Betty Crawford is a staff accountant for a local CPA firm. For the past 15 years, the CPA firm has given employees a year-end bonus equal to two weeks’ salary. On November 30, the firm’s management team announced that there would be no annual bonus this year. Because of the firm’s long history of giving a year-end bonus, Betty and her co-workers had come to expect the bonus and felt that the firm had breached an implicit agreement by discontinuing the bonus. As a result, Betty decided that she would make up for the lost bonus by working an extra six hours of overtime per week for the rest of the year. The firm's policy is to pay overtime at 150% of straight time. Betty’s supervisor was surprised to see overtime being reported because there are generally very few additional or unusual client service demands at the end of the calendar year. However, the overtime was not questioned, because employees are on the “honor system” in reporting their work hours. 1. Is the firm acting in an ethical manner by eliminating the bonus? Explain your answer. 2. Is Betty behaving ethically by making up the bonus with unnecessary overtime? Why?
Betty Crawford is a staff accountant for a local CPA firm. For the past 15 years, the CPA firm has given employees a year-end bonus equal to two weeks’ salary. On November 30, the firm’s management team announced that there would be no annual bonus this year. Because of the firm’s long history of giving a year-end bonus, Betty and her co-workers had come to expect the bonus and felt that the firm had breached an implicit agreement by discontinuing the bonus. As a result, Betty decided that she would make up for the lost bonus by working an extra six hours of overtime per week for the rest of the year. The firm's policy is to pay overtime at 150% of straight time. Betty’s supervisor was surprised to see overtime being reported because there are generally very few additional or unusual client service demands at the end of the calendar year. However, the overtime was not questioned, because employees are on the “honor system” in reporting their work hours.
1. Is the firm acting in an ethical manner by eliminating the bonus? Explain your answer.
2. Is Betty behaving ethically by making up the bonus with unnecessary overtime? Why?
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