Ethics - Chapter 3

Which author suggests that the social responsibility of business is to increase profits?

Milton Friedman

In business, which has a greater influence on decision making?

The organization's values

Whistleblowing through the disclosure of wrongdoing to parties can be characterized as either internal or external whistleblowing.

True

Ethical decisions in the workplace are often made jointly in work groups or ______.

in organizational settings

The whistleblower provisions of the Dodd-Frank Act include ______.

incentives for whistleblowers when the information they provide aids in the recovery of over $1 million

The ethics of whistleblowing have been questioned because Dodd-Frank _________ the practice.

incentivizes, incentivises, rewards, or encourages

Having the procedures and structures in place to minimize or avoid conflicts of interest is another way of describing ______.

independence

A conflict of interests can occur when ______.

individuals make judgment calls on behalf of others personal interests do not match the interests of those that trust you

A conflict of interests can occur when ______.

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

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 . (Enter only one word per blank.)

internal control

Blowing the whistle is an acceptable practice from an ethical perspective when ______.

it is the morally correct action to take

Dennis Kozlowski, the CEO of Tyco, selected employees based on ______. (Select all that apply)

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 an unrealistic emphasis on meeting financial projections intense pressure to maintain the numbers

The Dodd-Frank Act contains _________incentives for whistleblowers.

monetary

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

organizational relationships and expectations for behavior

A conflict of interest may occur when a person holds a position of trust that ______.

requires judgment on behalf of others

Organizations can create an ethical workplace culture by ______. (Check all that apply)

rewarding ethical behavior and including it in employee performance evaluations taking action against employees who violate ethics policies developing an ethics training program

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

Which of the following do Koh and Boo identify as measures of organizational ethics?

1. Support for ethical behavior from top management 2. The ethical climate of the organization 3. The connection between ethical behavior and career success 4. favorable organizational outcomes

Why is the Giving Voice to Values technique critical in ethical decision making in business? (Select all that apply)

1. The correct decision is often unclear. 2. Rules governing ethical dilemmas are often vague. 3. The results of the decision are unknown.

The intensity of an ethical situation is based on the ______. (Select all that apply)

1. norms in common situations 2. situational pressures in the workplace 3. values of those involved

The intensity of an ethical situation is based on the ______. (Select all that apply)

1. situational pressures in the workplace 2. values of those involved 3. norms in common situations

Which of the following are components of the Cadbury Code? (Select all that apply)

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. 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.

Opportunity for unethical behavior results from conditions that ______.

Increase Rewards

Which of the following is not a mechanism of corporate governance?

AICPA Code of Conduct

Which of the following promote ethical behavior in an organization? (Select all that apply)

B. Effective leadership within the organization. C. Rules of conduct within the organization E. Ethical norms and standards within the organization

If management appears unconcerned about ethics and more focused on the bottom line, ______. (Select all that apply)

B. employees are more prone to fraudulent financial reporting D. employees are more prone to commit occupational fraud

The intensity of an ethical situation is based on the ______. (Select all that apply)

B. situational pressures in the workplace C. values of those involved E. norms in common situations

Directing the business and affairs of the corporation is the ultimate responsibility of the ______.

Board of Directors

Principles people use to decide what is right and wrong in the ethical decision-making process are referred to as _____________ Values

Individual

The ethical person-organization fit refers to ______.

C. how ethical behavior might occur within an organization

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

Which of the following actions would be protected under the National Labor Relations Act? (Select all that apply)

Concerted efforts to improve conditions at work conducted on social media An employee who complains on behalf of coworkers about safety issues

The shared beliefs of top management about how they should manage themselves and other employees and how business should be conducted is known as ______.

Corporate Culture

Ethical expectations that society has for business can be referred to as ______.

Corporate Social Responsibility

Principles people use to decide what is right and wrong in the ethical decision-making process are referred to as values.

Individual Values

Which of the following might contribute to a weak board of directors? (Check all that apply)

Interrelationships between board members and top management Lack of independence from management

The SEC protects whistleblowers by ______.

barring companies from threatening to enforce a confidentiality agreement

Near and Miceli link whistleblowing to acts that are ______. (Check all that apply)

immoral illegitimate illegal

Enron and WorldCom both failed as going concerns a result of ______. (Check all that apply)

a tension between ethics and the bottom line an excessive emphasis on financial results at all costs pressure to maintain the numbers

Which of the following are potential concerns of the whistleblowing program? (Select all that apply)

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 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.

Which of the following are criteria DeGeorge identifies for when whistleblowing is morally acceptable?

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 firm's actions will do considerable harm to others.

Which of the following is not a type of fraud?

Errors in the financial statements

The moral atmosphere of the work environment and the level of ethics practiced within a company is referred to as

Ethical Climate

Jennings points to seven common signs ___________of in a company. (Enter one word per blank.)

Ethical Collapse

In the case of the Ford Pinto, the company applied which principle?

Ethical legalism

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

In the case of the Ford Pinto, ______. (Select all that apply)

Ford relied completely on utilitarian thinking Ford complied with all the laws and safety issues

The purposeful manipulation of financial statements is called financial statement

Fraud

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.

According to the 2013 NBES Survey of Reporting of Observed Misconduct, all instances of observed misconduct ______.

Have declined

The purpose of the Ethical Dissonance Model includes which of the following? (Check all that apply)

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.

When a company retaliates against an employee for bringing bad news to the attention of top management, a the syndrome exists.

Kill the Messenger Syndrome

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, high individual ethics

Which type of fraud accounts for 89% of all types of occupational fraud?

Misappropriation of assets

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. More than 50% would call the ethics hotline. Almost 75% of employees observed misconduct in their organization within the past 12 months. More than 50% of employees reported the observed misconduct could cause a loss of public trust. A driving force behind misconduct was pressure to do whatever it takes to meet targets. 23% of employees would do nothing. Only 54% of employees would try to resolve the matter directly.

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 may become potential whistleblowers. Others in the organization become informed of the facts.

Corporate governance regulation in the United States includes which of the following? (Check all that apply)

Protection for whistleblowers Auditors must attest to and report on management's certification on internal controls. Management must certify the internal controls over financial reporting.

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 ______.

Rationalization

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 Communicating the importance of compliance to employees Enforcing disciplinary actions

Which section of Sarbanes-Oxley requires the inclusion of a statement that management accepts responsibility for maintaining adequate internal control over financial reporting?

Section 404

Which of the following factors appear in every case of financial statement fraud? (Select all that apply)

Situational pressure Perceived opportunity Rationalization

Concerns over internal control procedures that may have contributed to the Equifax data breach include which of the following? (Select all that apply)

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.

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 National Labor Relations Act

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

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 party to whom the complaint is made

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 enrich oneself at the expense of the organization To steal assets from the organization such as cash To achieve some personal gain

When people need to resolve issues in their daily lives, they often make decisions based on their own

Values

What was an underlying theme in nearly all of the companies with major accounting frauds in the early 2000s?

Weak board of directors

Fear of reprisals refers to ______.

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 report wrongdoing regardless of perceived retaliation because it is a moral requirement to do so

Sarbanes-Oxley requires the audit committee ______

be completely independent of management

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). (Enter one word per blank.)

corporate governance

In the economic model of CSR, business exists to ______.

create jobs produce goods and services for society

The board of directors are responsible for ______. (Check all that apply)

directing the business and affairs of the corporation acting in the best interests of the corporation acting in good faith of the organization

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

A company's reputation for trust is enhanced when ______. (Check all that apply)

employees follow through ethical intent with ethical action organizational values are supported by top management organizational values guide actions by employees

The best way to gain trust through organizational decision making is that ______. (Check all that apply)

employees should act in accordance with ethical intent employees should act in accordance with established organization values senior managers should model the organization's values

Corporate social responsibility involves ______. (Check all that apply)

ethical expectations that society has for business responsibility to prevent harm

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 loyalty to the boss

In Miceli and Near's research, the primary reason given by whistleblowers for not coming forward is ______.

fear of retaliation

Internal controls are designed to ______. (Check all that apply)

help prevent an insufficient number of disclosures in the financial statements help prevent and detect materially false and misleading financial reports help to ensure that laws are strictly adhered to help to prevent asset misappropriations

The person-organization fit in the Ethical Dissonance Model that creates the greatest likelihood of ethical behavior occurring is ______.

high organizational ethics, high individual ethics

An accountant who goes along with fraud due to the strain of meeting earnings projections is subject to

situational pressure

The most frequently observed misconduct in organizations in the 2013 National Business Ethics Survey was ______.

stealing or theft

Executive compensation packages can be used to alleviate the agency problem because ______. (Check all that apply)

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 company performance compensation packages can be used to link executive pay to performance of the company's shares

The survey on occupational fraud and abuse found ______. (Check all that apply)

that frauds reported lasted a median of 16 months before being detected 89% of the reported cases of fraud were due to misappropriation of assets financial statement fraud schemes made up 9% of the frauds

Section 302 of Sarbanes-Oxley Act requires

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

The primary result of occupational fraud is ______.

the abuse of employer trust

Timely and accurate disclosure on all material matters, including the financial situation and corporate governance, are required by ______.

transparency

An ethical workplace culture is influenced by ______. (Check all that apply)

whistleblowing policies strong internal controls having an ethical code of conduct