Professor Elam

Monday Sept 28, 2015

Candidates for the Texas CPA exam must complete a TSBPA approved class in accounting ethics. 

One of the components of an ethical reasoning model is identifying the stakeholders. 

I continue my coverage of the VW scandal as how a small decision ends up affecting so many. Most car makers have finance units. These units raise capitaL to finance the cars. If the collateral, the cars, fall in value, the paper, debt, has to be written down. 

Now that is happening to VW's Finance Unit.

But it gets worse. The supplier of th emission software, well respected Robert Bosch, wrote VW a letter way back in 2007 that the planned use of the software would be illegal. And then the VW internal auditors found the letter. Which raises the question ,if the VW internal auditors knew, how could the CEO not know?

Or as one of my friends like to say, it is always blackest just before things go 

Pitch Black.

And os the next casualty are the parts suppliers. Shares of Tenneco, Borg Warner, Delphi, ad Continental were pummeled last week following the disclosures.  The CEO at Honeywell complains that this casts a shadow over the diesel technology that does work. 

Bear markets are unforgiving. Bad behavior is punished in far more severe fashion than in bull markets. This is a good example of how the stone cast in the water creates a widening circle of disaster.