Deck 5: Corporate Ethical Governance & Accountability.

Question 1

Which code deals with ethics principles plus additional examples?

A) credo
B) code of ethics
C) code of conduct
D) code of practice
E) All of these are correct.

Answer 1

code of conduct

Question 2

A conflict of interest exists when a given decision maker (D) and another person (P) are in the following situation:

A) D has to exercise judgment in P's behalf.
B) P has to exercise judgment in D's behalf.
C) D has a special interest that interferes with proper judgment.
D) D has to exercise judgment in P's behalf, and P has to exercise judgment in D's behalf.
E) D has to exercise judgment in P's behalf, and D has a special interest that interferes with proper judgment.

Answer 2

D has to exercise judgment in P's behalf, and D has a special interest that interferes with proper judgment.

Question 3

Experience has revealed that, to be effective, a code must be reinforced by

A) tone at the top.
B) an ethics officer and internal auditors.
C) a comprehensive ethical culture.
D) principles, rules and examples.
E) All of these are correct.

Answer 3

All of these are correct.

Question 4

The primary focus of a compliance-based ethics program is

A) preventing, detecting and punishing violations of the law.
B) defining organizational values and encouraging employee commitment.
C) improving image and relationship with stakeholders.
D) protecting management from blame.
E) All of these are correct.

Question 5

A company's internal auditors and its Ethics Officer should report

A) day-to-day to the CEO.
B) day-to-day to the Audit Committee of the Board of Directors.
C) regularly to the Audit Committee of the Board of Directors without management being present.
D) day-to-day to the CEO, and regularly to the Audit Committee of the Board of Directors without management being present.
E) day-to-day to both the CEO and the Audit Committee of the Board of Directors.

Question 6

A Conference Board survey identified which of the following rationales for developing codes of ethics?

A) Make employees aware that adherence is critical to bottom-line success.
B) Provide a statement of do's and don'ts.
C) Discuss what is expected in stakeholder relationships.
D) Establish values and mission.
E) All of these are correct.

Question 7

A fundamental problem examined by agency theory is how it is possible to align

A) shareholders' and stakeholders' goals.
B) manager's and stakeholders' goals.
C) shareholders' and managers' goals.
D) principal's and shareholders' goals.
E) agent's and stakeholders' goals.

Question 8

Building trust within an organization can have favorable impact on employees' willingness to share information and ideas in a process of

A) ethical awareness.
B) ethical awakening.
C) ethical renewal.
D) ethical wave.
E) None of these are correct.

Question 9

The 20/60/20 rule states that the total percent of employees who could commit a fraudulent act is

A) 20%.
B) 60%.
C) 80%.
D) 100%.
E) None of these are correct.

Question 10

The most important factor in encouraging employee observance to an ethics program is that employees perceive that it is

A) compliance-based.
B) values-based.
C) achievement-oriented.
D) stakeholder-based.
E) externally oriented.

Question 11

Which of these is the preferred approach for dealing with conflicts of interests?

A) management
B) disclosure
C) remediation
D) avoidance
E) awareness

Question 12

Which of the following is NOT a mechanism for monitoring a code of ethics?

A) ethics audit or internal audit procedures
B) reviews by legal department
C) awards and bonuses
D) annual sign-off by employees
E) employee surveys

Question 13

Which of the following is NOT true?

A) Principles are more useful than rules because principles can be interpreted as new circumstances require.
B) Rules are more useful than principles because rules can be interpreted as new circumstances require.
C) A blend of principles and rules is often optimal.
D) Principles are more useful than rules, and a blend of principles and rules is often optimal.
E) All of these are correct.

Question 14

The primary focus of an integrity-based ethics program is

A) preventing, detecting and punishing violations of the law.
B) defining organizational values and encouraging employee commitment.
C) improving image and relationship with stakeholders.
D) protecting management from blame.
E) All of these are correct.

Question 15

Which of the following is NOT a characteristic identified by forensic experts in prospective fraud situations?

A) high intelligence
B) greed
C) need for whatever is taken
D) opportunity to take advantage
E) low probability of being caught

Question 16

Which of the following is NOT an example of emerging public accountability standards or initiatives?

A) SOX-404
B) GRI
C) AA-1000
D) FTSE4Good
E) All of these are correct.

Question 17

SOX imposed which of the following new penalties for executives?

A) fines
B) suspension
C) criminal prosecution for executives
D) return of ill-gotten gains
E) All of these are correct.

Question 18

A potential conflict of interest exists when a given decision maker (D) and another person (P) are in the following situation:

A) P has a special interest that interferes with proper judgment.
B) D may have to exercise judgment in P's behalf.
C) D has a special interest that interferes with proper judgment.
D) P has a special interest that interferes with proper judgment, and D may have to exercise judgment in P's behalf.
E) D may have to exercise judgment in P's behalf, and D has a special interest that interferes with proper judgment.

Question 19

Corporations are now increasingly realizing that they are accountable

A) legally to shareholders.
B) legally to all stakeholders.
C) strategically to additional stakeholders.
D) legally to shareholders and all stakeholders.
E) legally to shareholders and strategically to additional stakeholders.

Question 20

Which of the following is NOT an ethics risk management principle?

A) Normal definitions of risk are too narrow for stakeholder accountability.
B) Assign responsibility; develop follow-up processes and board review.
C) Discovery and remediation are essential.
D) The code of ethics must be reviewed by independent parties.
E) An ethics risk exists when expectations of stakeholders may not be met.