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The SEC has increased focus on identifying and penalizing misstatements in public company financials.What is one method that the SEC is using to identify companies,CEOs,and CFOs that are misstating financial statements?


A) Utilizing the whistleblower provisions of the Dodd-Frank Act to provide a hot line.
B) Analyzing patterns of internal control problems even absent a restatement of the financials.
C) Analyzing whether the CFO has implemented adequate internal controls and safeguards over the financial reporting function.
D) Utilizing the company's ethics code to spot misstatements.

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Which of the following was not a finding of the ACFE 2014 Report to the Nation on Occupational Fraud?


A) Fraud is more likely to be detected by tips than any other way
B) Frauds lasted a medium of 18 months before detection
C) Asset misappropriation schemes was the most common type of occupational fraud
D) External auditors discover about 10 percent of the frauds

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In the Bhopal case,in evaluating its exposure to possible future liability due to technology failures,Union Carbide used which of the following concepts?


A) Professional skepticism
B) Business risk
C) Cost-benefit analysis
D) Rights Theory

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Which of the following is NOT a characteristic behavior illustrating the fiduciary duty of the board of directors?


A) Safeguarding corporate assets
B) Promoting shareholder interests
C) Exercising care in carrying out their responsibilities
D) Representing the interests of all stakeholders

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Trust in business is important because:


A) Management needs to feel confident that employees will carry out organizational objectives
B) Stakeholders need to feel confident that relationships with organizations will be consistent and reliable
C) Stakeholders rely on management to produce shareholder returns
D) Management needs to feel confident that those with relationships with the organization do what they say

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Which of the following is NOT an underlying trait of character of an effective leader identified by Johnson?


A) Confidence
B) Temperance
C) Reverence
D) Compassion

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Backdating of stock options is unethical because:


A) It favors top executives over other company employees with respect to the number of options
B) It purposefully manipulates the option criteria that determine their value
C) It changes the exercise price on options to benefit top executives
D) It changes the exercise date on options to benefit top executives

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Lana is a CPA and works as an internal auditor for Dynamite,Inc.As she was performing a revenue timing test,for the internal audit schedule and the external auditors,she noticed that the Western division consistently kept the books open 4 days into the next quarter.Lana immediately reported to the Chief Internal Auditor; together they took the issue to the CFO and Controller.The CFO assured them that the issue would be resolved.It has been 90 days since the meeting.Lana is considering blowing the whistle but cannot decide who to tell and when. What are the ethical issues of concern for Lana? What would you advise Lana to do,how,to whom and in what order,assuming she could qualify for a reward under Dodd-Frank?

Correct Answer

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First,Lana does have a confidentiality r...

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The 2013 Ethics Resource Center National Business Ethics Survey indicates each of the following results with respect to how employees view the ethics and ethical practices of organizations they work for except:


A) Misconduct at work has declined over the years
B) Whistleblowing is up
C) Ethical cultures are weaker
D) Pressure to cut corners is lower

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To ensure audit committee independence,the committee should meet separately with each of the following groups except:


A) Senior executives
B) Internal auditors
C) External auditors
D) Shareholders

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Which of the following is not an element of an ethical corporate culture?


A) Setting a proper tone at the top
B) Establishing strong internal controls
C) Having an effective internal audit function
D) Having an effective external audit

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A unique aspect of occupational fraud is:


A) The misuse of company assets
B) The falsification of financial statements
C) The failure to disclose full and complete information
D) The failure to resolve conflicts of interest

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Organizational ethics can be thought of as:


A) Descriptions of how ethics occurs at a company
B) Principles and standards of behavior that guide business decisions
C) Rules of conduct that establish legal requirements for businesses
D) Standards of reporting ethical violations

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In the Pinto case,Ford relied on which approaches to ethical reasoning to decide on a course of action with respect to the faulty gas tank placement:


A) Egoism and utilitarianism
B) Enlightened egoism and rights theory
C) Ethical legalism and utilitarianism
D) Justice and rights theory

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Kyle and Luis were friends since rooming together in college ten years ago.They were both finance and accounting double majors.They were each other's weddings and their wives were also good friends.After college Kyle went on to get his CPA license and ultimately went to work as controller,and then CFO,of a publicly held hardware chain,King's Hardware.King's had twenty-five retail outlets in a five state region and looking at acquiring a hardware chain (Rex's) of six retail outlets in a state that King's wants to get a presence in.Luis worked for a bank after college but then changed to being a real estate investor.Luis was the one who gave Kyle the tip on Rex's being open to a takeover offer; Luis was the realtor for all of Rex's store locations. Kyle hired a CPA firm to do due diligence for the acquisition,including updated appraisals of Rex's store locations and valuations of contents of each store.Kyle had the report.The problem was that the report is showing that Luis was a 10% owner of Rex's; would be paid a 15% commission by Rex's upon a successful buy-out; and,most troubling of all,the value of Rex's locations and inventory was overstated on Rex's books by 50%. Kyle is considering who to tell,how,when.Most of all he is feeling betrayed by Luis. 1.What are the ethical issues? 2.What would you do next and why? Consider the following in your response. •What do you need to say,to whom,and in what sequence? •What are the reasons and rationalizations you are likely to hear from those who would try to detract you from your goal? •How can you counteract those pressures? What is your powerful and persuasive response to these arguments? To whom should you make them? When and in what context?

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The ethical issues are the overvaluation...

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Compensation of executives has soared over the last forty plus years to more than 400 times the pay for average workers.Remedies to rein in executive compensation include all but:


A) Say on pay provisions
B) More diligent board oversight of compensation packages
C) Restrictions by the law as to the maximum total compensation allowable
D) Clawbacks of compensation when it can be shown executives knew of fraud

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Lawsuits filed against Johnson & Johnson for product defects years after the Tylenol affair best illustrates that:


A) Even good companies can do bad things
B) A reputation for trust can be lost in an instance
C) Good companies are targets of consumer lawsuits
D) Ignoring bad evidence about a product is a bad idea

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What is the ethical issue in the Rite Aid Inventory Surplus Fraud case?


A) The surplus inventory sales and kickback involved collusion between two officers of the company.When Foster wanted to stop the scheme,he was blackmailed in continuing the fraud.
B) Rite-Aid had a comprehensive corporate governance system that complied with all the requirements of Sarbanes-Oxley.
C) The internal auditor found and blew the whistle on the surplus inventory sales and kickback cover-up.
D) Vice Presidents of the company were involved in a material,nine year surplus inventory sales and kickback scheme.

Correct Answer

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Jodie Fisher's allegations of sexual harassment are made believable due to Mark Hurd's:


A) Conflict of interests
B) Misuse of company assets
C) Inaccurate expense reports
D) All of the above

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Has SOX accomplished its intended goal of reliable financial reporting by public companies?


A) Yes,as the CEO and CFO are certifying that financial statements contain no material misstatements.
B) Maybe,as very few defendants have been charged with false certification,and fewer still have been convicted.
C) Maybe,as laws are needed but they serve as only a minimum standard of ethical conduct and may not lead to ethical conduct.
D) No,as the SEC has unsuccessfully sought to collected disgorgement of bonuses and other compensations of officers.

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