**Case Study: Employee Bonuses and Overtime Ethics****Scenario Overview:**Tonya Latirno is a staff accountant at Cannally and Kennedy, a local CPA firm. For the past decade, the firm has consistently awarded employees a year-end bonus equivalent to two weeks’ salary. However, on November 15, the management announced there would be no annual bonus this year. Given the firm's history, Tonya and her coworkers expected the bonus and viewed its removal as a breach of an implicit agreement.To compensate for the lost bonus, Tonya decided to work six extra hours of overtime each week for the rest of the year. The firm’s policy is to pay overtime at 150% of the standard salary rate.**Supervisor's Observations:**Tonya's supervisor noted the unexpected overtime reports, especially since the end of the year typically lacks significant additional client service demands. Nonetheless, the supervisor didn't question it due to the firm's reliance on an "honor system" for reporting hours.**Discussion Questions:**1. **Ethical Considerations for Cannally and Kennedy:** - Is the firm acting ethically by discontinuing the year-end bonus? Consider the historical context and employee expectations.2. **Ethical Considerations for Tonya:** - Is Tonya behaving ethically by working unnecessary overtime to compensate for the bonus? Examine the implications of her actions on the honor system. This case encourages exploring the balance between business decisions and employee expectations, alongside the integrity in reporting work hours.

Ethics: Ethics in business is a much debated yet less followed topic. Every business has to…

Answered: Is Cannally and Kennedy acting in an…

Is Cannally and Kennedy acting in an ethical manner by eliminating the bonus? Explain your answer. Is Tonya behaving ethically by making up the bonus with unnecessary overtime? Why or why not?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

**Case Study: Employee Bonuses and Overtime Ethics**

**Scenario Overview:**

Tonya Latirno is a staff accountant at Cannally and Kennedy, a local CPA firm. For the past decade, the firm has consistently awarded employees a year-end bonus equivalent to two weeks’ salary. However, on November 15, the management announced there would be no annual bonus this year. Given the firm's history, Tonya and her coworkers expected the bonus and viewed its removal as a breach of an implicit agreement.

To compensate for the lost bonus, Tonya decided to work six extra hours of overtime each week for the rest of the year. The firm’s policy is to pay overtime at 150% of the standard salary rate.

**Supervisor's Observations:**

Tonya's supervisor noted the unexpected overtime reports, especially since the end of the year typically lacks significant additional client service demands. Nonetheless, the supervisor didn't question it due to the firm's reliance on an "honor system" for reporting hours.

**Discussion Questions:**

1. **Ethical Considerations for Cannally and Kennedy:**
- Is the firm acting ethically by discontinuing the year-end bonus? Consider the historical context and employee expectations.

2. **Ethical Considerations for Tonya:**
- Is Tonya behaving ethically by working unnecessary overtime to compensate for the bonus? Examine the implications of her actions on the honor system.

This case encourages exploring the balance between business decisions and employee expectations, alongside the integrity in reporting work hours.

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