choosing actions to benefit themselves. That would not be a guiding principle for the person who subscribes to the deontological approach. Kant's categorical imperative functions as a guideline. It may be that reliance on a single approach will not suffice. Different situations, different dilemmas, might require varying approaches, and while one ethical theory helps to solve one problem, it may be inadequate to solve another. With a basic grasp of ethics, self-awareness of motivation and a commitment to guiding principles, one has a framework for practical decision-making. For example, [4] Boynton and Johnson's (2006) framework for general ethical decision-making consists of the following six steps: obtain the facts relevant to the decision; identify the ethical issues from the facts; determine who will be affected by the decisions and how; identify the alternatives; identify the consequences of each alternative; and make the ethical choice. Every situation is unique, requiring a unique decision. To make a decision, one ought examine the relevant facts. This process may include an effort to uncover factors that are hidden to a casual view. When the salient facts are ascertained, the next step is to identify the ethical issues to be discerned in the situation. This is often difficult. One approach could be to ask questions: could the conflict, the situation, or the decision be damaging to people or to the community; does the issue go beyond legal or institutional concerns; and what impact will there be on people - their dignity, their rights, and their hopes? 19 September 2016 Page 7 of 18 ProQuest The most important decisions often affect people other than the decision maker. It is important to identify these people and consider how they are affected. It is important to consider the consequences of your decision. As part of this information gathering and discernment process, it can be helpful to use ethically informed sources like professional norms, legal precedents, and even ethical insights from religious and cultural traditions. When information is collected and you have considered who will be affected by the decision, you must formulate various decision-alternatives. To do this, it is important to have an open mind and a broad perspective. One should try to identify both good and bad consequences of each alternative, not just for oneself or for your organization, but for all affected parties. It is important that one is honest about the stakes one has in the different outcomes. And because no two situations are identical, it is important to evaluate each situation from various ethical perspectives, to encompass each morally significant factor. The objective is to make the best possible choice with the available information. Finally, once the decision is made, you must be willing to accept responsibility for your choice. You must also maintain a sense of your own limitations and remain humble. (For you might have made a wrong decision in spite of your reflection and effort.) We understand that "time is money" and that many decisions have to be made quickly without an opportunity to gather as much information as one might prefer. But we also believe that the benefits leaders could gain from an ethical framework will be of value to their businesses, to stakeholders and for the maintenance of trust in the business environment. The Adelphia fraud John Rigas and two partners formed Adelphia in 1952. He bought out the partners and expanded his business with his brother and, later, his sons. On July 1, 1986, the company was publicly listed. Five cable television companies owned by the Rigas' were reorganized into one company ([1] Adelphia, 1994). The public listing meant that Adelphia had to follow different regulations than for a family company. Adelphia was now required to make annual reports and have them approved by an auditor before filing them with the SEC. The company was required to have a Board of Directors and hold annual general meetings. By the time the Adelphia scandal broke in 2002, Adelphia was the sixth largest cable company in the United States. The annual revenue was $2.9 billion, and the company had 5,547,690 subscribers[2] . Including subsidiaries, the company was located in 32 states and Puerto Rico ([2] Adelphia, 2000). After the revelation of the scandal, Adelphia filed for Chapter 11 bankruptcy protection[3] on June 25, 2002. It continued to operate under bankruptcy protection until The Federal Communications Commission approved the purchase of the company by Comcast Corp. and Time Warner Inc. (in July 2006) ([31] The Wall Street Journal, 2006). The scandal The SEC complaint against Adelphia stated: This case concerns one of the most extensive financial frauds ever to take place at a public company. From at least 1998 through March 2002 Adelphia [...] systematically and fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them on the books of off-balance sheet affiliates. It also inflated earnings to meet Wall Street expectations, falsified operations statistics, and concealed blatant self-dealing by the family that founded and controlled Adelphia, the Rigas family ([30] The SEC, 2002, p. 1). Some early signs might have indicated that not all was as it should be at Adelphia. From the beginning of his career John Rigas was known as an aggressive businessman. He was not afraid to take huge risks if the expected pay off was high enough. Debt financing was used to secure new acquisitions ([19] Leonard et al. , 2002). The public listing secured company access to capital to finance growth. In these efforts to grow, the manipulation of Adelphia's financial reports began. According to James Brown's testimony, it became a part of the corporate culture of Adelphia to conceal information that might be disadvantageous for the company ([15] Grant, 2004). 19 September 2016 Page 8 of 18 ProQuest Despite the regulations for Adelphia as a publicly listed corporation, the Rigas family continued to use the company as a personal "piggy bank". The Cash Management System (CMS) provided the family with opportunity for rampant self-dealing, which was concealed by fraudulent misrepresentations and omissions of material facts. The pattern was that the family would use the company funds intending to replace the money later. Adelphia, its subsidiaries, and the Rigas Entities all deposited some or all of their cash generated or otherwise obtained from their operations, borrowings and other sources in the Adelphia CMS, withdrew cash from the Adelphia CMS to be used for their expenses, capital expenditures, repayments of debt and other uses, and engaged in transfers of funds with other participants in the Adelphia CMS ([30] The SEC, 2002). The amounts were later disclosed in a small footnote in the company filings. But the money trails were difficult to follow. The fact of such a system ought to have served as a warning sign that the bond between the Rigas family and the now public Adelphia was flawed. With increasing focus on corporate governance and business ethics after major business scandals in the early 2000s, it was only a matter of time before questions were raised regarding the Rigas family's use of Adelphia's assets and the financial arrangements of the company itself. These questions were raised after Adelphia's subsidiary, Adelphia Business Solution (Adelphia B.S.) on March 27, 2002 filed for Chapter 11 bankruptcy protection,[4] having struggled for months to meet debt obligations ([23] Nuzum, 2002). Adelphia had to take large losses when Adelphia B.S filed for Chapter 11 bankruptcy protection. Timothy Rigas, CFO of Adelphia, refused to speculate on the losses and reassured investors that Adelphia would provide $67.5 million in debtor-in-possession financing to Adelphia B.S. and that the Rigas family would provide a matching amount. But investors were more concerned with the revelation that Adelphia would guarantee $2.3 billion in debt that was not on the company's balance sheet. According to Rigas, the debt was supposed to be on the balance sheets of certain managed entities, but as a resource to Adelphia. These entities were supposed to have substantial assets, in addition to cable assets, that would back the debt. At first glance, these off-balancesheet transactions appeared to be legitimate. But in light of the Enron incident and considering that the offbalance-sheet debt was in closely held partnerships controlled by the Rigas family, investors took a skeptical attitude. They wanted information regarding the financial health of the managed entities. They were also curious about how much of the $2.3 billion had been used by the Rigas family to buy shares in the company ([23] Nuzum, 2002). On April 1, 2002 Adelphia announced that it would delay filing of the company's annual report with the SEC, needing time to review specific accounting matters related to the co-borrowings. At this time, large stockholders pressured the company to sell off assets or merge the entire company to cover the debts ([10] Frank, 2002a). On April 2, 2002, the SEC opened an informal inquiry to investigate the accounting methods used by Adelphia ([25] Pulliam and Solomon, 2002). On April 16, 2002 Adelphia missed a second deadline for filing its annual report and the informed the public that they might change their financial estimated for the present year. Disagreements between Adelphia and the company's auditor, Deloitte, regarding the appropriate way to account for the loan agreements contributed to the delay of the financial report. The SEC investigation focused on the company's accounting and disclosure practice related to the off-balance-sheet loans ([11] Frank, 2002b). Stakeholders, financial analysts, and the media were harsh in their critique of Adelphia's financial culture. Oren Cohen, a Merrill Lynch bond analyst, said that; the investors should feel blindsided. The people who bought stock in the November deal[5] and saw that the Rigas' were also buying stock in the deal did not realize that Adelphia was co-borrower with the family on these loans ([25] Pulliam and Solomon, 2002, p. C1). Investors and analysts had previously criticized the company for its aggressive use of debt financing, even in the context of the debt-heavy cable industry. Fred Moran, an analyst with Jefferies &Co., accused the company of lacking concern for the well-being of shareholders, and focusing only on the use of debt financing in order to grow rapidly ([25] Pulliam and Solomon, 2002). 19 September 2016 Page 9 of 18 ProQuest In the weeks after the revelation of the co-borrowings, the media paid much attention both to Adelphia and the Rigas family. Reporters traveled to Coudersport to talk to the locals who reported that John Rigas really cared for the citizens of the company home site. But not everybody was supportive of the Rigas family. A number of townspeople and investors were concerned that the family was rather free with shareholder money. They believed corporate money was used to finance public generosity ([12] Frank, 2002c). Investigators found evidence suggesting that corporate money had been used to finance a golf-course built on the Rigas property, to buy timber rights for the family and to fund a local hockey team, the Buffalo Sabres. The Rigas family had also been using Adelphia property as if it were their own. Vacations had been taken using the company plane. On one occasion, that plane was used to fly a Christmas tree to John Rigas' daughter in New York. When the first tree was not good enough, they had flown another one up. Ellen Rigas, in no way connected to the company, had also received millions of dollars in funding for her film-production ventures ([13] Frank and Solomon, 2002). Investigations by the SEC revealed major flaws with the corporate governance culture in Adelphia. The Audit Committee, which was supposed to monitor the company's financial reporting, seemed not to have functioned the way it should have. It turned out that the committee met only once in 1999, and four times in 2000. In most other companies, the size of Adelphia, the audit committee met eight or nine times a year. In addition, for a long period the composition of the committee was far from desirable. From the last seven months of 2000 until April 2001, the committee consisted of only two members; one outside director, and Timothy Rigas, who at that time also held the position as financial director of Adelphia. Two additional outside directors were then appointed, and two months later Timothy Rigas was removed from the committee by the company ([28] Solomon, 2002). In September a federal grand jury indicted the three members of the Rigas family together with James R. Brown and Michael C. Mulcahey. This was one of the largest cases ever involving insider trading and company fraud ([21] Markon, 2002). The government's case against the Rigas' strengthened when James R. Brown, Adelphia's former vice president of finance, pleaded guilty to one count each of conspiracy, securities fraud and bank fraud. Brown agreed to testify against the members of the Rigas family ([7] DeBaise, 2002). During the trial James R. Brown testified that; "I lied in person to investors when I met them. I lied in the company's filings. I lied in the company's press releases ([15] Grant, 2004, p. C1)." According to Brown, Adelphia began to manipulate their financial reports not long after the company had been publicly listed in 1986. Brown said that he and "other Adelphia officers regularly fabricated statistics on the number of subscribers, cash flow, cable-system upgrades and other closely followed metrics." He claimed that lying became a part of Adelphia's corporate culture: For example, Brown said that he and other top executives would meet on Saturdays at Adelphia's headquarters in Coudersport at the end of each quarter, partly to determine whether the company's financial results were in compliance with loan agreements. If they were not, "we would make other types of manipulation of either arbitrarily expenses between companies or adding invented affiliate income or interest income from one internal company to another ([15] Grant, 2004, p. C1). Brown's testimony also revealed that Adelphia for more than ten years kept two sets of books, one showing the reports that Adelphia made to its lenders, and the other identifying what statistics had been manipulated ([15] Grant, 2004, p. C1). On July 8, 2004 the jury convicted John and Timothy Rigas of "fraud and conspiracy for looting the company of more than $100 million, hiding more than $2 billion in debt the family incurred, and lying to the public about Adelphia's operations and financial condition ([16] Grant and Nuzum, 2004, p. A1)." They were sentenced to 15 and 20 years in prison, respectively, ([27] Searcey and Yuan, 2005). The fraud convictions were later appealed to the US Supreme Court, but a federal court denied the request for a new trial. Michael C. Mulcahey, the former Adelphia executive, was acquitted on all 23 counts of conspiracy. He was later barred by the SEC from ever serving as an officer or director of a publicly traded company again. In the case against Michael Rigas the 19 September 2016 Page 10 of 18 ProQuest jury could not agree on a verdict ([16] Grant and Nuzum, 2004). Michael Rigas later plead guilty to making a false entry in Adelphia's records, to avoid a retrial on 15 counts of securities fraud. For this he was sentenced to serve ten months of home confinement and had to pay a $2 000 fine ([5] Bray, 2006). An ethical perspective to the Adelphia fraud Deloitte's responsibilities for ethical behavior Deloitte was Adelphia's external auditor during the fraudulent period. Because Deloitte failed to detect and report the fraud perpetrated by Adelphia and members of the Rigas family, we take a closer look at Deloitte's role as auditor in the Adelphia scandal. In the following section we try to answer whether Deloitte behaved in an ethical and professional manner. And whether other experienced auditors would have given Adelphia a clean audit statement. Our assessments will be based on the AICPA Code of Professional Conduct. This code of professional conduct requires auditors to act in a way that will serve the public interest (AICPA, section 53, Article II). Members are required to perform all professional responsibilities with the highest sense of integrity (AICPA, section 54, Article III). Section 201 of the AICPA Code of Professional Conduct also requires auditors to exercise due professional care in the performance of professional services (AICPA, Section 201.) Section 203 of the AICPA Code of Professional Conduct requires the accountant to not express an opinion ... that the financial statements... are presented in conformity with generally accepted accounting principles... if such statements... contain any departure from an accounting principle (AICPA, Section 203)[6] . It is difficult to establish whether Deloitte acted in a way that served the public interest. Section 316 of the U.S. Auditing Standards describes the auditors' responsibility to detect fraud (AICPA, Statements on Auditing Standards, AU316.) The standard requires that auditors should maintain a professional scepticism and recognize the possibility that material misstatements due to fraud could exist. Knowing some of the misconducts that occurred at Adelphia, we find it hard to believe that an experienced audit team could fail to detect the fraud. Especially, since there were, in our opinion, several warning signs. One is the fact that Adelphia was very reluctant to disclose information about the co-borrowings to the public. Deloitte advised Adelphia to disclose this information and the fact that the company refused to make the disclosure is an even larger warning sign. A second warning sign is that the family basically controlled the Board of Directors and the Audit Committee. The opportunity to commit fraud is present when the Board of Directors and the Audit Committee are not independent. A third warning sign of fraud is the lifestyle of the Rigas family. Deloitte should also have noticed the extravagant lifestyle of the Rigas family and questioned the source of funds used to support this lifestyle. We believe that Deloitte jeopardized their professional integrity on several occasions. One example is when Adelphia tried to avoid informing investors that the company omitted a significant portion of its co-borrowing liabilities from the financial statements. Deloitte, from 2000 on, advised Adelphia to include a footnote that should state the total amount which had been borrowed by the Rigas Entities. Adelphia's management argued that they thought disclosing to be unnecessary and Deloitte acquiesced. By not standing up for what they believed to be the right conduct Deloitte showed a lack of integrity. Through this wrong judgment Deloitte failed to protect the users of Adelphia's financial information. With regard to the principles of professional competence and due care, we have to consider whether Deloitte had the knowledge and skills required to perform the Adelphia audit. One would, from a general point of view, think that a large firm like Deloitte would possess the skills and knowledge needed in order to carry out the audit of Adelphia. But when a fraud of such dimension goes undetected, one may wonder whether the audit team assigned to Adelphia lacked the required competence. For example, the exclusion of liabilities from the financial statements, in connection with the co-borrowings, is a violation of GAAP and we believe that reporting liabilities should be common knowledge for an experienced and competent auditor. We also find it strange that Deloitte did not question the composition of the Board of Directors and the Audit Committee at an earlier stage. A skilled auditor probably should have considered such a significant influence by one party (in this case, a single family) to be a warning sign and thus it should have taken a more critical approach when conducting an audit of the 19 September 2016 Page 11 of 18 ProQuest company. In retrospect, it is clear that Deloitte made a mistake when they issued unqualified audit opinions for Adelphia. Whether another experienced auditor would have arrived at the same conclusion as Deloitte is difficult to say. But considering the warning signs that Deloitte apparently ignored, in our opinion, it failed to comply with some of the principles related to professional conduct. Given these mistakes and the clear principles of the professional, we believe it possible - even likely - that another auditor would have come to a different conclusion. Based on the evaluations above, we believe that it is reasonable to raise questions about whether Deloitte followed the AICPA Code of Professional Conduct as one would expect. An auditor's main objective is to serve the public and its need for accurate and reliable information. We believe that Deloitte failed to serve this objective because the information published in the financial statements was not relevant and reliable. Deloitte should have understood that by allowing Adelphia not to disclose information about the co-borrowing and the liabilities, they jeopardized the relevancy and reliability of the financial statements. This is supported by a statement made by Mark K. Schonfeld, Director of the SECs Northeast Regional Office, who stated: What is especially troubling here is that Deloitte recognized the risk of fraud posed by this client at the outset. When auditors turn a blind eye toward misconduct on a high-risk client and allow a fraud of this magnitude to go undetected, the consequences will be severe ([30] The SEC, 2002). After agreeing to pay the $50 million to settle charges made by the SEC, in regard to the Adelphia scandal, Deloitte issued a public statement that appeared to blame Adelphia and some executives for "deliberately misleading" the auditors. The terms of the agreement with the SEC deny Deloitte to neither admit nor deny any of the charges. Deloitte was therefore forced by the SEC to rescind the statement ([28] Solomon, 2002). Deloitte's decisions and the ethical decision-making model Compliance with the ethics code of the profession is one way to evaluate Deloitte's decisions. In this section, we apply the concern for ethical discernment and the use of an ethical decision-making model to the decision made by Deloitte to allow Adelphia not to disclose information about the co-borrowing and the liabilities to see whether Deloitte might have chosen differently had they known more about ethics and exercised ethical discernment. From 2000 on, Deloitte advised Adelphia to include a footnote in the annual report that described the total amount that had been borrowed by the Rigas Entities and guaranteed by Adelphia. Adelphia's management argued that they thought disclosing the liabilities to be unnecessary, and Deloitte issued an unqualified opinion on the financial statements without the disclosures. If we first consider the ethical theory of egoism, it seems apparent that the decision to issue an unqualified opinion without the disclosure of the liabilities was a decision not just made in self-interest but was also a selfish decision. It seems that Deloitte was acting in accordance with the theory that: "I will always serve my client's best interest, whatever consequences this might bring others is not of my concern." We also find it difficult to defend the action by applying either of the other two ethical theories. The utilitarian theory states that one should maximize happiness for the largest number of people. Issuing the audit report without the required disclosure may make the Rigas family happy, but the family is greatly outnumbered by Adelphia's stockholders. The total number of "happy" people is thus not maximized. As for the deontological theory: it clearly labels this action as immoral. Withholding information from stockholders that would be useful to them to make decisions regarding the company cannot be said to be in line with any categorical imperative. And if Deloitte tried to make a maxim out of issuing clean audit reports when adequate disclosure is missing, it would say something like: "It is all right to withhold information from stockholders if the client does not want to disclose the information." This hardly expresses a universalizable principle of morality. If Deloitte had known about the three ethical theories, exercised ethical discernment, and used an ethical decision-making model, what may their decision then have been? There is no way of knowing this for sure, but we here scrutinize the six steps of the ethical decision-making model to see whether we can identify some 19 September 2016 Page 12 of 18 ProQuest alternative decisions that Deloitte might have made[7] . The relevant facts in this case concern both the wishes of the Rigas family to avoid disclosure and the requirement that the auditors not issue an unqualified audit report on financial statements whenever they know that the financial statements are not materially correct. The financial statements are not materially correct if the auditor fails to disclose information that would make a difference to outsiders. If an outsider would change his decision regarding the company knowing the information, then the information should be disclosed. The ethical issue identified by the facts is whether the auditor should issue a clean opinion knowing that the financial statements are not materially correct. The auditors, the client, and shareholders are affected by the decision. If the auditor issues an unqualified opinion in this situation, he fails to comply with professional standards. By asking the auditor to ignore the information regarding the liabilities guaranteed by the company, the client fails to provide outsiders with information they need to make decisions about the company. If the disclosure is not included in the annual report, outsiders will be misled about the liabilities of the company and will believe that the company has less cash committed to future liability payments than will actually be spent. Going through this process suggests that if Deloitte had known about, and actively used, an ethical framework they would have had a difficult time justifying their actions. They might not have issued an unqualified opinion without requiring the appropriate disclosure regarding the liabilities guaranteed by the company. Adelphia's responsibilities for ethical behavior In this section, we apply our ethical judgment, and the ethical decision-making model, to the decision of building a private golf course to see whether John Rigas might have chosen differently had he known more about ethics. Rigas spent corporate money (a total of $12.8 million) to build a private golf course on Rigas land. Having a private golf course on his land added great value to the Rigas fortune, and the use of Adelphia funds for the construction was never disclosed to investors ([30] The SEC, 2002). When John Rigas was confronted with accusations that he had thus enriched himself at the expense of Adelphia investors, he defended himself by claiming that he had planned to donate the land. According to Rigas, he never intended to benefit financially. As for the motivation to build a state of the art golf course in a rural town with merely 2,600 inhabitants, Rigas claimed he was hoping to create new jobs for the region and help the city become more attractive for white-collar workers ([6] Cauley, 2007). If we first consider the ethical theory of egoism, it would seem apparent that the decision to build a golf course on private land and finance it with corporate money was a decision not just made in self-interest but was also a selfish decision. It seems that Rigas was acting in accordance with the theory that: "I will always serve my own best interest, whatever consequences this might bring others is not of my concern." Rigas did not seem to have any problems using the stockholders' money as long as he got his golf course. He even concealed its use by not disclosing the information in the financial statements. Yet, if what Rigas claimed in his defense is correct regarding his motivation, the decision might not be classified as selfish. The question then is why Rigas did not disclose the information. Even if we believe Rigas and his statement that building the golf course was not a selfish (egoistic) decision, we find it difficult to defend the action by applying either of the other two ethical theories. The utilitarian theory states that one should maximize happiness for the largest number of people. A golf course would add to the happiness of the Rigas family and for some golfers, but in this case they are greatly outnumbered by Adelphia's stockholders. The total number of "happy" people is thus not maximized. If the golf course actually attracted better workers to Adelphia, this may have been in the best interest of the investors. But had the investors been asked about the best way to spend money, they might have made different suggestions to increase the company value. We can therefore not see that happiness is maximized. As for the deontological theory: it clearly labels this action as immoral. Making stockholders pay over $12 million for a golf course without informing them cannot be said to be in line with any categorical imperative. And if John 19 September 2016 Page 13 of 18 ProQuest Rigas tried to make a maxim out of building a golf course with corporate money it might say something like: "It is all right to spend other people's or a company's money without informing them or asking permission." This hardly expresses a universalizable principle of morality. If Rigas had known about the three ethical theories and used an ethical decision-making model, what may his decision then have been? There is no way of knowing this for sure, but we would like to go through the six steps of the ethical decision-making model to see whether we can identify some alternative decisions that Rigas might have made.[8] The relevant facts in this case concern both the Rigas family and Adelphia. Cost-benefit analysis could have been made in order to estimate whether the golf course would be profitable. Alternative ways to invest or spend the money should have been considered. Having considered alternative ways to spend the money, Rigas ought to have tried to identify ethical issues from the facts and the knowledge that he achieved doing the initial analysis. We do not know precisely what information such analysis might have provided. But one ethical issue that Rigas should have identified is the question regarding disclosure. To conceal from the investors how their funds were spent requires some very convincing arguments in order to be ethically defensible, even more so when you build a golf course on your own property. Determining the affected parties is the next step in the ethical decision-making model. In this case many people were affected by the decision. The Rigas family, Adelphia and the company investors are obviously affected, but the inhabitants of Coudersport should also be considered. In addition, this decision affects the people who broke the law by not following generally accepted accounting principles regarding disclosure. They risk imprisonment if caught. Based on the steps that have been conducted we have identified four different decision alternatives: John Rigas could stick to his initial decision and build the golf course with corporate funds. John Rigas could decide not to build the golf course. John Rigas could decide to finance the golf course with his own money. John Rigas could put the suggestion up for vote at Adelphia's stockholder meeting, and let the investors decide the best way to spend the corporate money. The consequences of option number one have been discussed. If Rigas had applied the ethical decisionmaking model, he would have identified this alternative as unethical and thus rejected it. Alternative number two implies that the investors will not be deceived. Rigas could have identified this as an option by applying the utilitarian framework. He would then see that building a golf course with corporate money would not maximize happiness for any large number of people; thus building the course would be unethical and should be rejected. If he still wanted a golf course, he could have financed it personally. This is the third alternative. The last alternative we have identified on behalf of Rigas is that he could have left it to the stockholders to decide how to spend their money. The three last alternatives are ethical and Rigas might have chosen any of them. Applying the ethical framework thus criticizes Rigas' choice and presents three different ethical alternatives. This process of ethical judgment suggests that if Rigas had known about, and actively used, an ethical framework he would have had a difficult time justifying his actions. He might not have built the golf course. Summary and conclusions In this paper, we advocated ethical discernment to enhance trust and confidence. We have presented three ethical theories, discussed the code of professional conduct that applies to accountants, and offered a model for ethical decision-making. We further introduced ideas about leadership and the potential significance of an ethical decision framework for the oversight of financial decision-making. The ethics model has been applied to the Adelphia scandal. In our application, we also criticized auditor performance at several junctures. Our aim has been to see whether ethical reasoning and a more sophisticated exercise of ethical judgment might be an alternative to laws and regulation when it comes to restoring confidence in the financial markets through the prevention of fraudulent financial reporting and improvement in the decision-making processes of management and auditors. 19 September 2016 Page 14 of 18 ProQuest We believe that the ethics model might be a valuable tool when business leaders face important decisions. The decision-making model helps to create different perspectives on a dilemma and enables the decision maker to consider consequences for affected people. When we applied the ethical decision-making framework to the decision of Adelphia's auditor to issue an unqualified audit opinion without adequate disclosure and to John Rigas' decision to construct a golf course at company expense, we determined that with more ethical knowledge, the decision makers would have had a difficult time rationalizing their actions. This indicates that had the auditor and management used an ethical framework, fraudulent financial reporting might have been prevented. If our approach were adopted, we believe that auditors and business leaders who use such a framework will likely choose more ethical alternatives than decision makers who do not use an ethics framework. We assert: Auditors and business leaders who make ethical decisions will most likely be considered to be trustworthy and thus contribute to restoring trust and confidence in the financial markets. The Encyclopædia Britannica The authors would like to thank Bruce Stuart for his valuable comments on this paper. Footnote 1. A maxim is your reason for acting. 2. A home with one or more television sets connected to a cable system is counted as one basic subscriber ([2] Adelphia, 2000). 3. The Chapter 11 bankruptcy protection provides companies with an opportunity to reorganize, usually involving a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time (US Courts). 4. The Chapter 11 bankruptcy protection provides companies with an opportunity to reorganize, usually involving a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time (US Courts). 5. The November deal is one of the times when the Rigas family bought stocks in Adelphia and communicated to the investors that these buys were funded with the family's own money, when it in fact was Adelphia funds that were used to finance the purchase of the stocks. 6. The International Ethics Standards Board for Accountants which provides ethics standards for auditors operating under the regulations of the International Federation of Accountants (IFAC) has similar ethics standards for accountants. The International Ethics Standards Board for Accountants (IESBA's) fundamental principles include a requirements that a professional accountant should be straightforward and honest in performing professional services; a professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgments, a professional accountant should act diligently and in accordance with applicable technical and professional standards when providing professional services; and a professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession (International Federation of Accountants, Fundamental Principles for International Ethics Standards Board for Accountants). 7. It is important to remember that this is just an experiment and by no means is it certain that our conclusions would be identical to the ones Deloitte might have reached had it known and used the ethical theories and the ethical decision-making model. 8. It is important to remember that this is just an experiment and by no means is it certain that our conclusions would be identical to the ones John Rigas might have reached had he known and used the ethical theories and the ethical decision-making model. References 1. Adelphia (1994), Adelphia Communications Corporation 10-K 1994, The Securities and Exchange Commmission, available at: www.sec.gov/Archives/edgar/data/796486/0000796486-94-000006.txt (accessed 19 September 2016 Page 15 of 18 ProQuest May 6, 2008). 2. Adelphia (2000), Adelphia Communications Corporation 10-K 2000, The Securities and Exchange Commission, available at: www.sec.gov/Archives/edgar/data/796486/000079648601000012/0000796486-01000012-0001.txt (accessed...
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Explanation & Answer

1
BUSINESS ETHICAL PROBLEMS

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2
BUSINESS ETHICAL PROBLEMS
Introduction
Organizations that behave ethically are more apt to earn the trust of their customers,
employees, and stockholder. Principled expertise and morals when making decisions
regarding a public corporation are an integral part of a successful business. The managers and
supervisors should ensure that the corporation employees, both senior and junior adhere to
the codes of conduct written down in the business ethics. There should be mutual respect and
reliance between the shareholders, managers, supervisors and all company employees. As
observed in the case of Adelphia, not adhering to the code of business ethics is accompanied
by severe consequences such as public disgrace and legal law suits.
Background
As a publicly-traded corporation, Adelphia, Inc. was one of the largest providers of
cable services in the United States. After the company went public, it was learned that the
company had materially misrepresented its audited financial statements by failing to disclose
billions of dollars in debt. To make matters worse, the company’s independent auditors were
found to have been complicit in the fraudulent activity, helping the company to conceal the
lavish personal expenditures of the Riga’s family.
Ethical glitches raised by the Adelphia case
Counterfeit fiscal reports
The first major ethical problem raised by the Adelphia case relates to the
manipulation of Adelphia’s financial statements. John Riga’s and his sons routinely “cooked
the books,” purposefully inflating earnings in an effort to meet shareholders’ earnings
expectations, and to demonstrate the company’s earnings power to prospective investors.
Fearful of a plunge in Stock price or defaulting on its creditor agreements, Ade...


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