Deck 4: Ethics and Company Culture

Question 1

The employment-at-will doctrine contains an exception for whistle-blowers.

Answer 1

True

Question 2

The compensation problem of CEOs has been solved through federal caps.

Answer 2

False

Question 3

Captain Sullenberger was prepared to land a plane on the Hudson River because of his focus on training.

Answer 3

False

Question 4

The failure to speak out when an ethical or legal lapse occurs within your firm is in itself an ethical violation.

Question 5

Whistleblowers who turn to external avenues for dealing with issues are unethical.

Question 6

Ethics training is an effective way to curb employees' unethical conduct.

Question 7

Joseph Jett did not serve time in prison for his activities at Kidder Peabody.

Question 8

Employee hotlines exist to help employees who feel they cannot communicate concerns through the lines of authority.

Question 9

Incentive plans influence employees' choices on ethical dilemmas.

Question 10

Employee hotlines exist to help employees who feel they cannot communicate concerns through the lines of authority.

Question 11

Alignment of compensation with company values is necessary to curb company-level ethical lapses.

Question 12

Screening bad apples out before hiring is an effective way to curb employees' unethical conduct.

Question 13

Galleon Hedge Fund used an inside source who had previously settled a case for passing along inside information.

Question 14

Some employees remain silent about issues they see and simply continue working at the company.

Question 15

If whistleblowers do not have internal avenues for dealing with issues, they will quit or turn to external avenues.

Question 16

An underwater mortgage is not enforceable.

Question 17

The failure of employees to deal with issues and concerns can result in conflicts and concerns that remain unresolved .

Question 18

Whistleblowers have both internal and external avenues for dealing with issues.

Question 19

Nick Leeson did not serve time in prison for his activities at Barings Bank.

Question 20

Jerome Kerviel served less than one year in prison for his activities at Société G é n é rale.

Question 21

The WorldCom stock frenzy is unique in business history.

Question 22

Enron did not disclose that an officer of the company was a principal in the off-the-book entities.

Question 23

WorldCom employees who raised questions about the company's accounting were forbidden from talking with Arthur Andersen auditors.

Question 24

Ethical lapses involve gradual decision processes.

Question 25

Dennis Kozlowski's first trial resulted in a hung jury.

Question 26

FINOVA eventually declared bankruptcy.

Question 27

Warren Buffett bought FINOVA in bankruptcy.

Question 28

If I discover that a fellow employee is reporting falsely his overtime hours, it is best for me to say nothing and ignore the situation.

Question 29

No employees at WorldCom raised any objections to the accounting practices.

Question 30

WorldCom's accounting issues were discovered by its head of internal audit.

Question 31

WorldCom's accounting was confusing because of its mergers and acquisitions.

Question 32

Mr. Ebbers was a Sunday School teacher at his Hattiesburg, Mississippi church.

Question 33

The duty of loyalty between employee and employer makes whistle-blowing unethical per se.

Question 34

Most ethical lapses are sudden and not foreseen.

Question 35

If my supervisor asked me to cover for him by lying about his whereabouts, I should agree to do it but remind him that I can't make it a habit.

Question 36

FINOVA was a second-tier lender.

Question 37

A company executive exerting pressure on a scientist and her university to delay disclosure of study results harmful to the company and its products would be unethical.

Question 38

EBITDA is a GAAP method of financial reporting.

Question 39

WorldCom employees who followed orders and made the accounting entries for capitalizing ordinary expenses served prison time.

Question 40

Both the director of general accounting and the controller at WorldCom were comfortable with capitalizing ordinary expenses.

Question 41

Prior to working for Kidder Peabody, Joseph Jett was fired from one job and laid off from another.

Question 42

Sarbanes-Oxley requires all covered companies to have a code of ethics for financial officers.

Question 43

Under Sarbanes-Oxley, a company must file an 8-K if it has waived its code of ethics for a financial reporting officer.

Question 44

Both Kozlowski and Tyco were generous in their philanthropic activities.

Question 45

There was a fluid transfer of employees between Andersen and Enron.

Question 46

UBS had rules that prevented operations employees from trading/client-facing positions.

Question 47

Goodwill was not a part of Tyco's accounting and financial reports.

Question 48

Under Sarbanes-Oxley, audit committees of publicly held companies' boards need not be made up of independent members so long as the majority of the board is independent.

Question 49

The U.S. Supreme Court reversal of the Andersen conviction means that there were no ethical missteps by Andersen.

Question 50

Tyco was not forthcoming in its financial statements about its acquisitions.

Question 51

Destruction of documents related to the financial reports of a company carries a 20-year penalty.

Question 52

If the earnings of a company are revealed to be false, the officers who earned bonuses based on these earnings must forfeit them.

Question 53

All of the officer loans at Tyco were approved by the Tyco board.

Question 54

No HealthSouth board members did business with Scrushy or HealthSouth.

Question 55

Attorneys who represent publicly traded companies need not report any financial fraud to boards because of attorney-client privilege.

Question 56

The board waived Enron ethics code provisions at least three times.

Question 57

The "rogue traders" all had the skills to work around company internal controls in order to cover their activities.

Question 58

Mr. Scrushy was very generous in giving funds to his home town and charitable causes.

Question 59

David Duncan was indicted on obstruction charges and convicted.

Question 60

The HealthSouth board knew very little about the creative accounting at HealthSouth.

Question 61

Your unit has not been able to meet its sales goals for your quarter. Your assistant has suggested that you ship out enough goods to meet the quarterly goals by simply overshipping quantities on customer orders. When the goods are returned, you would simply take the returns in the next quarter after you have had more of an opportunity to meet goals.  A customer who agreed to help you with your shifting would not be engaged in unethical behavior.

Question 62

The managers who cooperated with the federal government in the Upper Branch mine explosion criminal investigation received lesser sentences.

Question 63

The mistake at the Department of Interior in fees on leases resulted from a failure to stop an incentive program following an increase in oil prices.

Question 64

Booking sales in advance of actual contracts is not a violation of accounting rules.

Question 65

The head of security at the Upper Branch mine had the presence of mine inspectors announced.

Question 66

The CEO of Massey Energy was acquitted in his trial related to the deaths at the Upper Branch mine explosion.

Question 67

Removing records from the workplace to prevent access by regulators on a pre-announced inspection is both illegal and unethical.

Question 68

Enron used "mark to market" accounting.

Question 69

Your unit has not been able to meet its sales goals for your quarter. Your assistant has suggested that you ship out enough goods to meet the quarterly goals by simply overshipping quantities on customer orders. When the goods are returned, you would simply take the returns in the next quarter after you have had more of an opportunity to meet goals.  S uppose you learn that other divisions within the company have always engaged in this form of earnings shifting. The practice is still an ethical breach.

Question 70

WorldCom's accounting issues involved capitalization of ordinary expenses.

Question 71

Analysts for investment banks cannot be required to obtain approval or consent from their employers for their reports.

Question 72

The CEO of Massey Energy required hourly faxed reports of coal production.

Question 73

Loans to corporate executives are now illegal under Sarbanes-Oxley.

Question 74

Materiality is generally defined by accountants as a percentage range.

Question 75

Analysts can be terminated for issuing negative reports that affect the investments of their employer banks.

Question 76

Your unit has not been able to meet its sales goals for your quarter. Your assistant has suggested that you ship out enough goods to meet the quarterly goals by simply overshipping quantities on customer orders. When the goods are returned, you would simply take the returns in the next quarter after you have had more of an opportunity to meet goals. Your assistant's suggestion is a breach of ethics.

Question 77

The FBI found security records for The Upper Branch mine in a dumpster.

Question 78

Earnings management is the use of accounting techniques to smooth earnings.

Question 79

In the Claremont-McKenna case, the initial reported bumps in average SAT scores ranged from 10 points to 100 points.

Question 80

The failure of an auditor to disclose the possible obsolescence of a firm's major product is a judgment call and not an ethical issue.