Business & Professional Ethics for Directors, Executives & Accountants, 6e

Multiple Choice Questions

Chapter 5 Corporate Ethical Governance & Accountability
1) Corporations are now increasingly realizing that they are accountable:
a.
b.
c.
d.
e.

Legally to shareholders
Legally to all stakeholders
Strategically to additional stakeholders
(a) and (b)
(a) and (c)

ANSWER: e
2) The companys internal auditors and the Ethics Officer should report:
a. Day-to-day to the CEO
b. Day-to-day to the Audit Committee of the Board of Directors
c. Regularly to the Audit Committee of the Board of Directors without management being
present
d. (a) and (c)
e. (a) and (b)
ANSWER: d
3) Which of the following is not true?
a. Principles are more useful than rules because principles can be interpreted as new
circumstances require
b. Rules are more useful than principles because rules can be interpreted as new circumstances
require
c. A blend of principles and rules is often optimal
d. All of the above
e. (a) and (c) only
ANSWER: b
4) Experience has revealed that, to be effective, a code must be reinforced by:
a.
b.
c.
d.
e.

Tone at the top

Ethics officer and internal auditors
A comprehensive ethical culture
Principles, rules and examples
All of the above

ANSWER: e
5) Which of the following is not an ethics risk management principle?
Business & Professional Ethics for Directors, Executives & Accountants, 5e,
L.J. Brooks & P. Dunn, Cengage Learning, 2010

a.
b.
c.
d.
e.

Normal definitions of risk are too narrow for stakeholder accountability

Assign responsibility, develop follow-up processes and board review
Discovery and remediation are essential
The code of ethics must be reviewed by independent parties
An ethics risk exists when expectations of stakeholders may not be met

ANSWER: d
6) A conflict of interest exists when a given decision maker (D) and another person (P) are in the
following situation:
a.
b.
c.
d.
e.

D has to exercise judgement in Ps behalf

P has to exercise judgement in Ds behalf
D has a special interest that interferes with proper judgement
(a) and (b)
(a) and (c)

ANSWER: e
7) A potential conflict of interest exists when a given decision maker (D) and another person (P) are in
the following situation:
a.
b.
c.
d.
e.

P has a special interest that interferes with proper judgement

D may have to exercise judgement in Ps behalf
D has a special interest that interferes with proper judgement
(a) and (b)
(b) and (c)

ANSWER: e
8) This is the preferred approach to deal with conflicts of interests
a.
b.
c.
d.
e.

Management
Disclosure
Remediation
Avoidance
Awareness

ANSWER: d
9) A fundamental problem examined by agency theory is how it is possible to align:
a.
b.
c.
d.
e.

Shareholders and stakeholders goals

Managers and stakeholders goals
Shareholders and managers goals
Principals and shareholders goals
Agents and stakeholders goals

ANSWER: c
Business & Professional Ethics for Directors, Executives & Accountants, 5e,
L.J. Brooks & P. Dunn, Cengage Learning, 2010

10) The 20/60/20 rule states that the total percent of employees who could commit a fraudulent act is:
a.
b.
c.
d.
e.

20%
60%
80%
100%
None of the above

ANSWER: b
11) Which of the following is not a characteristic identified by forensic experts in prospective fraud
situations?
a.
b.
c.
d.
e.

High intelligence
Greed
Need for whatever is taken
Opportunity to take advantage
Low probability of being caught

ANSWER: a
12) The primary focus of a compliance-based ethics program is:
a.
b.
c.
d.
e.

Preventing, detecting and punishing violations of the law

Define organizational values and encourage employee commitment
Improve image and relationship with stakeholders
Protect management from blame
All of the above

ANSWER: a
13) The primary focus of an integrity-based ethics program is:
a.
b.
c.
d.
e.

Preventing, detecting and punishing violations of the law

Define organizational values and encourage employee commitment
Improve image and relationship with stakeholders
Protect management from blame
All of the above

ANSWER: b
14) The most important factor in encouraging employee observance to an ethics program is that
employees perceive that it is:
a.
b.
c.
d.
e.

Compliance-based
Value-based
Achievement oriented
Stakeholder-based
Externally oriented

ANSWER: b
Business & Professional Ethics for Directors, Executives & Accountants, 5e,
L.J. Brooks & P. Dunn, Cengage Learning, 2010

15) Building trust within an organization can have favourable impact on employees willingness to share
information and ideas in a process of:
a.
b.
c.
d.
e.

Ethical awareness
Ethical awakening
Ethical renewal
Ethical wave
None of the above

ANSWER: c
16) A Conference Board survey identified the following rationale for developing codes of ethics:
a.
b.
c.
d.
e.

Make employees aware that adherence is critical to bottom-line success

Provide a statement of dos and donts
Discuss what is expected in stakeholder relationships
Establish values and mission
All of the above

ANSWER: e
17) This code deals with ethics principles plus additional examples:
a.
b.
c.
d.
e.

Credo
Code of ethics
Code of conduct
Code of practice
All of the above

ANSWER: c
18) Which of the following is not a mechanism for monitoring a code of ethics?
a.
b.
c.
d.
e.

Ethics audit or internal audit procedures

Reviews by legal department
Awards and bonuses
Annual sign-off by employees
Employee surveys

ANSWER: c
19) Which of the following is not an example of emerging public accountability standards or initiatives?
a.
b.
c.
d.
e.

SOX-404
GRI
AA-1000
FTSE4Good
All of the above

ANSWER: e
Business & Professional Ethics for Directors, Executives & Accountants, 5e,
L.J. Brooks & P. Dunn, Cengage Learning, 2010

20) SOX imposed the following new penalties for executives:

a.
b.
c.
d.
e.

Fines
Suspension
Criminal prosecution for executives
Return of ill-gotten gains
All of the above

ANSWER: c

Business & Professional Ethics for Directors, Executives & Accountants, 5e,
L.J. Brooks & P. Dunn, Cengage Learning, 2010