2014 Professional Ethics & Conduct
Are you a robot?
Are you a
robot?
Levels of Ethical Maturity
• Self-Actualization
• Societal Influence
• Comparative
Authority
• Exclusive Authority
Ethical Issues
Will we agree??
Ethical Theories
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Utilitarianism: Promotion of the best long-term interest
of everyone should be the moral standard
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Maximize good over harm
Consequences of acts are moral justification
Rights and duties have no independent standing
Benefits can be defined and measured and added
Ethical Theories
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Deontology:
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Consequences are not the only criteria for determining the
morality of the action. Act is what matters
Emphasizes maxims, rules, principles
Morals are based on fundamental principles not upon mere
results
Kant’s imperative - one should take that action that he/she
would wish everyone to take in all circumstances, irrespective
of the consequences of the single action
Example of Conflict
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Eight hostages are about to be executed for no significant
crime. You are given the opportunity to shoot and kill
one of the hostages and the rest will be freed. If you do
not take this action all will be killed.
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What will you do?
What would a utilitarian do?
What would a deontologist do?
ETHICAL DILEMMAS
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INDIVIDUAL
CORPORATE
SOCIETAL
Ethical Drift
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organizations suffer from ethical drift – a gradual,
unconscious lowering of moral standards. While
businesses compete for profit, the boundaries between
right and wrong become blurred and people’s ethical
frame of reference shifts. Human biases like being
unrealistically optimistic about an outcome, believing
ourselves to be all-powerful, all-knowing and invincible,
and the tendency to justify our own behavior no matter
how morally hollow
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Sternberg
Silent Saboteurs
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Spectacular scandals account for only about 10% of the
business losses attributable to poor ethical behavior.
The other 90% accounts for billions of dollars annually
across the U.S. and appear in the way
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we treat each other when we try to protect our own turf, or
get ahead at the expense of others, or
do the wrong thing because we believe that is what our
company wants us to do
Silent Saboteurs
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Scapegoating
Abdicating
Budget Games
Overpromising
Turf-guarding
Endless meetings and memos
Under delivering
Risk aversion
Sharp penciling
Frank Navran, Training and
Development Magazine
More “Silent Saboteurs”
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I’ve Got a Secret
Credit Taking
Lack of Recognition
Attention to Detail
Let People Know
Nursing a Grievance
Smoke, but No Fire
Emergency, or Just Poor Planning
Robin Hood
Pushing the Limits
Frank Navran, Training and
Development Magazine
Sweat the Small Stuff
A recent company shared from their ethics compliance
office that the most complaints result from an employee
observing another employee’s improper use of the
company’s assets. The thoughts are:
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It’s only a pen
Nobody will care
Everybody does it
It doesn’t belong to anybody
Nobody will find out
Ethical issues that should concern us the most are the ones
we face everyday.
Wall Street Ethics
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52% felt it likely their competitors had engaged in
unethical acts.
24% felt it likely their company co-workers had engaged
in unethical acts.
24% said they would engage in insider trading to make
$10 million if they could get away with it.
28% felt the financial services industry does not put the
interests of clients first.
29% believe financial services professionals may need to
engage in unethical or illegal activity in order to be
successful.
Online survey of 250 financial professionals conducted by
Labaton Sucharow, a New York City law firm in USA
Today July 16, 2013
The Ultimatum Game
Is it ever OK to lie?
If you were interviewing
someone for a job and it
was brought up that he lied
to his current employer
about where he was, would
it affect your views on his
trustworthiness?
“When all else fails, tell the truth.''
— Donald T. Regan
What time is it?
To contact:
N.C. State Board of Certified Public
Accountant Examiners
www.nccpaboard.gov
Hierarchy of
Ethical Behavior
Character and Courage
–Doing the Right Thing
Moral Right and Wrong
Personal Integrity
N.C. Code of
Professional
Ethics and
Conduct
Professional Regulation/
Accounting Standards
Legal Regulation
The Oath of a CPA

I Will Support the Laws And Regulations of the
State of North Carolina and the United States.
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I Will Perform my Professional Duties to the Best
of my Ability and Abide by The Rules Of Professional
Conduct; and
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I Will Uphold the Honor And Dignity of the
Accounting Profession by Serving with Integrity,
Objectivity, and Competence.
Registered North Carolina CPA’s
(approx. 19,500)
2%
6%
Public - 39%
7%
6%
Industry (accounting)- 40%
39%
Industry (non-accounting)- 6%
Other - 7%
Education - 2%
40%
Government - 6%
NC CPAs Residing in NC – approx. 16,000
NC CPAs Residing in other States – approx. 3,500
CPAs Nationwide – Approx. 600,000
Numbers taken from October Activity Review
2013 State Board Activity
400
350
300
250
200
2012
2013
150
100
50
0
Matters Opened
Cases
Unauthorized
CPA Use
Disciplinary
Orders
Disciplinary Orders
CPE
Peer Review
Firm Registration
941 Nonpayment
2012
2013
Tax Shelters
Substandard Audits
Others
0
5
10
15
20
25
30
35
2014 Changes
NC Rules and Regulations
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Active and Inactive status only – there is no longer a
retired status
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Certificate applicants are required to disclose any arrests,
charges, convictions, PFJs, continuations, or nolo contendere
pleas to any criminal offense.
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Previously, this was only done at the Exam Application.
Reporting to the Board – notify the Board within 30 days
of any settlements, investigations or liens;
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Notification required regardless of any confidentiality clause in
the settlement
CPE – Professional Ethics
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Annual ethics course – 2 hour group study or self study;
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NEW: The ethics course must be presented by an
approved NASBA sponsor
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The course must provide you with a certificate of
completion.
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Any ethics hours in excess of 2 hours can be carried over,
but cannot be used for the annual ethics requirement in
succeeding years.
So this happened…
NEW: Qualifications of CPE Sponsors
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The Board does not register sponsors of CPE courses.
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The Board does not register CPE courses.
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CPE sponsors in good standing with NASBA shall be in
compliance with CPE requirements.
Qualifications of CPE Sponsors
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CPE that is not a NASBA sponsor must:
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Have an individual that did not prepare the course review the
course;
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Provide documentation that states:
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The general content of the course and skill level taught,
Any prerequisites or preparation required,
The level of the course (basic, intermediate, etc.),
The teaching methods used,
The amount of recommended CPE credit, and
The date the course is offered.
Time for an obvious question
Is CPE important?
Is CPE Important? Frequent Answers
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An integral part of professional development
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Does little to improve professional competency
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Too expensive
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Doesn’t apply to my job
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Not enough time to meet the requirement each year
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The requirements are too confusing
CPE Requirements
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40 hours each calendar year
Up to 20 hours of CPE can be carried over
Up to 10 hours for publications and 20 hours for
teaching;
Prorated based on date of approval of application (30, 20,
or 10 hours)
A course must increase your professional competency
You must maintain records substantiating CPE credits for
five years (includes current year)
No CPE requirement for inactive
You must have a certificate of completion for each course
Do you take CPE seriously?
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Reading the paper
Texting
Checking email
Facebook
Shopping online
Playing games
Preparing a tax return
Reviewing workpapers
Knitting
Taking online CPE during live class
CPEasy?
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184 licensees admitted they completed some of their
2012 calendar year CPE between 1/1/13 and 6/30/13.
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What’s the fate of these 184?
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In accordance with 21 NCAC 08G .0406, each was
issued a Letter of Warning from the Board.
CPEasy?
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3-5% of the 1,000-1,200 licensees audited are unable
to provide certificates of completion.
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How long are CPA’s required to maintain their CPE
records for purposes of a CPE audit?
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In accordance with 21 NCAC 08G .0401(i), it is the
CPA’s responsibility to maintain records
substantiating the CPE credits claimed for the current
year and for each of the four calendar years prior to
the current year.
08N - Professional Ethics & Conduct
Rules For All CPAs (Section 200)
Rules For All CPAs Using the CPA Title (Section 300)
Rules for All CPAS Performing Attest and Assurance
Services (Section 400)
Rules for All CPAs (Section 200)
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Integrity
Deceptive Conduct
Prohibited
Discreditable Conduct
Prohibited
Discipline by
Federal/State Authorities30 days
Cooperation with Board
Inquiry - 21 days to
respond
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Confidentiality
Violation of tax laws
Reporting Convictions
and Judgments
Accounting Principles
Responsibilities in Tax
Practice
Competence
Outsourcing to third
parties
IFRS
North Carolina Code - Integrity
The reliance of the public and the business community on
sound financial reporting and advice on business affairs
imposes on the accounting profession an obligation to
maintain high standards of technical competence, morality,
and integrity.
To this end, a CPA shall at all times maintain independence
of thought and action, hold the affairs of clients in strict
confidence, strive continuously to improve professional
skills, observe generally accepted accounting principles and
standards, promote sound and informative financial
reporting, uphold the dignity and honor of the accounting
profession, and maintain high standards of personal conduct.
Discreditable Conduct Prohibited
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A CPA shall not engage in conduct discreditable to the
accounting profession:
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Acts that reflect adversely on the CPA’s honesty, integrity,
trustworthiness, or good moral character
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Stating or implying an ability to improperly influence a
governmental agency or official
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Failing to comply with any order issued by the Board; or
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Failing to fulfill the terms of a peer review engagement
contract
Deceptive Conduct Prohibited
A CPA shall not engage in deceptive
conduct. Deception includes fraud or
misrepresentation and representations
or omissions which a CPA either knows
or should know have a capacity or
tendency to deceive. Deceptive conduct
is prohibited whether or not anyone
has been actually deceived.
Reporting Convictions, Judgments &
Disciplinary Actions
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Criminal Actions - A CPA shall notify the Board within 30 days
of any conviction or finding of guilt of, pleading of nolo
contendere, or receiving a prayer for judgment continued to
any criminal offense.
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Civil Actions - A CPA shall notify the Board within 30 days of
any judgment or settlement in a civil suit, bankruptcy action,
administrative proceeding, or binding arbitration, the basis of
which is grounded upon an allegation of professional
negligence, gross negligence, dishonesty, fraud,
misrepresentation, incompetence, or violation of any federal or
state tax law and which was brought against either the CPA or
a North Carolina office of a CPA firm of which the CPA was a
managing partner.
Reporting Convictions, Judgments &
Disciplinary Actions
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Settlements - Notify within 30 days of any settlement in lieu of
a civil suit or criminal charge grounded upon an allegation of
professional negligence; gross negligence; dishonesty; fraud;
misrepresentation; incompetence; or violation of any federal,
state, or local law. Notification is required regardless of any
confidentiality clause in the settlement.
Investigations - Notify within 30 days of any inquiry or
investigation by the IRS or any state DOR criminal
investigation divisions pertaining to any personal or business
tax matters.
Liens - Notify within 30 days of the filing of any liens by the
IRS or any state DOR regarding the failure to pay or apparent
failure to pay for any amounts due any tax matters.
Advertising vs. Networking
Volunteer Opportunities
David is a CPA and the Controller for a retail company. He and his
family are very involved in local church activities and he was
recently asked to be chair of the finance committee. He thought
this would be a good way to serve the church and agreed to take
the position. The minister had been at the church for 12 years and
was highly respected member of the community. The finance
committee worked closely with the church bookkeeper, a part-time
position held by a long-time member of the congregation and a
close friend of the minister. She prepared a monthly report of
collections and expenses for the finance committee and everything
seemed to run smoothly.
Three months after accepting the chair position Anne, the church
secretary asked for a private meeting with David. She reluctantly
began her story of how she believed the minister was embezzling
church funds with the assistance of the church bookkeeper.
Anne’s husband was head usher and although not required,
he often counted the collections before locking them in the
church safe
On Monday the book-keeper would count the collections,
report totals to the minister and one of them would take
the deposit to the bank.
The past two Monday’s the bookkeeper was ill so the
minister asked Mary to take the deposit to the bank. She
noticed the amount was less than her husband told her was
collected. She initially thought her husband made a mistake,
but then got curious and looked at past deposits. Most
were less than what her husband counted.
Serving on a Board of Directors
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What are the duties?
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Are the Duties Heightened for CPAs?
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Typical Claims Brought against Board Members
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What are the Risks?
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How Can the Risks be Mitigated?
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What are the Key Steps to Consider before Accepting?
2013 National Business
Ethics Survey
KPMG Integrity
Survey 2013
Observed Misconduct is in Decline
Ethics Resource Center 2013
Ethics Culture Has Strengthened
Ethics Resource Center 2013
Misconduct Declines as Ethics Culture
Improves
Ethics Resource Center 2013
Who Commits Misconduct?
In Strong Ethics Cultures,Vast Majority of Misconduct Done by
Individual Employees
Ethics Resource Center 2013
Tone at the Top is Bottoming Out – Who
Commits Misconduct
Ethics Resource Center 2013
Moving Up the Ranks
You are a CPA and have been with a mid-size company for 7 years and moved up the
ranks now supervising 12 employees. Your company has just announced a merger with a
larger company. Some layoffs in your department are inevitable.Your supervisor Mary,
asks you to rank your 12 employees and turn in the list in a week. Mary and her
husband are close family friends and her husband is your regular Saturday golf partner.
After wrestling with the list all week by using performance metrics, former evaluations,
observation and input from peers and clients, you turn the list in to Mary. After looking
at the list, Mary says it looks good, but to switch #3 (Corey) and #12 (John). Mary hired
John, 2 years ago. He works closely with both you and Mary. In your department his
work is sub-standard and he struggles with the responsibilities and has an attitude
problem with other employees. You are perplexed by Mary’s suggestion. As you are
leaving Mary’s office her administrative assistant follows you out and says, “I overheard
your conversation with Mary and I want you to know the reason for her suggestion.
Mary and John have been having an affair since he was hired. I overhear their
conversations and he travels with her to business meetings that he has no reason to
attend. I know, I do the expense reports for both of them.”
What do you do?
The Most Common Company-wide
Misconduct
Offering something of value (e.g., cash, gifts,
entertainment) to customers/clients 24%
 Health/safety violations 22%
 Offering something of value to public officials
20%
 Violating employee benefits, wage, or overtime
rules 20%
 Violating Internet policies 20%
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KPMG Integrity Survey 2013
 73%
of employees reported that they
had observed misconduct within
their organizations in the previous 12
months
 More than half of employees
reported that what they observed
could potentially cause a significant
loss of public trust if discovered
KPMG Integrity Survey 2013
Nearly half of employees were uncertain that
they would be protected from retaliation if
they reported concerns to management
 more than half suggested a lack of confidence
that they would be satisfied with the outcome
 Ethics and compliance programs continue to
have a favorable impact on employee
perceptions and behaviors
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Root Causes of Misconduct
64% Feel pressure to do “whatever it takes” to meet business
targets
60% Believe the code of conduct is not taken seriously
59% Believe they will be rewarded for results, not the means
used to achieve them
59% Fear losing their jobs if they do not meet targets otherwise
59% Lack understanding of the standards hat apply to their jobs
57% Lack resources to get the job done without cutting corners
57% Believe polices or procedures are easy to bypass or
override
49% Are seeking to bend the rules or steal for their own
personal gain
Prevalence of Misconduct
KPMG
%
Employees
2013
2009
2005
2000
Observed
Misconduct in
prior 12
months
73%
74%
74%
76%
Believed
observations
could cause “a
significant loss
of public trust
if discovered”
56%
46%
50%
49%
Misconduct in Accounting and Finance
Observations
2013
2009
Breaching computer,
networks or database
controls
34%
22%
Entering customer
contracts without proper
terms, contracts, or
approvals
35%
18%
Stealing or
misappropriating assets
30%
17%
29%
13%
Falsifying or manipulating
financial reporting
information
Prevalence of Misconduct -Could cause
Significant loss of Public Trust – Significant
Industry Increases
Industry
% Indicating Significant
Misconduct
% Increase from 2009
Electronics, Software &
Services
63%
26%
Aerospace & Defense
59%
19%
Consumer Markets
56%
20%
Chemicals & Diversified
Industrials
54%
20%
Real Estate & Construction
54%
15%
Misconduct in Sales and Marketing
Observations
2013
47%
2009
27%
Improperly gathering
competitor confidential
information
34%
20%
Violating contract terms
with customers
29%
14%
Engaging in anticompetitive practices
32%
12%
Submitting false or
misleading invoices to
customers
30%
9%
Engaging in false or
deceptive sales practice
Propensity to Report Misconduct
KPMG
% Employees
2013
2009
2005
2000
Notify
Supervisor or
another
manager
78%
81%
81%
63%
Try resolving
directly
54%
52%
53%
40%
Call hotline
53%
44%
38%
21%
Notify
someone
outside the
organization
26%
10%
10%
4%
23%
6%
6%
5%
Look the other
way or do
nothing
Reporting & Retaliation
Ethics Resource Center 2013
Making the Whistle Louder
Ethics Resource Center 2013
Is it Unethical of Fraud?
The Shades of Gray
Quadrant I
Ethical and Legal
Ethical
Quadrant II
Ethical and Illegal
Financial
Reporting Rules
Legal
Professional
Corporateand
Financial
Decisions
Decisions
Illegal
Quadrant IV
Unethical and Illegal
Quadrant III
Unethical and Legal
Unethical
Accounts Payable?
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Steve is in the accounting department at a regional branch of the bank. He
opens and books bills from suppliers and sends them accounts payable for
payment. Everything under $500 is paid directly with no further
authorization needed. Steve’s wife died from cancer last year after an
extended illness and he is raising their three children on his own. He is still
trying to pay off huge medical bills from his wife’s illness. The bill collectors
are getting very aggressive and he doesn’t know how he will make the
payments, pay the day care bills and buy groceries. This week he has to pay
$400 in past due day care or the children will be expelled. He goes home
and decides to print a fake invoice for office supplies under a reasonable
sounding supply company name using his PO Box as an address for the
$400 and mails it to the bank. He opens it and sends it through for
payment as usual and within a week receives $400 payment. He vows to
himself that he will never do this again and will pay it back, but next month
the same issues happen so he repeats his billing.
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Will Steve get caught?
Accounting
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Former KPMG Partner Scott London Sentenced to 14
Months for Insider Trading (April, 2014)
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Provided inside information to Mr. Shaw, jewelry store owner
London said, he had been driven by wanting to help out Mr.
Shaw, whose jewelry business was struggling. After receiving
payments from Mr. Shaw, he said in that interview, “I’d feel like I
just robbed somebody and I’d feel totally guilty.” But
“unfortunately those feelings weren’t enough to keep me from
doing it.” He called it a “slippery slope.”
Pleaded guilty
“it wasn’t inadvertent,” the judge said
Remember Madoff
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Madoff is serving a 150-year prison sentence after
pleading guilty in 2009
$65 billion Ponzi scheme
March, 2014 Verdict on 5 ex-Madoff
employees: Guilty of fraud
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"These defendants each played an important role in
carrying out the charade, propping it up and concealing it
from regulators, auditors, taxing authorities, lenders and
investors. The scheme these defendants helped perpetrate
cost innumerable investors their life savings. Now it likely
will cost the defendants their freedom," said Manhattan
U.S. Attorney Preet Bharara in a statement.
Guilty on charges they aided and profited from the
decades-long fraud
Not Just the Executives!
GUILTY
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Daniel Bonventre, 67, Madoff's ex-director of operations;
Annette Bongiorno, 65, a former executive assistant who
managed the firm's longest-standing clients;
JoAnn Crupi, 52, who oversaw the company's bank
account;
Former Madoff computer programmers Jerome O'Hara,
50, and George Perez, 48.
Brothers Sentenced for Health Care
Fraud
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March 19, 2014 Charleston, S.C., Truman Lewis, of Charlotte, and his
brother Norman Lewis, of Georgetown, were sentenced for
participating in a conspiracy to commit health care fraud and money
laundering. Truman Lewis was sentenced to 120 months in prison
and Norman Lewis was sentenced to 90 months in prison. Both
were ordered to pay $3,307,967 in restitution to Medicaid. Truman
and Norman Lewis billed Medicaid for almost $9 million in a 22month period, with much of the billing being fraudulent. The
defendants ran a for-profit youth mentoring service called Helping
Hands Youth and Family Services, which had offices in Georgetown,
Conway, Rock Hill, and Columbia. The defendants billed for
weekends when children were not seen, for periods of time before
children were in the program, for periods of time after the children
had left the program, and for children who had no diagnosis to
justify billing.
Georgia Man Sentenced for Filing False
Claims
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January 10, 2014, in Augusta, Ga., Jeffrey Sponseller was
sentenced to 33 months in prison, three years of supervised
release and ordered to pay $441,729 in restitution. Sponseller
previously pleaded guilty to one count of false claims.
According to court documents, Sponseller was an optometrist
and owner of Eye Care One, a medical company which
purportedly specialized in comprehensive vision care at
nursing home facilities. On July 27, 2009 Sponseller visited a
nursing facility and later submitted claims to Medicare for over
$30,000 for 177 patients. From January 1, 2008 through
February 24, 2011, Sponseller billed Medicare for more than
$800,000. Many of these claims were false and fraudulent in
that the specific health care services were not provided.
Owner of Tax Return Preparation Franchise and
Health Provider Business Sentenced To Prison
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Sept. 11, 2014, in Greensboro, North Carolina, Claude Arthur Verbal II, was
sentenced to 135 months in prison for tax fraud, healthcare fraud and money
laundering crimes in two separate cases.Verbal was also ordered to serve three
years of supervised release and to pay restitution of $4,078,584 to the Internal
Revenue Service (IRS) and $2,382,378 to the North Carolina Department of Health
and Human Services.
Verbal was the owner of Nothing But Taxes (NBT), that operated from 2005 to at
least 2012.Verbal personally prepared false tax returns for clients and taught and
encouraged his employees to do so as well. Verbal and employees frequently offered
clients a dramatically larger tax refund if the client agreed to make a cash payment
to their tax preparer over and above the flat return preparation fee that NBT
charged every client, whether or not their return was falsified.
In a separate case,Verbal was the owner and operator of Infinite Wellness Concepts
(IWC), a Medicaid behavioral health provider with several locations in North
Carolina. IWC was contracted to provide group therapy, intensive in-home services,
and enhanced mental health and substance abuse services. Verbal acquired at least
$1 million in fraudulently obtained funds from the Medicaid program. The money
laundering charge to which Verbal pleaded guilty relates to the purchase of a
$52,000 diamond ring with the proceeds of healthcare fraud.
Cost of Medicare Fraud
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2012 report, FBI report said, “The United States spends more than
$2.5 trillion on health care annually, and rough estimates indicate
that anywhere from 3 (percent) to 10 percent of all health care
expenditures are attributed to fraud.“

Annual cost of fraud ranges from $75 billion to $250 billion.

Government Accounting Office doesn't think this estimate is far
wrong. It reported that in 2011, Medicare and Medicaid paid an
annual $65 billion in "improper payments." It defines "improper" to
include payments that are made in error -- not fraud, but wrong just
the same.
Dodd Frank & Consumer Protection Act

SEC law providing whistleblowers with “monetary
rewards”.
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Information must lead to recovery of $1 million or
more.

Reward is between 10-30% of monetary sanction.

Must be securities fraud against a public company
False Claims Act & The Qui Tam
Whistleblower Reward

False Claims Act is intended to encourage people to come
forward with information and assist the government in
stopping Medicare fraud, defense contractor fraud and other
kinds of federal fraud.

The qui tam reward for the whistleblower ranges from 15% to
30%, depending on the extent to which the whistleblower and
his counsel contribute to the prosecution of the case.

In addition, the False Claims Act provides for the recovery of
attorney fees and expenses.

These two provisions combine to encourage whistleblowers
to come forward
Generational Differences in the
Workplace
ETHICS,
VALUES
AND AGE
Ethics Resource Center
Which one are you?
2013 NBES
How Do the Generations Compare on
Misconduct?
Overall
Traditionalists
Boomers
Gen X
Millennials
13%
Felt
Pressure
22%
9%
13%
15%
45%
Observed
Misconduct
36%
44%
45%
49%
65%
Reported
Misconduct
39%
64%
69%
67%
22%
Perceived
Retaliation
16%
18%
21%
29%
Ends and Means

% of workers who agree to look the other way if the
company did something questionable
2013 NBES
Recommendations
Best way to address challenges of
a workplace spanning multiple
generations is…



Implement effective ethics and
compliance program
Build strong ethics culture that
encourages employees to do
right thing
Do this in a way that reaches
and influences each generation
Case Study


John Green is a fourth year CPA in a large firm on an IT
consulting engagement at a major power company’s
nuclear facility. His assignment was expected to end in
one week, but he just received word they would like him
to stay an additional two weeks due to a serious
unplanned outage at the facility which slowed down the
consulting engagement. He is disappointed because he
will not be able to attend a class reunion. He posts on
Facebook and the Class Reunion website that delays in
the outage will prevent him from being back in town to
attend the reunion.
Is there a problem?
Social Networks - CPA’s are doing it,
though they probably don’t know why
SocialCPAs 2012 Social Media Survey
It’s Not Just Facebook & YouTube

Significant missteps are
happening in HR and recruiting:



Profiling
Third party recruitment practices
LinkedIn





New connections = leak of confidential
information
Endorsements = job search
Endorsements destroy your reference
policy
Email notices continue long after you have
left your company
Resume fraud and material
misrepresentations
2012 NBES-SN
Frequency of Social Networking at Work
2012 NBES-SN
Training Best Practices


Select the right method (Live,
eLearning, blended)
Make it continuous




Refresher training
Burst Training (periodic 5-7
minute reminders)
Compliance communication
materials
Company intranets


Redistribute key policies via
training program
Make it engaging




Scenario-based
Realistic (contemporary) issues
and stories
Focus on behaviors not the law
Not overly legalistic – make
the content accessible
2012 NBES-SN
How Can We Use Social Media to Our
Advantage?
Companies can learn from social
networking employees to get a
better picture of what employees
do and how they communicate.
Engaging social networkers will
ultimately help:



Enhance the company’s
reputation
Strengthen employees’ ethical
performance
Create a closer relationship
between company and
employees
2012 NBES-SN
The Future Ethical/Fraud Issues: What’s
Coming
 IT
Security
 Cybercrime
Fraud in Cyberspace
JPMorgan Chase Hacking Affects 76
Million



A cyberattack this summer on JPMorgan Chase
compromised the accounts of 76 million households and
seven million small businesses
Began in June but was not discovered until July
Operating overseas, the hackers gained access to the
names, addresses, phone numbers and emails of JPMorgan
account holders. In its regulatory filing on Thursday,
JPMorgan said that there was no evidence that account
information, including passwords or Social Security
numbers, had been taken
Home Depot – 56 million card numbers
stolen


Home Depot, Sept. 18, says that to evade detection, the
criminals involved in the cyber-attack against it used
custom-built malware, which has not been used in other
attacks.
Home Depot estimates it will spend $62 million in 2014
for breach-related costs
Home Depot Fraud


Home Depot fraud has started to trigger fraudulent
transactions across financial institutions and, in some cases,
draining cash from customer bank accounts,
The fraudulent transactions are showing up across the U.S. as
criminals use stolen card information to buy prepaid cards,
electronics and even groceries, these people said. In some
cases, the fraudulent transactions have been tracked to batches
of cardholder accounts that are tied to specific ZIP Codes
98
Methods of Attack –
Verizon 2012 Study of Data Thefts
Error
Misuse
Social
Data Theft
Physical
Malware
Hacking
0%
10%
20%
30%
40%
50%
60%
Time from initial compromising to discovery
– Verizon 2012
Minutes
Hours
Days
Weeks
Years
Months
PWC 2013 State of Cybercrime Survey
1.
Leaders do not know who is responsible for their
organization’s cybersecurity, nor are security experts
effectively communicating on cyberthreats, cyberattacks,
and defensive technologies.
2.
Leaders underestimate their cyber-adversaries’
capabilities and the strategic financial, reputational, and
regulatory risks they pose.
PWC 2013 State of Cybercrime Survey
3.
Leaders are unknowingly increasing their digital
attack vulnerabilities by adopting social
collaboration, expanding the use of mobile devices,
moving the storage of information to the cloud,
digitizing sensitive information, moving to smart grid
technologies, and embracing workforce mobility
alternatives—without first considering the impact these
technological innovations have on their cybersecurity
profiles.
Medical Records Are a Gold Mine for
Cybercrime


Report security firms Norse and SANS found nearly
50,000 instances of malicious attacks on health care
institutions, including 375 cases where the network was
breached
. Last year the health care industry suffered more
cyberattacks than any other industry in the US, including,
for the first time, the business sector. "The report is a
snapshot of what’s happening throughout the industry,"
researchers wrote. “No health care organization is
immune. Reports of breaches against health care
organizations, large and small, continue to rise.”
HP & Ponemon Institute
2013 Cost of Cyber Crime Study
HP & Ponemon Institute
2013 Cost of Cyber Crime Study

Average annualized cost of cybercrime incurred per
organization was $11.56 million, with a range of $1.3
million to $58 million.



an increase of 26%, or $2.6 million, over the average cost
reported in 2012.(3)
Organizations experienced an average of 122 successful
attacks per week, up from 102 attacks per week in
2012.(4)
The average time to resolve a cyberattack was 32 days,
with an average cost incurred during this period of
$1,035,769, or $32,469 per day

55% increase over 2012’s estimated average cost of $591,780
for a 24-day period.(1)
HP & Ponemon Institute
2013 Cost of Cyber Crime Study

Most costly cybercrimes are caused by denial-of-service,
malicious-insider and web-based attacks, together
accounting for more than 55% of all cybercrime costs per
organization on an annual basis.(5)

Information theft continues to represent the highest
external costs, with business disruption a close second.(6)

On an annual basis, information loss accounts for 43% of total
external costs, down 2 percent from 2012. Business disruption
or lost productivity accounts for 36% of external costs, an
increase of 18% from 2012. (1)
HP & Ponemon Institute
2013 Cost of Cyber Crime Study



Recovery and detection are the most costly internal
activities. For the past year, recovery and detection
combined accounted for 49% of the total internal activity
cost, with cash outlays and labor representing the
majority of these costs.
Cybercrime cost varies by company size, but smaller
organizations incur a significantly higher per-capita cost
than larger organizations.
Organizations in financial services, defense, and energy
and utilities experience substantially higher cybercrime
costs than those in retail, hospitality and consumer
products.
Decision Model for Resolving Ethical
Issues








DETERMINE THE FACTS
IDENTIFY ALL STAKEHOLDERS
DEFINE ETHICAL ISSUES AND MAJOR PRINCIPLES, RULES,
VALUES
SPECIFY ALTERNATIVE COURSES OF ACTION
COMPARE ETHICAL PRINCIPLES WITH ALTERNATIVES TO
SEE IF CLEAR DECISION
ASSESS CONSEQUENCES OF EACH ALTERNATIVE
DISCUSS THE ISSUE WITH SOMEONE
MAKE YOUR DECISION
@Rockness Education Services 2005
I-Tunes APP

http://www.scu.edu/ethics/ethical-decision/
Three Questions
Ask yourself when you are faced with an ethical dilemma:
 Is it legal? Will you be violating any criminal laws, civil
laws, or company policies by engaging in this activity?
 Is it balanced? Is it fair to all parties concerned both in
the short-term as well as the long-term?
 Is it right? You know the difference between right and
wrong…how does this decision make you feel about
yourself? Are you proud of yourself for making this
decision? Would you like others to know you made the
decision you did?
Kenneth Blanchard and Norman Vincent Peale,
authors of The Power of Ethical Management
“When you come close to selling out,
reconsider”
From I Hope you Dance, Lee Ann Womack
“Ethical errors end careers more
quickly and more definitively than any
other mistake in judgment or
accounting”
Solomon, 1994
People often over-estimate
the cost of doing the right
thing and under-estimate
the cost of not doing the
right thing!
@Rockness Education Services 2005
“To see what is
right and not to
do it is want of
courage.”
(Confucius)
Cal Christian
christianj@ecu.edu
Jonathan Kraftchick
jkraftchick@cbh.com
Melissa Critcher
mcritcher@carolina.rr.com
Joanne Rockness
jrockness@nc.rr.com