Chapter 05 - Organizational Ethics and the Law

Chapter 05 Organizational Ethics and the Law Answer Key

True / False Questions

1. (p. 95) Personal values and moral character play key roles in improving a company's ethical performance. TRUE 2. (p. 95) In most companies, a moral atmosphere cannot be detected. FALSE 3. (p. 96) In a benevolence ethical climate, the interests of the company's employees and external stakeholders most likely would be given high priority. TRUE 4. (p. 96) Managers, as major decision-makers, are one of the keys to whether a company will act ethically or unethically. TRUE 5. (p. 96) It is impossible for multiple ethical climates to exist within one organization. FALSE 6. (p. 97) All ethics issues in business are the same. FALSE 7. (p. 97) Honesty, integrity and accuracy are absolute requirements of the accounting function. TRUE 8. (p. 98) The International Accounting Standards (IAS) were created by the Sarbanes-Oxley Act. FALSE 9. (p. 105) Any business that wished to do so can improve the quality of its ethical performance. TRUE 10. (p. 107) The majority of large U.S. corporations do not have codes of ethics. FALSE 11. (p. 107) In the United States, most ethics policies are primarily based on the company's mission and vision. FALSE 12. (p. 113) Iceland and Sweden are two countries that are least likely to be subjected to bribery. TRUE

5-1

Chapter 05 - Organizational Ethics and the Law

13. (p. 116) Ethics deal with human dilemmas that frequently go beyond the formal language of law. TRUE 14. (p. 117) Following laws can always define proper action. FALSE 15. (p. 117) Illegal acts committed by employees, such as fraud and insider trading, are called blue-collar crime. FALSE

Multiple Choice Questions

16. (p. 95) The core components upon which a company's ethical performance depends include: A. The values and virtues of the managers. B. The personal character of the managers and employees. C. The traditions, attitudes, and business practices built into a company's culture. D. All of the above. 17. (p. 96) The unspoken understanding among employees of what is and is not acceptable behavior is called: A. Ethical climate. B. Efficiency. C. Success. D. Rites and rituals. 18. (p. 96) If a manager approaches ethical issues with a self-centered approach, emphasis will be on: A. Integrity. B. Social relationship. C. Economic efficiency. D. Laws. 19. (p. 96) Which of the following is not an example of an ethical criterion? A. Egoism. B. Concern for others. C. Principle. D. Corporate driven.

5-2

Chapter 05 - Organizational Ethics and the Law

20. (p. 96) If a manger approaches ethics with benevolence in mind, he or she would stress what? A. Friendly relations with an employee. B. Company rules and procedures. C. Laws and professional codes. D. Economic efficiency. 21. (p. 96) Which ethical criterion is described by the idea that a company should strive for efficiency? A. Egoism. B. Benevolence. C. Principle. D. Business-centered. 22. (p. 97) By law, the financial records of publicly held companies are required to be: A. Managed by an accounting department of at least 5 CPAs. B. Summarized in the employee manual for new hires. C. Reviewed quarterly by the IRS. D. Audited by a certified professional accounting firm. 23. (p. 98) The International Accounting Standards are essential for: A. Imposing greater oversight by governments. B. Integrating the European Union capital markets. C. Promoting the integrity of global capital markets. D. All of the above. 24. (p. 100) Which financial institution asked Wall Street finance companies to self-regulate? A. The Federal Reserve Board. B. Nasdaq. C. The New York Stock Exchange. D. The London Stock Exchange. 25. (p. 100) A member of the Chartered Financial Analyst Institute (CFA) must: A. Promote the integrity of and uphold the rules governing global capital markets. B. Exercise sensitive and moral judgments in all activities. C. Maintain objectivity. D. All of the above. 26. (p. 104) Business managers need a set of ethical guidelines to help them: A. Understand the changing customs throughout the world. B. Justify the resolution which best helps them. C. Identify and analyze the nature of the ethical problem. D. None of the above.

5-3

Chapter 05 - Organizational Ethics and the Law

27. (p. 104) Which of the following organization's code of ethics advocates "loyalty to your organization, justice to those whom you deal and faith in your profession?" A. Institute for Supply Management. B. Institute of Certified Public Accountants. C. Financial Accounting Standards Board. D. Association for Computing Machinery. 28. (p. 104) Building ethical safeguards into a company's everyday routines is called: A. Change management. B. Justifying ethics. C. Institutionalizing ethics. D. Ethical awareness. 29. (p. 105) A company that channels employee behavior in a lawful direction by emphasizing the threat of detection and punishment is: A. Operating under the compliance-based approach. B. Practicing "tone at the top." C. Operating under the integrity-based approach. D. Operating under the instrumental policy approach. 30. (p. 105) Integrity-based ethics programs: A. Seek to avoid legal sanctions. B. Combines concern for the law with an emphasis on employee responsibility. C. Threatens employees with punishment for non-compliance with the ethics program. D. Are predominately implemented within the European Union. 31. (p. 107) A giant step is taken toward improving ethical performance throughout the company when: A. The firm hires a university ethics professor to lecture employees on moral philosophy. B. The Justice Department launches an investigation of the firm's pricing practices. C. Senior-level managers signal to employees that they believe ethics is a high priority. D. A consumer hot line is created and staffed 24 hours a day. 32. (p. 107) Which of the following statements is true? A. In Japan, most codes were found to be a mixture of legal compliance and statements of mission. B. The rationale underlying corporate codes of ethics are the same from country to country. C. The values and mission codes are least popular with European and Canadian companies. D. Codes of ethics in Latin America primarily focus on guidelines for accepting or refusing gifts. 33. (p. 107) Which ethics policies are most popular amongst European and Canadian companies? A. Statements of the company's values and mission. B. Policies focusing on legal compliance. C. Instrumental policies. D. Both A and C, but not B.

5-4

Chapter 05 - Organizational Ethics and the Law

34. (p. 108) An ethics or compliance officer is generally entrusted to: A. Act as a liaison between the company and the Securities and Exchange Commission. B. Reduce the risks to the company of employee misconduct. C. Distribute copies of the company's code of ethics to all interested stakeholders. D. Arrange for ethics training for employees at a nearby university. 35. (p. 109) Ethics reporting mechanisms have been: A. Established to create an avenue for the company to obtain allegations of unethical conduct. B. Increasing in employee use and effectiveness. C. Wholly rejected by skeptical and weary employees. D. Both A and B, but not C. 36. (p. 109) Which of the following is not a typical use of an ethics reporting mechanism? A. To provide interpretations of proper ethical behavior involving conflicts of interest and the appropriateness of gift giving. B. To give employees an opportunity to discuss the appropriate rating on their annual performance reviews without management's influence. C. To create an avenue to make known to the proper authorities allegations of unethical conduct. D. To give employees and other corporate stakeholders a way to discover general information about a wide range of work-related topics. 37. (p. 110) Typically, ethics training is offered to: A. Managers. B. To the rank-and-file. C. Both managers and the rank-and-file. D. The Board of Directors only. 38. (p. 111) Which of the following is a typical practice in an ethics audit procedure? A. The auditor notes any deviations from the company's ethics standards that become evident during the ethics audit. B. The auditor brings deviations to the attention of the audit supervisor. C. Department managers are required to file a report with the auditor on the corrective action they took to deal with the deviation. D. All of the above. 39. (p. 111) The critical component in installing an effective ethics program is: A. To allow all employees the freedom to act as they wish. B. In hiring an expensive ethics consultant. C. The integration of various ethics safeguards into a comprehensive program. D. Maintaining the position as the industry sales leader. 40. (p. 112) Recipients of the corporate ethics awards show that: A. Awards are based on economic power, not ethical performance. B. Firms can be financially successful and ethically focused. C. Being legally compliant results in receiving an ethics award. D. Improving ethical performance is very costly, but bolsters a firm's reputation.

5-5

Chapter 05 - Organizational Ethics and the Law

41. (p. 112) Ethisphere Magazine recognizes and rewards ethical leadership and business practices worldwide according to their: A. Regulatory Percentage Track (RPT). B. Ethics and Leadership Radar (ELR). C. Quality Measurement (QM). D. Ethical Quotient (EQ). 42. (p. 114) One of the most widespread and potentially powerful efforts to combat bribery was initiated by: A. The Global Forum on Fighting Corruption. B. The Organization for Economic Cooperation and Development. C. International Labour Organization. D. The U.S. Foreign Corrupt Policy Act. 43. (p. 116) Motorola and Reebok are examples of: A. Companies with clearly defined long-term strategic plans. B. Companies trying to motivate employees to adhere to basic ethical principles of fairness, honesty and human rights. C. Companies trying to educate employees to respect the customs of other nations. D. Both B and C, but not A. 44. (p. 116-117) The Interactive Digital Software Association case exemplifies: A. The idea that laws cannot always define proper action. B. The idea that ethical principles are broader than laws. C. Industries preempting legislation and voluntarily adopting ethically based practices. D. All of the above. 45. (p. 117) Which of the following is not an example of a white-collar crime? A. Embezzlement. B. Check fraud. C. Theft. D. Money laundering.

5-6