Case Study - NORTEL NETWORKS CORPORATION

Answer the questions given below in your own words, do not reproduce directly from the given case:-

1. Explain how the Nortel Scandal took place.

2. In 1998 Nortel's Code of Conduct was viewed as being leading edge. Notwithstanding the code of conduct, Nortel's financial statements were still manipulated with the knowledge and assistance of many employees in finance departments throughout the organization globally. How was this possible?

a. There were a series of recommendations made by the Special Committee to prevent recurrence of the accounting conducts. Give these recommendations.

b. Explain what principles of ethics and responsibilities of the professional accountant were violated.

4. Explain the material weaknesses identified during the whole scenario?

Ethical Principles in the AICPA

The Principles of the Code, express the profession's recognition of its responsibilities to the public, to clients, and to colleagues.
There are six principles, as follows:

Principle I RESPONSIBILITIES
In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities.

Principle II SERVE THE PUBLIC INTEREST
Members should accept the obligation to act in a way that will serve and honor the public.

Principle III INTERGRITY
Members should perform all responsibilities with integrity to maintain public confidence.

Principle IV OBJECTIVITY AND INDEPENDENCE
Members should be objective, independent and free of conflicts of interest.

Principle V DUE CARE
Members should observe the profession's standards and strive to improve competence

Principle VI SCOPE & NATURE OF SERVICE
A member in public practice should observe the Code of Professional Conduct.

(Source: NORTEL NETWORKS CORPORATION* ETHICAL MISSTEPS, Linda A. Robinson, Centre for Accounting Ethics School of Accountancy University of Waterloo Waterloo ON N2L 3G1 June 2005 )

Attachment:- NORTEL NETWORKS CORPORATION.pdf