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Rule-Based Ethics Standards

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Should we have rules-based ethics standards? Why or why not? Should they tell you exactly what to do in specific ethical situations?

Do you agree with the authors that a code of ethics should do more than establish minimum acceptable standards? Why or why not?


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1. According to the article business ethics deals with the questions of whether specific business practices are acceptable. We should not have rules based ethical standards. Rules based accounting has not worked in practice. The focus is on checking the boxes more than achieving the objectives. Rules based ethics are perceived to be very complex, hard to understand, and difficult to follow. Rules base ethic is a list of detailed rules that must be followed when carrying out business. Professional managers prefer rules based ethics because in absence of rules their actions could be questioned in court. When strict rules are followed ...

Solution Summary

The answer to this problem explains ethics in accounting and goes over the rule-based ethics standards. The references related to the answer are also included.

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Auditing Questions: Rules-Based Standards and Enron/Anderson

1. Explain how "rules-based" accounting standards differ from "principles-based" standards. How might fundamentally changing accounting standards from "bright-line" rules to principle-based standards help prevent another Enron-like fiasco in the future? Are there dangers in removing "bright-line" rules? What difficulties might be associated with such a change?

2. Enron and Andersen suffered severe consequences because of their perceived lack of integrity and damaged reputations. In fact, some people believe the fall of Enron occurred because of a "run on the bank." Some argue that Andersen experienced a similar "run on the bank" as many top clients quickly fired the firm in the wake of Enron's collapse. Is the "run on the bank" analogy valid for both firms? Why or why not?

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