Smartbook Chapter 3
If management appears unconcerned about ethics and more focused on the bottom line, ______. (Select all that apply)
employees are more prone to fraudulent financial reporting employees are more prone to commit occupational fraud
The ethical person-organization fit refers to ______.
how ethical behavior might occur within an organization
In the Ford Pinto case, Ford's risk-benefit analysis failed because ______.
the company ignored the rights of various stakeholders
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
Why is the Giving Voice to Values technique critical in ethical decision making in business? (Select all that apply)
The results of the decision are unknown. Rules governing ethical dilemmas are often vague. The correct decision is often unclear.
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
Opportunity for unethical behavior results from conditions that ______.
increase rewards
Mechanisms that help manage and monitor corporate governance activities to create sustainable shareholder value are known as corporate governance mechanisms.
internal
The Dodd-Frank Act contains incentives for whistleblowers.
monetary
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
Internal compliance officers and internal auditors generally cannot receive whistleblower awards under Dodd-Frank because ______.
it is part of their job responsibilities to report suspicion of illegal acts to management
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 management assessment of the effectiveness of internal control A statement of management's responsibility over internal control An attestation report from the auditor covering management's assessment of effectiveness of internal control
Which of the following actions would be protected under the National Labor Relations Act? (Select all that apply)
An employee who complains on behalf of coworkers about safety issues Concerted efforts to improve conditions at work conducted on social media Concept Resources Text
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 are pillars of corporate governance?
Fairness Independence Accountability Transparency
The purpose of the Ethical Dissonance Model includes which of the following? (Check all that apply)
It describes the ethical person-organization fit. It describes how the ethics of an organization influences behavior. It illustrates the interaction between the organization and the individual.
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
True or false: Internal control systems cannot guarantee all fraud will be detected.
True
Ford used questionable ethical reasoning in the Pinto case because it relied on ______.
act utilitarianism
An individual acting in accordance with his/her own reasons or motives and not those of organizational policies or whistleblowing legislation is demonstrating ______.
autonomous will
Near and Miceli link whistleblowing to acts that are ______. (Check all that apply)
illegitimate illegal immoral
Which of the following are requirements expected of a code of ethics for senior financial officers? (Select all that apply)
Full and fair disclosure Honest and ethical conduct
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
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
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
A conflict of interest may occur when a person holds a position of trust that ______.
requires judgment on behalf of others
Which of the following encourage ethical behavior in the workplace? (Select all that apply)
An ethical climate in the organization Support for ethical behavior from top management
In the case of the Ford Pinto, the company applied which principle?
Ethical legalism
From an ethical perspective, what is the most controversial provision of the Dodd-Frank Act?
It incentivizes whistleblowing.
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
Which of the following is the least common method of detecting occupational fraud?
Confession
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 might contribute to a weak board of directors? (Check all that apply)
Interrelationships between board members and top management Lack of independence from management
Fear and silence can stifle whistleblowing in a company because of ______. (Check all that apply)
fear of reprisals a kill the messenger syndrome a culture that retaliates against whistleblowers
When people need to resolve issues in their daily lives, they often make decisions based on their own .
values
A whistleblower must report concerns to the SEC within how many days of becoming aware of the violation to be eligible for whistleblower protections?
180 days
In business, which has a greater influence on decision making?
The organization's values
How does the culture of an organization contribute to ethical decision making? (Check all that apply)
Through organizational relationships By the tone set by those at the top of the organization Through organizational expectations
True or false: An SEC rule implementing the Dodd-Frank whistleblower reward program bars companies from enforcing confidentiality agreements.
True
In Miceli and Near's research, the primary reason given by whistleblowers for not coming forward is ______.
fear of retaliation
The Dodd-Frank whistleblower provisions contain ______. (Check all that apply)
financial incentives for blowing the whistle anti-retaliatory protections for whistleblowers an exclusion from whistleblowing awards for internal accountants as it is their legal duty to report violations
Blowing the whistle is an acceptable practice from an ethical perspective when ______.
it is the morally correct action to take
When people need to resolve issues in their daily lives, they often make decisions based on their own
values
Which of the following do Koh and Boo identify as measures of organizational ethics?
The connection between ethical behavior and career success The ethical climate of the organization Support for ethical behavior from top management
Examples of financial statement fraud include which of the following? (Check all that apply)
Underreported expenses Artificially inflated assets Fictitious revenue
Which author suggests that the social responsibility of business is to increase profits?
Milton Friedman
Which of the following are components of the Cadbury Code? (Select all that apply)
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.
True or false: A corporate governance system includes mechanisms to ensure that management operates the organization in the interests of shareholders.
True
Ethical expectations that society has for business can be referred to as ______.
corporate social responsibility
Jennings points to seven common signs of in a company.
ethical collapse
According to the 2013 NBES Survey of Reporting of Observed Misconduct, all instances of observed misconduct ______.
have declined
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
Ethical decisions in the workplace are often made jointly in work groups or ______.
in organizational settings
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 size of executive pay packages are of concern because ______. (Check all that apply)
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
Dennis Kozlowski, the CEO of Tyco, selected employees based on ______. (Select all that apply)
reluctance to challenge authority possible conflicts of interest lack of experience
The best way to gain trust through organizational decision making is that ______. (Check all that apply)
senior managers should model the organization's values employees should act in accordance with established organization values employees should act in accordance with ethical intent
Executive pay packages create concern when ______. (Check all that apply)
significant disparity in executive pay raises issues of equity management manipulates earnings to drive up company stock price
Which of the following is not a goal of internal controls?
Ensure that fraud does not occur
The primary result of occupational fraud is ______.
the abuse of employer trust
Which of the following promote ethical behavior in an organization? (Select all that apply)
Effective leadership within the organization. Rules of conduct within the organization Ethical norms and standards within the organization
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
Whistleblowing in accounting is a duty when it is motivated by ______.
determination to protect the public interest
Organizations can create an ethical workplace culture by ______. (Check all that apply)
developing an ethics training program taking action against employees who violate ethics policies rewarding ethical behavior and including it in employee performance evaluations
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
The purposeful manipulation of financial statements is called financial statement .
fraud
An ethical workplace culture is influenced by ______. (Check all that apply)
having an ethical code of conduct whistleblowing policies strong internal controls
Internal mechanisms of corporate governance include ______. (Select all that apply)
management the Board of Directors the audit committee
The conditions in an organization that limit or permit ethical or unethical behavior are referred to as
opportunity
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
An accountant who goes along with fraud due to the strain of meeting earnings projections is subject to ______.
situational pressure
Control activities can be defined as ______.
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 tone at the top
Internal compliance officers and internal auditors can qualify for whistleblower awards if ______. (Check all that apply)
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
Timely and accurate disclosure on all material matters, including the financial situation and corporate governance, are required by ______.
transparency
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
According to the ACFE Global Survey, the typical organization loses ______.
5% of its revenue to fraud each year
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 is the most common method of detecting occupational fraud?
A tip
Which of the following were findings in the KPMG Integrity Survey 2013 that looked at organization misconduct?
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.
Identify the elements of corporate culture. (Check all that apply)
Audit committee Internal auditors CEO and CFO
Corporate governance regulation in the United States includes which of the following? (Check all that apply)
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.
Which of the following are important components of tone at the top? (Select all that apply)
Enforcing disciplinary actions Communicating the importance of compliance to employees
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.
Unless certain exceptions apply, the Dodd-Frank Act excludes which of the following individuals from receiving whistleblower awards? (Check all that apply)
Internal auditors Internal compliance officers
Which type of fraud accounts for nearly 40% of all types of occupational fraud?
Misappropriation of assets
The COSO report identifies which of the following components of the internal control framework? (Check all that apply)
Monitoring Risk assessment The control environment Control activities
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 50% would call the ethics hotline. More than 75% of employees would notify their supervisor of violations.
By reporting through the internal reporting process, which of the following are possible outcomes? (Select all that apply)
Others may become potential whistleblowers. Others in the organization become informed about concerns.
Which of the following encourage ethical behavior in the workplace? (Select all that apply)
Support for ethical behavior from top management An ethical climate in the organization
Which of the following are elements of whistleblowing? (Check all that apply)
The act of whistleblowing The party to whom the complaint is made The organization against which the complaint is lodged
Which of the following are components of the Cadbury Code? (Select all that apply)
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.
When an individual with low ethics joins an organization with low ethics, which of the following occur? (Check all that apply)
The fit is there, but it turns in a negative direction of corruption. The employee is more willing to participate in corruption. The employee adopts the attitude of going along to get along.
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
The underlying motivation for fraud is to ______.
achieve a gain over another party that would not otherwise exist
Financial statement fraud schemes occur because ______.
an employee causes a misstatement of material information in the financial reports
Select all that apply Enron and WorldCom both failed as going concerns a result of ______. (Check all that apply)
an excessive emphasis on financial results at all costs pressure to maintain the numbers a tension between ethics and the bottom line
The SEC protects whistleblowers by ______.
barring companies from threatening to enforce a confidentiality agreement
Directing the business and affairs of the corporation is the ultimate responsibility of the ______.
board of directors
Executive compensation packages can be used to alleviate the agency problem because ______. (Check all that apply)
compensation packages can be used to link executive pay to performance of the company's shares 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
Under Sarbanes-Oxley, the audit committee is expected to be ______. (Check all that apply)
conscientious and diligent in its oversight role of the financial statements conscientious and diligent in carrying out its responsibilities completely independent of management
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
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 moral atmosphere of the work environment and the level of ethics practiced within a company is referred to as _____ .
ethical climate
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
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
The survey on occupational fraud and abuse found ______. (Check all that apply)
financial statement fraud schemes made up 9% of the frauds 85% of the reported cases of fraud were due to misappropriation of assets that frauds lasted about 18 months before being detected
All of the following are prohibited actions under Sarbanes-Oxley when an employee reports lawful concerns, except ______. (Check all that apply)
harassment demotion
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 control
Whistleblowing through the disclosure of wrongdoing to parties can be characterized as either or whistleblowing. (Enter one word per blank.)
internal external
When a company retaliates against an employee for bringing bad news to the attention of top management, a the syndrome exists.
kill messenger
Unethical behavior and financial collapse sometimes go hand and hand because of ______. (Check all that apply)
loyalty to the boss intense pressure to maintain the numbers an unrealistic emphasis on meeting financial projections
The moral atmosphere of the work environment and the amount of ethics practiced is referred to as the ____ ethical climate.
organizational
Dennis Kozlowski, the CEO of Tyco, selected employees based on ______. (Select all that apply)
possible conflicts of interest reluctance to challenge authority lack of experience
In the economic model of CSR, business exists to ______.
produce goods and services for society create jobs
The purpose of the control environment is to ______. (Check all that apply)
provide discipline and structure for internal controls set the ethical tone of the organization influence the control consciousness of employees
Overstatement of revenue occurs by ______. (Check all that apply)
recording revenues when acting as a middle man recording gross revenue, rather than net revenue recording sales of product on consignment
The intensity of an ethical situation is based on the ______. (Select all that apply) situational pressures in the workplace relevant laws and policies values of those involved fear of retaliation norms in common situations
situational pressures in the workplace values of those involved norms in common situations
The most frequently observed misconduct in organizations in the 2013 National Business Ethics Survey was ______.
stealing or theft
Koh and Boo found that positive ethical culture and climate produce ______.
support for ethical behavior from top management favorable organizational outcomes the ethical climate of the organization
Organizations can create an ethical workplace culture by ______. (Check all that apply)
taking action against employees who violate ethics policies rewarding ethical behavior and including it in employee performance evaluations developing an ethics training program
The survey on occupational fraud and abuse found ______. (Check all that apply)
that frauds lasted about 18 months before being detected 85% of the reported cases of fraud were due to misappropriation of assets financial statement fraud schemes made up 9% of the frauds
Which of the following is not a type of fraud?
Errors in financial statements
Which of the following are rules managers should follow when fostering ethical leadership? (Select all that apply) Make decisions that respect the rights of others. Do not choose actions that will harm others. Always put shareholder interest first. Consider how actions will affect others. Choose the action that maximizes earnings. Think about potential actions before making a decision.
Make decisions that respect the rights of others. Do not choose actions that will harm others. Consider how actions will affect others. Think about potential actions before making a decision.
The common causes of ethical collapse include ______. (Check all that apply)
conflicts of interest are ignored overly rapid pace of innovation and change loyalty to the boss
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
Corporate social responsibility involves ______. (Check all that apply)
ethical expectations that society has for business responsibility to prevent harm
The ethical person-organization fit option that is most likely to lead to unethical behavior occurring is ______.
low individual ethics, low organizational ethics
Decision making in an organization is influenced by its culture through ______.
organizational relationships and expectations for behavior
An ethical climate is enhanced through which of the following? (Choose all that apply)
Values-driven organization Openness and transparency
What was an underlying theme in nearly all of the companies with major accounting frauds in the early 2000s?
Weak board of directors
Fear and silence can stifle whistleblowing in a company because of ______. (Check all that apply)
a kill the messenger syndrome a culture that retaliates against whistleblowers fear of reprisals
Fear and silence can stifle whistleblowing in a company because of ______. (Check all that apply)
a kill the messenger syndrome a culture that retaliates against whistleblowers fear of reprisals
Internal controls are designed to ______. (Check all that apply)
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
External mechanisms of corporate governance include ______. (Select all that apply)
state and federal statutes shareholder proposals
Corporate social responsibility involves ______. (Check all that apply)
ethical expectations that society has for business responsibility to prevent harm
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.
Principles people use to decide what is right and wrong in the ethical decision-making process are referred to as ____ values.
individual
Which section of Sarbanes-Oxley requires a code of ethics for senior financial officers?
Section 406
One characteristic of virtually all frauds in the late 1990s and early 2000s was ______.
the CEOs and CFOs knew about the materially misstated financial statements
Revenues can be overstated by recording ______. (Check all that apply)
bogus revenues revenues too soon
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
The intent of external auditors qualifying for whistleblower awards is to ensure ______.
wrongdoing by the accounting firm is reported
According to the Treadway Commission Report, internal auditor concerns about the financial statements should be reported directly to the ______.
audit committee
Sarbanes-Oxley requires the audit committee ______.
be completely independent of management
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 section of Sarbanes-Oxley prohibits retaliation for any lawful act done by the employee?
Section 806
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.
Executive compensation packages can be used to alleviate the agency problem because ______. (Check all that apply
compensation packages can be used to link executive pay to performance of the company's shares 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
