Ethics
When people need to resolve issues in their daily lives, they often make decisions based on their own _______
values
When people need to resolve issues in their daily lives, they often make decisions based on their own ________
values
The manner in which leaders behave and operate independent of the situation is shaped by the _______that are woven into their inner lives.
virtues
How many independent members of the audit committee is the minimum required to satisfy requirements to list a stock on the Nasdaq or New York Stock Exchange? 3 2 4 None
3
According to the ACFE Global Survey, the typical organization loses ______. $1 million of its assets each year 10% of its revenue to fraud each year 5% of its revenue to fraud each year $1 million of its revenue to fraud each year
5% of its revenue to fraud each year
Which of the following are components of the Cadbury Code? (Select all that apply) The renumeration committee should be executive directors. A majority of the board should be outside directors. There should be a separation of duties between the chairman of the board and the CEO.
A majority of the board should be outside directors. There should be a separation of duties between the chairman of the board and the CEO.
Which of the following are components of the Cadbury Code? (Select all that apply) The CEO should also be the the chairman of the board. A non-executive director should not engage in day to day operations of the company. A majority of the board should be internal executives. The audit committee should have a minimum of three non-executive directors.
A non-executive director should not engage in day to day operations of the company. The audit committee should have a minimum of three non-executive directors.
Which of the following individuals would be considered independent directors? A person with no indirect relationship to the company Shareholder of the company A person with an indirect material relationship to the company A person with no direct relationship to the company Partner of the company
A person with no indirect relationship to the company A person with no direct relationship to the company
Which of the following are potential concerns of the whistleblowing program? (Select all that apply) The whistleblowing program gives incentive to employees to report fraud and protects them from retaliation. The whistleblowing program protects the identity of individuals who report fraud, and this may be necessary information. A self-interested person may reveal company information with inadequate safeguards as to the quality of the information. Permitting compliance officers to become whistleblowers based on the passage of time may dissolve trust in compliance officials.
A self-interested person may reveal company information with inadequate safeguards as to the quality of the information. Permitting compliance officers to become whistleblowers based on the passage of time may dissolve trust in compliance officials.
Which of the following must be included in a company's internal control report according to the Sarbanes-Oxley Act? (Select all that apply) A statement of management's responsibility over internal control A management assessment of the effectiveness of internal control An attestation report from the auditor covering management's assessment of effectiveness of internal control A management assessment of fraud in the financial statements Auditor guarantee that the financial statements of the company have not been subject to fraud
A statement of management's responsibility over internal control A management assessment of the effectiveness of internal control An attestation report from the auditor covering management's assessment of effectiveness of internal control
Which of the following is the most common method of detecting occupational fraud? Management review Internal audit Accident A tip External audit
A tip
Which of the following conclusions were drawn from the results of the ACFE occupational fraud survey? (Check all that apply) A tip is the most likely way for occupational fraud to be detected. The amount of fraud losses correlate with higher levels of authority. Anti-fraud controls correlate to significant decreases in occupational fraud. Almost none of the victim organizations recovered any losses they suffered due to the fraud. Anti-fraud controls are the most likely way that occupational fraud is detected.
A tip is the most likely way for occupational fraud to be detected. The amount of fraud losses correlate with higher levels of authority. Anti-fraud controls correlate to significant decreases in occupational fraud.
According to the 2013 NBES Survey of Reporting of Observed Misconduct, all instances of observed misconduct ______. have increased have stayed the same have declined
According to the 2013 NBES Survey of Reporting of Observed Misconduct, all instances of observed misconduct ______. have increased have stayed the same have declined
Which of the following were findings in the KPMG Integrity Survey 2013 that looked at organization misconduct? A driving force behind misconduct is rewarding employees based upon the means used to achieve desired results. Almost 60% of employees were certain they would be protected from retaliation if they blew the whistle on misconduct. Almost 75% of employees observed misconduct in their organization within the past 12 months. A driving force behind misconduct was pressure to do whatever it takes to meet targets. More than 50% of employees reported the observed misconduct could cause a loss of public trust.
Almost 75% of employees observed misconduct in their organization within the past 12 months. A driving force behind misconduct was pressure to do whatever it takes to meet targets. More than 50% of employees reported the observed misconduct could cause a loss of public trust.
Which of the following actions would be protected under the National Labor Relations Act? (Select all that apply) An employee who complains that her personal performance evaluation is unfair An employee who complains on behalf of coworkers about safety issues Concerted efforts to improve conditions at work conducted on social media Posting proprietary company information on social media
An employee who complains on behalf of coworkers about safety issues Concerted efforts to improve conditions at work conducted on social media
Corporate governance regulation in the United States includes which of the following? (Check all that apply) Internal auditors must review corporate governance guidelines to ensure they have been followed. Protection for executives in fraud cases Auditors must attest to and report on management's certification on internal controls. Protection for whistleblowers Management must certify the internal controls over financial reporting.
Auditors must attest to and report on management's certification on internal controls. Protection for whistleblowers Management must certify the internal controls over financial reporting.
What was the primary accounting manipulation in the Anthony Menendex v. Halliburton case? Bill and hold transactions Manipulating estimates of fair market value Capitalizing expenses as assets
Bill and hold transactions
Identify the elements of corporate culture. (Check all that apply) CEO and CFO External auditors Audit committee Internal auditors
CEO and CFO Audit committee Internal auditors
Clawback actions by the SEC occur because ______. (Check all that apply) CEOs and CFOs receive excessive pay from stock profits tied to earnings that were restated CEOs and CFOs have knowledge of financial wrongdoing during a financial restatement period excessive pay packages to CEOs and CFOs that can be linked to financial restatements are illegal practices CEOs and CFOs breach their fiduciary responsibilities CEOs and CFOs are paid excessive compensation
CEOs and CFOs receive excessive pay from stock profits tied to earnings that were restated CEOs and CFOs have knowledge of financial wrongdoing during a financial restatement period CEOs and CFOs breach their fiduciary responsibilities
Which of the following procedures is required under SOX Section 302 to protect the public against fraudulent financial reporting? Certification of financial statements by the CEO and CFO Requiring the Chief Compliance Officer to report directly to the audit committee Certification of the financial statements by the independent auditor A code of ethics for the independent auditors
Certification of financial statements by the CEO and CFO
Which of the following are important components of tone at the top? (Select all that apply) Communicating the importance of compliance to employees Rarely modeling company values Enforcing disciplinary actions
Communicating the importance of compliance to employees Enforcing disciplinary actions
The objectives of internal control include which of the following? (Check all that apply) Compliance with applicable laws and regulations Effectiveness and efficiency of operations Management doesn't override internal controls Reliability of financial reporting Compliance with SEC regulations
Compliance with applicable laws and regulations Effectiveness and efficiency of operations Reliability of financial reporting
Which of the following is the least common method of detecting occupational fraud? External audit Management review Confession Internal audit A tip
Confession
Which of the following are rules managers should follow when fostering ethical leadership? (Select all that apply) Choose the action that maximizes earnings. Consider how actions will affect others. Do not choose actions that will harm others. Think about potential actions before making a decision. Always put shareholder interest first. Make decisions that respect the rights of others.
Consider how actions will affect others. Do not choose actions that will harm others. Think about potential actions before making a decision. Make decisions that respect the rights of others.
Which of the following are the steps necessary to prevent subordination of judgment? (Select all that apply) Consider whether safeguards exist to ensure that threats to compliance are reduced to an acceptable level. The accountant should obey the authority and wishes of the chief financial officer. Determine whether internal reporting requirements exist to report differences of opinion.
Consider whether safeguards exist to ensure that threats to compliance are reduced to an acceptable level. Determine whether internal reporting requirements exist to report differences of opinion.
Behavioral red flags shown by fraudsters in the ACFE Survey include which of the following? (Check all that apply) Stable home life Controlling personality Life of the party attitude Financial difficulties Social isolation
Controlling personality Financial difficulties Social isolation
The model that looks at the role of one's personal code of conduct in ethical behavior within an organization is called ______. Jones-Hiltebeitel model Kohlberg's moral development theory Cognitive dissonance model Rest's model of moral development
Jones-Hiltebeitel model
The responsibilities of ethics compliance officers include which of the following? (Check all that apply) Ensure compliance with laws and regulations Serve as a sounding board for management to try out new ideas Help to create a positive ethical tone in the organization Report violations of SOX to the SEC Conduct an internal audit of the financial statements
Ensure compliance with laws and regulations Serve as a sounding board for management to try out new ideas Help to create a positive ethical tone in the organization
Which of the following is not a goal of internal controls? Ensure that management policies are followed Ensure that ethical systems are built into corporate governance Help prevent and detect fraud Ensure that fraud does not occur
Ensure that fraud does not occur
Which of the following is not a type of fraud? Misappropriation of assets Errors in financial statements Disclosure fraud Fraudulent financial statements
Errors in financial statements
Which of the following can cause the ethical collapse of an organization? (Check all that apply) Failing to meet earnings targets Failing to punish those who violate ethics Asking "Can it be done legally?" rather than "Should it be done?" Audit failure Rationalizing unethical actions Failing to act with integrity
Failing to meet earnings targets Asking "Can it be done legally?" rather than "Should it be done?" Rationalizing unethical actions Failing to act with integrity
Assets can be misstated by which of the following? (Check all that apply) Failing to write them down to a lower market value Using fair market value to determine proper valuation Failing to depreciate them Recording them as acquired Manipulating reserves
Failing to write them down to a lower market value Failing to depreciate them Manipulating reserves
True or false: External auditors cannot qualify for a whistleblower award when reporting wrongdoing about their firm unless the information leads to a successful enforcement action against the client.
False
Which of the following are requirements expected of a code of ethics for senior financial officers? (Select all that apply) Untimely reporting Inaccurate disclosures Full and fair disclosure Honest and ethical conduct
Full and fair disclosure Honest and ethical conduct
Which of the following is another way of saying that a moral meltdown has occurred at a company that has experienced an ethical collapse? Good people in companies do really dumb things. Unethical actions are not reported. Failing to be loyal to the company's interests Failing to meet earnings estimates
Good people in companies do really dumb things.
Which of the following have improved oversight and responsibility? (Check all that apply) Having dedicated compliance officers Having no independent member on the board of directors Compliance officers communicating concerns frequently Having a stand-alone ethics committee
Having dedicated compliance officers Compliance officers communicating concerns frequently Having a stand-alone ethics committee
At what point is the auditor required to report suspected fraud directly to the SEC? After management and the board of directors correct the fraud and issue necessary external reports If the auditor does not receive communication from the client to the SEC within one business day of the audit report to the board of directors If management and the board of directors have not taken remedial action after the fraud was identified
If the auditor does not receive communication from the client to the SEC within one business day of the audit report to the board of directors
The Equifax data breach involved which of the following? (Select all that apply) Inadequate disclosures related to its cyber security Failing to protect consumer information it sells to banks and other organizations Manipulating earnings to increase stock price
Inadequate disclosures related to its cyber security Failing to protect consumer information it sells to banks and other organizations
Unless certain exceptions apply, the Dodd-Frank Act excludes which of the following individuals from receiving whistleblower awards? (Check all that apply) Employees who have been retaliated against Members of top management Internal auditors Internal compliance officers
Internal auditors Internal compliance officers
Which of the following might contribute to a weak board of directors? (Check all that apply) Pressure to achieve desired results Inadequate external audits Interrelationships between board members and top management Lack of independence from management
Interrelationships between board members and top management Lack of independence from management
The purpose of the Ethical Dissonance Model includes which of the following? (Check all that apply) It illustrates the disconnect between ethical standards and ethical behavior. It illustrates the interaction between the organization and the individual. It describes the ethical person-organization fit. It describes how the ethics of an organization influences behavior. It describes how cognitive dissonance may occur in an organization.
It illustrates the interaction between the organization and the individual. It describes the ethical person-organization fit. It describes how the ethics of an organization influences behavior.
Why have there been few cases of false certification of financial statements under SOX Section 302? (Check all that apply) It is very difficult to prove executives knowingly signed a false certification. Prosecutors prefer to charge executives with other crimes. Executives often plead guilty to avoid prosecution.
It is very difficult to prove executives knowingly signed a false certification. Prosecutors prefer to charge executives with other crimes.
There were many reasons why corporate governance failed at Lehman Brothers, such as ______. (Select all that apply) auditors communicated concerns regarding accounting irregularities proper disclosure of liquidity risk Lehman board members being allowed to invest in limited partnerships related to Lehman Lehman repeatedly exceeding its own internal risk limits adequate disclosure of material information
Lehman board members being allowed to invest in limited partnerships related to Lehman Lehman repeatedly exceeding its own internal risk limits
How do the actions of Cynthia Cooper in the WorldCom fraud relate to the ethical person-organization fit? Low organization, high individual ethics Low organization, low individual ethics High organization ethics, low individual ethics High organization ethics, high individual ethics
Low organization, high individual ethics
Ethical dissonance does not exist in which of the ethical person-organization fit options? (Select all that apply) Low organizational ethics, low individual ethics High organizational ethics, low individual ethics High organizational ethics, high individual ethics Low organizational ethics, high individual ethics
Low organizational ethics, low individual ethics High organizational ethics, high individual ethics
Which of the following is likely to occur when an individual with high ethics is employed by an organization with an unfavorable ethical climate? Higher job satisfaction Lower employee turnover Higher management support Lower job satisfaction
Lower job satisfaction
Which type of fraud accounts for 89% of all types of occupational fraud? Cash related fraud Inflated net earnings Skimming fraud schemes Misappropriation of assets Misappropriation of expenses
Misappropriation of assets
The COSO report identifies which of the following components of the internal control framework? (Check all that apply) Monitoring The control environment Reporting to the SEC Fraud detection Control activities Risk assessment
Monitoring The control environment Control activities Risk assessment
Which of the following were findings in the KPMG Integrity Survey 2013 related to what employees would do if they observed a violation of their organization's standards of conduct? More than 75% of employees would notify their supervisor of violations. 50% of employees would do nothing. Almost 75% of employees would try to resolve the matter directly. More than 50% would call the ethics hotline.
More than 75% of employees would notify their supervisor of violations. More than 50% would call the ethics hotline.
An ethical climate is enhanced through which of the following? (Choose all that apply) Openness and transparency Values-driven organization Non-supportive environment
Openness and transparency Values-driven organization
In the context of whistleblowing, by reporting through the internal compliance process, which of the following are possible outcomes? (Select all that apply) Others in the organization become informed of the facts. Employees are protected from illegal acts. Others in the organization may become potential whistleblowers.
Others in the organization become informed of the facts. Others in the organization may become potential whistleblowers.
Which of the following is not a source of ethical collapse in an organization? Stressing the letter of the law rather than its spirit Failing to achieve desired financial results Punishing those who violate ethics Providing reasons and rationalizations for ethical violations
Punishing those who violate ethics
Which of the following are important components of tone at the top? (Select all that apply) Reminding employees of a non-retaliation policy Modeling company values Rarely enforcing the code of conduct
Reminding employees of a non-retaliation policy Modeling company values
Operating expenses can be understated by which of the following? (Check all that apply) Expensing costs that should be capitalized Reporting operating expenses as part of cost of goods sold Accelerating recording operating expenses into an earlier period Capitalizing costs that should be expensed Failing to record operating expenses
Reporting operating expenses as part of cost of goods sold Capitalizing costs that should be expensed Failing to record operating expenses
Which of the following is the least commonly occurring anti-fraud control according to the ACFE Global Fraud Survey? Rewards for whistleblowers Code of conduct Management review External audit Dedicated fraud department
Rewards for whistleblowers
Why is the Giving Voice to Values technique critical in ethical decision making in business? (Select all that apply) Rules governing ethical dilemmas are clear and concise. Rules governing ethical dilemmas are often vague. The results of the decision are unknown. The results of the decision are known. The correct decision is often unclear.
Rules governing ethical dilemmas are often vague. The results of the decision are unknown. The correct decision is often unclear.
Which of the following promote ethical behavior in an organization? (Select all that apply) Whistleblower retaliation within the organization Opposing points of view within the organization Rules of conduct within the organization Ethical norms and standards within the organization Effective leadership within the organization.
Rules of conduct within the organization Ethical norms and standards within the organization Effective leadership within the organization.
Which section of Sarbanes-Oxley requires the inclusion of a statement that management accepts responsibility for maintaining adequate internal control over financial reporting? Section 806 Section 404 Section 301 Section 302 Section 406
Section 404
Which section of Sarbanes-Oxley prohibits retaliation for any lawful act done by the employee? Section 302 Section 806 Section 301 Section 406 Section 404
Section 806
Which of the following is not an indicator of possible fraud? Lavish lifestyle Financial difficulties Refusal to take vacations Socializing attitude
Socializing attitude
Which act protects the rights of employees to act together in a concerted manner to address conditions at work, with or without a union? The Dodd-Frank Act The National Labor Relations Act The Sarbanes-Oxley Act
The National Labor Relations Act
Which of the following are elements of whistleblowing? (Check all that apply) The act of whistleblowing The organization against which the complaint is lodged The response by those to whom the complaint is made The action taken by the organization to counteract the whistleblower The party to whom the complaint is made
The act of whistleblowing The organization against which the complaint is lodged The party to whom the complaint is made
When an individual with low ethics joins an organization with low ethics, which of the following occur? (Check all that apply) Socialized employees may attempt to alleviate the ethical dissonance. The employee is more willing to participate in corruption. The employee adopts the attitude of going along to get along. The fit is there, but it turns in a negative direction of corruption. The likelihood of the employee leaving the company rises.
The employee is more willing to participate in corruption. The employee adopts the attitude of going along to get along. The fit is there, but it turns in a negative direction of corruption.
The COSO report describes internal controls as a process that is affected by which of the following? (Check all that apply) The external auditors The entity's internal auditors The SEC The entity's top management The entity's board of directors
The entity's internal auditors The entity's top management The entity's board of directors
Which of the following do Koh and Boo identify as measures of organizational ethics? Protection of whistleblowers within the organization The ethical climate of the organization The person-organization fit The connection between ethical behavior and career success Support for ethical behavior from top management
The ethical climate of the organization The connection between ethical behavior and career success Support for ethical behavior from top management
Concerns over internal control procedures that may have contributed to the Equifax data breach include which of the following? (Select all that apply) The external auditors did not adequately consider problems with their information systems. The company had an adequate code of ethics and reporting procedures. The CEO did not adequately consider internal controls when certifying the internal controls.
The external auditors did not adequately consider problems with their information systems. The CEO did not adequately consider internal controls when certifying the internal controls.
Which of the following are criteria DeGeorge identifies for when whistleblowing is morally acceptable? The firm's actions will do considerable harm to others. Documented evidence must exist that certifies the individual's view is correct. The employee must believe that going public is worth the risk to oneself. The employee has reported to his/her supervisor and action was taken to remedy fraudulent activity. Documented evidence is unnecessary if whistleblower has another employee to corroborate story.
The firm's actions will do considerable harm to others. Documented evidence must exist that certifies the individual's view is correct. The employee must believe that going public is worth the risk to oneself.
Which of the following would contribute to the possibility of payroll fraud? (Select all that apply) The head of a department distributes pay checks to his/her employees. The company regularly asks employees to change their passwords. There is a lack of segregation of duties. The company actively monitors payroll records.
The head of a department distributes pay checks to his/her employees. There is a lack of segregation of duties.
In business, which has a greater influence on decision making? The individual's values The organization's values
The organization's values
What are the implications of one's personal code of conduct in ethical behavior within an organization? (Check all that apply) The personal code determines whether an individual will act ethically at all times. The personal code helps an individual to deal with non-routine tasks. The personal code influences whether an individual will condone fraud. The personal code influences how an individual deals with cognitive dissonance. The personal code provides ethical cues that help to deal with ethically challenging situations.
The personal code helps an individual to deal with non-routine tasks. The personal code influences how an individual deals with cognitive dissonance. The personal code provides ethical cues that help to deal with ethically challenging situations
Which revenue recognition GAAP violations did Anthony Menendez identify at Halliburton? (Choose all that apply) The risk of ownership did not pass to the buyer. Goods must be ready for shipment. Delivery must be for a fixed date. The seller must not maintain any performance obligations.
The risk of ownership did not pass to the buyer. Delivery must be for a fixed date.
How does the culture of an organization contribute to ethical decision making? (Check all that apply) Through organizational expectations By limiting the organizational relationships and expectations By the tone set by those at the top of the organization By including external auditors in the organization's chain of command Through organizational relationships
Through organizational expectations By the tone set by those at the top of the organization Through organizational relationships
According to the ACFE report, the motivation for an employee to engage in occupational fraud includes which of the following? (Check all that apply) To achieve some personal gain To steal assets from the organization such as cash To enrich oneself at the expense of the organization To manipulate the financial statements To satisfy stakeholder interests
To achieve some personal gain To steal assets from the organization such as cash To enrich oneself at the expense of the organization
Under which situations may a whistleblower disclose confidential company information? (Select all that apply) To document a retaliation claim A whistleblower may only disclose information that is necessary. Any disclosure of confidential information may be made by a whistleblower.
To document a retaliation claim A whistleblower may only disclose information that is necessary.
True or false: A corporate governance system includes mechanisms to ensure that management operates the organization in the interests of shareholders. True False
True
True or false: A whistleblower is permitted to disclose confidential company information when reasonably necessary. True False
True
True or false: A whistleblower is permitted to take confidential company documents as evidence of wrongdoing if they believe there is a likelihood that the documents may be destroyed to cover up the fraud. True False
True
True or false: An SEC rule implementing the Dodd-Frank whistleblower reward program bars companies from enforcing confidentiality agreements. True False
True
Enterprise risk management enables management to effectively deal with which of the following? (Select all that apply) Uncertainty Minimizing the control environment Enhancing risk response decisions Investigating misconduct Aligning risk appetite and strategy
Uncertainty Enhancing risk response decisions Aligning risk appetite and strategy
Examples of financial statement fraud include which of the following? (Check all that apply) Asset misappropriation Underreported expenses Recording accrued expenses Artificially inflated assets Fictitious revenue
Underreported expenses Artificially inflated assets Fictitious revenue
`Which of the following increased from 2011 to 2013 in the Views of Employees on Ethics in the Workplace Survey? (Select all that apply) Pressure to compromise ethical standards Whistleblowing retaliation Observed misconduct Use of ethical conduct as a performance evaluation measure Ethics training programs
Use of ethical conduct as a performance evaluation measure Ethics training programs
What was an underlying theme in nearly all of the companies with major accounting frauds in the early 2000s? Fear of reprisals Weak board of directors Pressure to maintain the numbers Loyalty to the boss
Weak board of directors
Fear of reprisals refers to ______. a company where whistleblowing is supported a culture where employees hesitate to disclose issues of ethical concern a culture where desired financial results determine ethical action a company where communication with the board of directors is prohibited
a culture where employees hesitate to disclose issues of ethical concern
The Categorical Imperative in Kant's ethical system implies ______. a rational, moral person will not report wrongdoing due to existing pressures within the organization a rational, moral person will report wrongdoing regardless of perceived retaliation because it is a moral requirement to do so a rational, moral person will report wrongdoing for fear of future consequences a rational, moral person will not report wrongdoing due to social pressure within the organization
a rational, moral person will report wrongdoing regardless of perceived retaliation because it is a moral requirement to do so
When an individual with high ethics joins an organization with low ethics, the likely result is ______. (Check all that apply) a "go along to get along" attitude a reduction in job satisfaction higher employee turnover an increase in employee satisfaction
a reduction in job satisfaction higher employee turnover
Enron and WorldCom both failed as going concerns a result of ______. (Check all that apply) failing to meet earnings estimates a tension between ethics and the bottom line an excessive emphasis on financial results at all costs pressure to maintain the numbers failing to hire competent management
a tension between ethics and the bottom line an excessive emphasis on financial results at all costs pressure to maintain the numbers
Financial statement fraud schemes occur because ______. an employee causes a misstatement of material information in the financial reports an employee steals money from the organization unethical managers always commit fraud an employee retaliates against bad treatment by top management
an employee causes a misstatement of material information in the financial reports
The board of directors are responsible for ______. (Check all that apply) acting in the best interests of the corporation acting in good faith of the organization directing the business and affairs of the corporation the ethics of top executives evaluating the legal responsibilities of external auditors for the firm's resources
acting in the best interests of the corporation acting in good faith of the organization directing the business and affairs of the corporation
Conflicts of interest between managers and principals are known as the ____________ problem.
agency
The Dodd-Frank whistleblower provisions contain ______. (Check all that apply) a requirement that the SEC be informed before reporting wrongdoing to compliance officers an exclusion from whistleblowing awards for internal accountants as it is their legal duty to report violations anti-retaliatory protections for whistleblowers financial incentives for blowing the whistle
an exclusion from whistleblowing awards for internal accountants as it is their legal duty to report violations anti-retaliatory protections for whistleblowers financial incentives for blowing the whistle
The Sarbanes-Oxley Act requires ______. an independent audit committee that oversees financial reporting the audit committee to conduct internal audit functions quarterly internal audits the Board of Directors to oversee financial reporting
an independent audit committee that oversees financial reporting
According to the Treadway Commission Report, internal auditor concerns about the financial statements should be reported directly to the ______. CEO board of directors audit committee CFO
audit committee
The Jones-Hiltebreitel model indicates that when employees perform routine tasks, the actions taken are ______. ethical automatic unethical delayed
automatic
Backdating of stock options has been of concern in the past because ______. (Check all that apply) backdating of options was illegal backdating of options is difficult to justify from an ethical perspective the option criteria were manipulated to make them more valuable to top executives top managers received less compensation from option packages than what would have occurred without the backdating top managers received more compensation from option packages than what would have occurred without the backdating
backdating of options is difficult to justify from an ethical perspective the option criteria were manipulated to make them more valuable to top executives top managers received more compensation from option packages than what would have occurred without the backdating
The SEC protects whistleblowers by ______. allowing whistleblowers to take any confidential documents from the company barring companies from threatening to enforce a confidentiality agreement
barring companies from threatening to enforce a confidentiality agreement
Values in an organization can best be thought of as ______. the culture that exists in an organization goals to achieve through strategic choices beliefs or convictions that best define the person-organization ethical fit beliefs or convictions that guide behavior and support the overall organization vision
beliefs or convictions that guide behavior and support the overall organization vision
Directing the business and affairs of the corporation is the ultimate responsibility of the ______. board of directors CFO CEO external auditors
board of directors
Revenues can be overstated by recording ______. (Check all that apply) revenues as earned bogus revenues current sales in future periods revenues in the proper period revenues too soon
bogus revenues revenues too soon
Directors are typically protected from liability for the consequences of a decision that is within managerial authority under the ____________ __________ rule
business judgement
Executive compensation packages can be used to alleviate the agency problem because ______. (Check all that apply) stock option plans may be tied to executive wealth compensation packages can be used to link executive pay to company performance stock option plans can be used to motivate executive performance in the best interests of the company compensation packages can be used to link executive pay to performance of the company's shares boards of directors do not have to monitor managerial performance
compensation packages can be used to link executive pay to company performance stock option plans can be used to motivate executive performance in the best interests of the company compensation packages can be used to link executive pay to performance of the company's shares
Under Sarbanes-Oxley, the audit committee is expected to be ______. (Check all that apply) more than 50% independent of management conscientious and diligent in its oversight role of the financial statements conscientious and diligent in carrying out its responsibilities completely independent of management disengaged from the financial reporting system
conscientious and diligent in its oversight role of the financial statements conscientious and diligent in carrying out its responsibilities completely independent of management
The way in which corporations act to meet the interests of shareholders can be defined as _________ -governance
corporate
The shared beliefs of top management about how they should manage themselves and other employees and how business should be conducted is known as ______. the stewardship theory stakeholder orientation corporate governance corporate culture
corporate culture
A ___________ ________________ system includes mechanisms to ensure that the agent (management) runs the firm for the benefit of one or more principals (shareholders, creditors, and other stakeholders).
corporate governance
Organizations can create an ethical workplace culture by ______. (Check all that apply) putting stakeholder interest above public interest developing an ethics training program taking action against employees who violate ethics policies rewarding ethical behavior and including it in employee performance evaluations focusing on meeting earnings projections each quarter
developing an ethics training program taking action against employees who violate ethics policies rewarding ethical behavior and including it in employee performance evaluations
The duty of good faith is exhibited by ______. directors having adequate knowledge to perform their responsibilities honestly directors putting the welfare of the organization above their personal interests the statutory responsibilities directors have in directing the business of the corporation
directors having adequate knowledge to perform their responsibilities honestly
Whistleblowing can be thought of as ______. (Check all that apply) disclosing to members of an organization practices that violate norms or the law going outside the organization to report wrongdoing an act that violates norms or moral standards an act that violates the law
disclosing to members of an organization practices that violate norms or the law going outside the organization to report wrongdoing
Internal compliance officers and internal auditors can qualify for whistleblower awards if ______. (Check all that apply) disclosure to the SEC is needed to prevent substantial injury to the entity or its investors the whistleblower has first reported the violation internally and at least 120 days have passed the whistleblower immediately reports the violation to the SEC disclosure to the SEC is needed to circumvent the entity's compliance process the whistleblower reasonably believes the entity is impeding investigation of the misconduct
disclosure to the SEC is needed to prevent substantial injury to the entity or its investors the whistleblower has first reported the violation internally and at least 120 days have passed the whistleblower reasonably believes the entity is impeding investigation of the misconduct
The requirement that a director or officer acts in the best interest of the corporation while exercising good faith is known as the standard of ______ ______________
due care
The level of care expected of a reasonable person in making business judgments is referred to as ______. reliable care fiduciary responsibility duty of care universality
duty of care
An honesty of intent that leads to caring for the well-being of stakeholders relates to ______. business judgment duty of care duty of good faith duty of loyalty
duty of good faith
Directors and officers putting their personal interests after the welfare of the organization is an example of ______. duty of care duty of judgment duty of loyalty duty of good faith
duty of loyalty
Faithfulness to an individual's obligations and duties relates to ______. duty of judgment duty of good faith duty of care duty of loyalty
duty of loyalty
In the accounting scandals of the early 2000s, the audit committees ______. either did not know about the fraud or chose to look the other way were not on the board of directors were part of an effective corporate governance system exercised diligence in the performance of their services
either did not know about the fraud or chose to look the other way
Under Sarbanes-Oxley, the audit committee is expected to ______. (Check all that apply) establish and implement internal controls establish an anonymous method for employees to submit concerns establish an internal audit function create formal procedures for processing hotline claims
establish an anonymous method for employees to submit concerns create formal procedures for processing hotline claims
Jennings points to seven common signs of _____________________ _______________ in a company.
ethical collapse
The person-organization ethical fit at WorldCom created challenges for Cynthia Cooper because ______. (Check all that apply) ethical dissonance existed Cooper had decided to leave WorldCom so there was no reason to report the wrongdoing Cooper was reluctant to blow the whistle for fear of reprisals Cooper was convinced that no one in top management would do anything to address the improper accounting the organization had low ethics while Cooper had high ethics
ethical dissonance existed Cooper was convinced that no one in top management would do anything to address the improper accounting the organization had low ethics while Cooper had high ethics
One of the biggest issues that corporate boards of directors face is _________ __________ and it has been found that most boards spend more time on this than ensuring the integrity of financial reporting.
executive compensation
According to the PwC study, many companies modified their clawback policies for reasons including ______. (Check all that apply) excessive executive pay executives model ethical behavior executives breaching of fiduciary duties executive misconduct executives breaking codes of conduct
executives breaching of fiduciary duties executive misconduct executives breaking codes of conduct
The business judgment rule establishes the legal liability of the board of directors by holding them accountable for ______. (Check all that apply) promoting the interests of all stakeholders preparing financial statements exercising diligence in the oversight of the company's operations exercising a level of care expected of a reasonable person
exercising diligence in the oversight of the company's operations exercising a level of care expected of a reasonable person
Auditors who have an obligation to the public interest that underlies their corporate governance responsibilities are known as _______ auditors.
external
There were many reasons why corporate governance failed at Lehman Brothers, such as ______. (Select all that apply) adequate disclosure of material information failed risk management procedures significant payments made to members of the board ignoring signs of liquidity risk
failed risk management procedures significant payments made to members of the board ignoring signs of liquidity risk
Koh and Boo found that positive ethical culture and climate produce ______. unfavorable organizational outcomes favorable organizational outcomes support for ethical behavior from top management the ethical climate of the organization
favorable organizational outcomes support for ethical behavior from top management the ethical climate of the organization
Fear and silence can stifle whistleblowing in a company because of ______. (Check all that apply) fear of reprisals a culture that retaliates against whistleblowers clear reporting channels for matters of concern the failure to meet financial estimates a kill the messenger syndrome
fear of reprisals a culture that retaliates against whistleblowers a kill the messenger syndrome
Employees given the trappings of success who are then reluctant to speak up out of fear of losing their lavish lifestyles most likely do so because of ______. (Check all that apply) fear of reprisals innovation like no other company loyalty to the boss pressure to maintain the numbers weak board of directors
fear of reprisals loyalty to the boss
The Dodd-Frank Act contains ____________incentives for whistleblowers.
financial
The purposeful manipulation of financial statements is called financial statement
fraud
Internal controls are designed to ______. (Check all that apply) help to prevent asset misappropriations help to ensure that laws are strictly adhered to help prevent and detect material errors in the financial statements help prevent and detect materially false and misleading financial reports help prevent an insufficient number of disclosures in the financial statements
help to prevent asset misappropriations help to ensure that laws are strictly adhered to help prevent and detect materially false and misleading financial reports help prevent an insufficient number of disclosures in the financial statements
The person-organization fit in the Ethical Dissonance Model that creates the greatest likelihood of ethical behavior occurring is ______. high organizational ethics, low individual ethics low organization ethics, low individual ethics high organizational ethics, high individual ethics low organization ethics, high individual ethics
high organizational ethics, high individual ethics
The ethical person-organization fit refers to ______. how ethical behavior might occur within an organization how an organization can align its goals with ethical behavior how top management can act in an ethical manner how ethical behavior influences one's personal code of conduct
how ethical behavior might occur within an organization
When an organization with high ethics hires an individual with low ethics, the likely result is that ______. (Check all that apply) if the employee's behavior cannot be altered, the employee may be let go for cause the organization will promote the individual with low ethics other employees may try to resolve the issue
if the employee's behavior cannot be altered, the employee may be let go for cause other employees may try to resolve the issue
Near and Miceli link whistleblowing to acts that are ______. (Check all that apply) immoral outside the control of employers illegal taken by external auditors illegitimate
immoral illegal illegitimate
Ethical decisions in the workplace are often made jointly in work groups or ______. in organizational settings independent of others
in organizational settings
The whistleblower provisions of the Dodd-Frank Act include ______. an award of 10 to 30 percent of the amount recovered in all lawsuits against the company external audit requirements before whistleblowing incentives for whistleblowers who circumvent internal measures to blow the whistle directly to the SEC incentives for whistleblowers when the information they provide aids in the recovery of over $1 million
incentives for whistleblowers when the information they provide aids in the recovery of over $1 million
Opportunity for unethical behavior results from conditions that ______. increase rewards decrease rewards
increase rewards
Having the procedures and structures in place to minimize or avoid conflicts of interest is another way of describing ______. accountability fairness transparency independence
independence
Principles people use to decide what is right and wrong in the ethical decision-making process are referred to as ____ values
individual
A conflict of interests can occur when ______. personal judgments are in agreement with those that trust you individuals make judgment calls on behalf of others personal interests do not match the interests of those that trust you
individuals make judgment calls on behalf of others personal interests do not match the interests of those that trust you
The purpose of the control environment is to ______. (Check all that apply) influence the control consciousness of employees identify how risk might affect the control environment set the ethical tone of the organization prevent and detect fraud provide discipline and structure for internal controls
influence the control consciousness of employees set the ethical tone of the organization provide discipline and structure for internal controls
Agency costs exist in agency theory because of _________ asymmetry.
information
The standard that establishes the basis for moral action and to avoid subordination of judgment is the _______ standard.
integrity
Mechanisms that help manage and monitor corporate governance activities to create sustainable shareholder value are known as __________ corporate governance mechanisms.
internal
The effectiveness of internal control systems should be ensured by the ___________ auditors.
internal
The effectiveness of internal control systems should be ensured by the _________________ auditors.
internal
The processes and procedures that management puts in place to protect company assets and to ensure company activities are conducted in accordance with the organization's policies comprise the system of _______________ ______________________
internal controls
An external audit ______. (Check all that apply) introduces a measure of accountability into the financial reporting process should be conducted independent of management influence exposes all levels of fraud ensures there has been no override of internal controls by management provides a level of confidence that the financial statements are accurate and reliable
introduces a measure of accountability into the financial reporting process should be conducted independent of management influence provides a level of confidence that the financial statements are accurate and reliable
SOX is intended to deter financial fraud because ______. it establishes rules as to how violators will be punished management establishes the requirements of the law the law creates the ethical standards to ensure the rules are followed its provisions are audited by independent auditors
it establishes rules as to how violators will be punished
The disclosure of wrongdoing by a client will not violate the CPA's confidentiality obligation when ______. (Check all that apply) it is necessary to comply with SEC regulations the CPA does so to gain a whistleblower's award it is necessary to comply with the provisions of Dodd-Frank the management of the CPA firm has first been informed
it is necessary to comply with SEC regulations it is necessary to comply with the provisions of Dodd-Frank
Blowing the whistle is an acceptable practice from an ethical perspective when ______. a monetary incentive exists to do so it is the morally correct action to take it is required by law it doesn't violate a confidentiality obligation
it is the morally correct action to take
When an individual with low ethics joins an organization with low ethics, ______. (Check all that apply) it takes more effort to stop corruption a culture of corruption is difficult to change the likelihood of the employee going along to get along decreases
it takes more effort to stop corruption a culture of corruption is difficult to change
Dennis Kozlowski, the CEO of Tyco, selected employees based on ______. (Select all that apply) proven experience lack of experience possible conflicts of interest reluctance to challenge authority proven moral background
lack of experience possible conflicts of interest reluctance to challenge authority
Unethical behavior and financial collapse sometimes go hand and hand because of ______. (Check all that apply) loyalty to the boss overly pessimistic financial projections an unrealistic emphasis on meeting financial projections intense pressure to maintain the numbers rogue employee behavior
loyalty to the boss an unrealistic emphasis on meeting financial projections intense pressure to maintain the numbers
Executive pay packages create concern when ______. (Check all that apply) CEOs work harder for the interest of various stakeholders management manipulates earnings to drive up company stock price significant disparity in executive pay raises issues of equity incentives are consistent with company goals
management manipulates earnings to drive up company stock price significant disparity in executive pay raises issues of equity
The agency problem arises because ______. (Check all that apply) shareholders run the business in a way that conflicts with manager needs managers may make decisions in an egoist way managers may have motivations beyond increasing shareholder wealth the agents are not clearly identified to management there is a separation of ownership and control managers may run the business to maximize executive compensation
managers may make decisions in an egoist way managers may have motivations beyond increasing shareholder wealth there is a separation of ownership and control managers may run the business to maximize executive compensation
The audit committee should ______. monitor the integrity of the financial statements implement internal control systems establish internal control systems identify fraud in the financial statements
monitor the integrity of the financial statements
According to the National Business Ethics Survey, the two most common observations of employees about ethics in their organizations are ______. (Check all that apply) observed misconduct weak ethical culture reported observed misconduct pressure to compromise ethical standards experienced retaliation after whistleblowing
observed misconduct reported observed misconduct
The conditions in an organization that limit or permit ethical or unethical behavior are referred to as _____
opportunity
Decision making in an organization is influenced by its culture through ______. conflicts between auditors and top management financial results organizational relationships and expectations for behavior financial projections
organizational relationships and expectations for behavior
Internal auditors ______. (Select all that apply) oversee risk management processes review effectiveness of whistleblower provisions review effectiveness of the audit committee conduct audits independent of management
oversee risk management processes review effectiveness of whistleblower provisions review effectiveness of the audit committee
The size of executive pay packages are of concern because ______. (Check all that apply) pay packages are excessive in relation to average worker salaries they are too large for effective oversight CEOs in the United States are paid less than CEOs in Switzerland and Japan CEOs in the United States are paid many times more than their counterparts in other countries
pay packages are excessive in relation to average worker salaries CEOs in the United States are paid many times more than their counterparts in other countries
ACFE survey statistics involving payroll fraud suggest ______. (Check all that apply) employees who commit fraud always take vacations payroll fraud schemes are detected within one year payroll fraud schemes have a median cost of $90,000 payroll fraud accounts for 8.5% of asset misappropriation schemes
payroll fraud schemes have a median cost of $90,000 payroll fraud accounts for 8.5% of asset misappropriation schemes
All of the following are prohibited actions under Sarbanes-Oxley when an employee reports lawful concerns, except ______. harassment discrimination promotion demotion
promotion
"Say on pay" provisions ______. (Check all that apply) provide more transparency related to executive compensation require fair compensation for both executives and employees enforce the primacy of the business judgment rule
provide more transparency related to executive compensation enforce the primacy of the business judgment rule
An accountant who believes fraud is in the best interest of the company and believes everything will go back to normal after the fraud occurs is subject to ______. internal control perceived opportunity opposition situational pressure rationalization
rationalization
Understatement of operating expenses occurs when ______. (Check all that apply) recording cost of sales as a non-operating expense recording costs as an asset properly classifying expenses in the period incurred not reporting expenses at all
recording cost of sales as a non-operating expense recording costs as an asset not reporting expenses at all
Improper asset valuations include all of the following, except ______. altering estimated useful lives manipulating reserves recording depreciation over estimated useful lives failing to write-down assets for decline in market value
recording depreciation over estimated useful lives
Overstatement of revenue occurs by ______. (Check all that apply) recording sales of product on consignment recording gross revenue, rather than net revenue recording revenues when acting as a middle man recording revenues when services are provided
recording sales of product on consignment recording gross revenue, rather than net revenue recording revenues when acting as a middle man
Ethical leaders ______. (Check all that apply) refuse to compromise values in order to go along with the group refuse to lie to investors go along with superiors if ethical behavior is risky recognize that moral action is risky put their employer's interest above all else
refuse to compromise values in order to go along with the group refuse to lie to investors recognize that moral action is risky
"Say on pay" provisions ______. (Check all that apply) require the disclosure of say-on-pay policies in the financial statements require public companies to provide shareholders a binding vote on executive compensation of designated officers require public companies to explain how their compensation policies have taken into account the results of say-on-pay provisions require public companies to allow shareholders to vote on executive compensation of designated officers at least once every three years require public companies to provide shareholders a non-binding vote on executive pay of designated officers
require public companies to explain how their compensation policies have taken into account the results of say-on-pay provisions require public companies to allow shareholders to vote on executive compensation of designated officers at least once every three years require public companies to provide shareholders a non-binding vote on executive pay of designated officers
A conflict of interest may occur when a person holds a position of trust that ______. requires judgment on behalf of others requires judgment for only oneself
requires judgment on behalf of others
The ethics of whistleblowing have been questioned because Dodd-Frank ___________ the practice.
rewards
Enterprise risk management enables management to effectively deal with ______. (Select all that apply) inadequate internal controls risk earnings management building value uncertainty
risk building value uncertainty
Corporate governance can be thought of as ______. (Check all that apply) the way in which stakeholder interests are met the ethics of a corporation separation of ownership and control the way in which suppliers of finance assure themselves of getting a return on investment
separation of ownership and control the way in which suppliers of finance assure themselves of getting a return on investment
An accountant who goes along with fraud due to the strain of meeting earnings projections is subject to ______. aversion to internal control desperation rationalization situational pressure perceived opportunity
situational pressure
The intensity of an ethical situation is based on the ______. (Select all that apply) situational pressures in the workplace values of those involved fear of retaliation norms in common situations relevant laws and policies
situational pressures in the workplace values of those involved norms in common situations
When an individual with low ethics joins an organization with high ethics, the likely result is that ______. (Check all that apply) socialized employees will leave the organization socialized employees will point out the disconnect the organization will alter its ethics to fit that of the individual if the employee's behavior cannot be altered, the employee will leave the company socialized employees may attempt to alleviate the ethical dissonance
socialized employees will point out the disconnect if the employee's behavior cannot be altered, the employee will leave the company socialized employees may attempt to alleviate the ethical dissonance
Stewardship advocates recognize that directors need to consider a broader range of interests including those involving ______. (Check all that apply) self-interest stakeholders customers employees
stakeholders customers employees
External mechanisms of corporate governance include ______. (Select all that apply) management state and federal statutes the audit committee the Board of Directors shareholder proposals
state and federal statutes shareholder proposals
The most frequently observed misconduct in organizations in the 2013 National Business Ethics Survey was ______. falsifying expense reports stealing or theft inflating hours worked violating company Internet policy
stealing or theft
An ethical workplace culture is influenced by ______. (Check all that apply) government regulation strong internal controls whistleblowing policies having an ethical code of conduct earnings projections
strong internal controls whistleblowing policies having an ethical code of conduct
Section 302 of Sarbanes-Oxley Act requires public companies to include in their annual reports a report of management on the company's internal control over financial reporting publicly traded corporations to "establish procedures" for accepting employee complaints concerning "questionable accounting or auditing matters." that principal executive and financial officers certify that they have reviewed the findings of annual or quarterly reports and find the statements within to be accurate and free of any materials errors
that principal executive and financial officers certify that they have reviewed the findings of annual or quarterly reports and find the statements within to be accurate and free of any materials errors
Internal mechanisms of corporate governance include ______. (Select all that apply) financial markets shareholder proposals the Board of Directors the audit committee management
the Board of Directors the audit committee management
The U.S. Supreme Court issued an opinion in the Digital Realty Trust case that whistleblowers are not protected against retaliation unless they report concerns to ______. the SEC external audit internal management
the SEC
The primary result of occupational fraud is ______. retaliation against the offender errors in financial statements the abuse of employer trust failing to disclose financial statement information
the abuse of employer trust
Application of the COSO framework to the Enron and WorldCom frauds may have strengthened internal controls that failed because ______. top management relied on the internal auditors to detect fraud the companies had not created any internal controls the external auditors failed to detect fraud the board and audit committee did not take their responsibilities seriously
the board and audit committee did not take their responsibilities seriously
The term agency costs refers to ______. (Check all that apply) outsiders being more aware of the future prospects for the corporation than insiders the oversight of management when the board of directors fails to exercise due care in carrying out its responsibilities insiders knowing more about the future prospects for the corporation than outsiders the imbalance that exists between information known by the corporation and its investors the costs incurred to meet shareholder interests
the oversight of management when the board of directors fails to exercise due care in carrying out its responsibilities insiders knowing more about the future prospects for the corporation than outsiders the imbalance that exists between information known by the corporation and its investors
Stewardship theory differs from agency theory because ______. (Check all that apply) the steward-CEO can best act by holding both the CEO and board chair positions steps are taken to enable managers rather than control them managers place the interests of shareholders ahead of self-interests personal motivations and incentives for managers are more important than acting in the best interests of the company agency costs are incurred to monitor the behavior of managers
the steward-CEO can best act by holding both the CEO and board chair positions steps are taken to enable managers rather than control them managers place the interests of shareholders ahead of self-interests
Control activities can be defined as ______. the processes that assess the efficiency and effectiveness of internal controls processes are designed to assess whether directives of management are carried out. the ethical tone of an organization the way in which systems provide information to help employees carry out their responsibilities the strategic actions established by management to ensure that its directives are carried out
the strategic actions established by management to ensure that its directives are carried out
The ethical environment that is created in an organization by its leadership is known as ______. the stewardship theory leader orientation the tone at the top duty of good faith
the tone at the top
External auditors may qualify for whistleblower awards if ______. they report information about potential violations of their audit firm's performance of audit services for the client they first resign from the client engagement they first report the matter to management and 120 days have passed with no action they first report the matter to the board of directors
they report information about potential violations of their audit firm's performance of audit services for the client
Timely and accurate disclosure on all material matters, including the financial situation and corporate governance, are required by ______. fairness independence transparency accountability
transparency
The intent of external auditors qualifying for whistleblower awards is to ensure ______. external auditors profit by reporting the wrongdoing of their clients external auditors profit by reporting fraud of both clients and the auditing firm wrongdoing by the client is reported wrongdoing by the accounting firm is reported
wrongdoing by the accounting firm is reported