Question 1

Backdating of stock options is unethical because:

Accepted Answer

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)  All of the above B

Question 2

Each of the following is a component of internal control under SAS 55 except for:

Accepted Answer

A)  The control environment
B)  Risk assessment
C)  Control activities
D)  Transparency D

Question 3

Each of the following is a pillar of corporate governance except for:

Accepted Answer

A)  Responsibility
B)  Accountability
C)  Fairness
D)  Independence D

Question 4

By which means were most frauds reported or discovered, according to the survey conducted by the ACFE (Association of Certified Fraud Examiners)?

Accepted Answer

A)  Accidental
B)  Internal Audit
C)  External Audit
D)  Tip

Question 5

What is a cause of agency problems?

Accepted Answer

A)  Information asymmetry
B)  Information symmetry
C)  Information technology
D)  Information privacy

Question 6

An Internet Company has a chance to expand its business into a developing country.This chance would make money for its shareholders, as it would be the first Internet Company allowed in the country.However, the conditions demanded by the country is that the Internet Company must turn over to the government the history of Internet sites visited by its citizens.Additionally the Internet Company must also censor Internet sites requested through the search engine.In the United States and other countries, the Internet Company would not monitor, censor, or turn over a history of Internet sites to any government.
What should the Internet Company do? Use ethical theories and ethical decision making model to back up your decision.

Accepted Answer

The answer of An Internet Company has a chance to...

Question 7

The relationship between the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy and rule of law is known as

Accepted Answer

A)  Code of ethics
B)  Corporate sustainability
C)  Corporate responsibility
D)  Corporate governance

Question 8

What was the accounting issue in the Bhopal, India case?

Accepted Answer

A)  Transparent disclosures
B)  Lack of safety measures
C)  Sustained injuries from leak of toxic gas
D)  Settlement of claims filed by victimsEssay Questions

Question 9

In the Parable of Sadhu case, Bowen T.McCoy's friend Steve summed up the dilemma by saying:

Accepted Answer

A)  I feel that what happened with the sadhu is a good example of the breakdown between ethics in different cultures.
B)  I feel that what happened with the sadhu is a good example of the breakdown between the individual and corporate ethics.
C)  People tend to inevitably act in their own best interest.
D)  All of the above.

Question 10

Top values included in corporate values statements include:

Accepted Answer

A)  Being top in the field
B)  Commitment to beating the competition
C)  Diversity
D)  Integrity and ethical behavior

Question 11

What is the agency problem?

Accepted Answer

A)  Managers place corporate goals ahead of personal goals.
B)  Managers place personal goals ahead of corporate goals.
C)  Managers place social goals ahead of personal goals.
D)  Managers place corporate goals ahead of social goals.

Question 12

One failure with respect to the internal controls at Tyco and Adelphia was:

Accepted Answer

A)  Falsification of bank statement balances
B)  Top executives manipulated financial statement amounts
C)  Top executives used hundreds of millions of dollars from interest-free loans for personal purposes
D)  Top management engaged in a Ponzi scheme

Question 13

A unique aspect of Johnson & Johnson's Credo is that it:

Accepted Answer

A)  It is an aspirational statement rather than the typical "thou shalt not" form of a code of ethics
B)  It encourages employees to internalize the values of the company
C)  It follows a stakeholder approach to decision making
D)  All of the above

Question 14

A strong and effective internal control environment can be enhanced by:

Accepted Answer

A)  Financial statements that present fairly financial position and results of operations
B)  Giving the internal auditors direct and unrestricted access to the audit committee
C)  Having the internal auditors report to the external auditors
D)  Having the external auditors report to the audit committee

Question 15

A company establishes a set of formalized rules and standards that describe what a company expects of its employees.This is called a

Accepted Answer

A)  Strategic plan
B)  Guideline
C)  Moral philosophy
D)  Code of ethics

Question 16

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

Accepted Answer

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

Question 17

What is whistle blowing? Distinguish between internal and external whistle blowing including the parties that might be contacted in each case.

Accepted Answer

The answer of What is whistle blowing? Distinguish between internal...

Question 18

Section 404 of the Sarbanes-Oxley Act requires that management:

Accepted Answer

A)  Assess the company's internal controls
B)  Certify the financial statements
C)  Disclose all executive compensation
D)  All of the above

Question 19

A strong and effective system of internal controls can help to create an ethical corporate culture.Explain how the internal control system can enhance ethical decision making.

Accepted Answer

The answer of A strong and effective system of internal...

Question 20

The SEC case against Jeanne M.Rowzee involved:

Accepted Answer

A)  Fraudulent financial statements
B)  Misappropriation of assets
C)  A Ponzi scheme
D)  Failure of corporate governance

Exam 3: Corporate Governance and Ethical Management