Which of the following statements is CORRECT?
A) If a lower level person in a firm does something illegal, like "cooking the books" to understate costs and thereby artificially increase profits because he or she was ordered to do so by a superior, the lower level person cannot be prosecuted but the superior can be prosecuted.
B) There are many types of unethical business behavior. One example is where executives provide information that they know is incorrect to outsiders. It is illegal to provide such information to federally regulated banks, but it is not illegal to provide it to stockholders because they are the owners of the firm.
C) If someone deliberately understates costs and thereby causes reported profits to increase, this can cause the price of the stock to rise above its intrinsic value. The stock will probably fall in the future. Both those who participated in the fraud and the firm itself can be prosecuted.
D) Ethical behavior is not influenced by training and auditing procedures. People are either ethical or they are not, and this is what determines ethical behavior in business.

Question

Quizplus · Accepted Answer

Option C is correct as it states the consequences of deliberate understating of costs and the possible legal actions against those who participate in such fraud. Option A is incorrect as the lower level person can also be prosecuted for doing something illegal even if ordered to do so by a superior. Option B is incorrect as providing incorrect information to stockholders can also be illegal and unethical. Option D is incorrect as training and auditing procedures can positively influence ethical behavior in business.

Which of the Following Statements Is CORRECT