Deck 4: Ethics and Company Culture

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

An underwater mortgage is not enforceable.

Answer 3

False

Question 4

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

Question 5

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

Question 6

Labeling infertility surgery as "diagnostic surgery" in order to allow the patient to recover the costs from an insurer is unethical.

Question 7

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

Question 8

Timothy Mayopoulos met with the board of Bank of America to discuss financial disclosures.

Question 9

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

Question 10

An industry practice that permits bill-padding is ethical.

Question 11

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

Question 12

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

Question 13

Jerome Kerviel was sentenced to three years in prison for his activities at Société General.

Question 14

Incentive plans influence employees' choices on ethical dilemmas.

Question 15

Timothy Mayopoulos was not fired by Bank of America.

Question 16

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

Question 17

The Bear Stearns fund managers were convicted of securities fraud.

Question 18

Frank Quattrone was convicted of insider trading.

Question 19

Bankruptcies for 2009 increased by about 40%.

Question 20

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

Question 21

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 22

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

Question 23

According to Professor White, a mortgage contract is a legal document and not a sacred promise.

Question 24

EBITDA is a GAAP method of financial reporting.

Question 25

Ethical lapses involve gradual decision processes.

Question 26

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

Question 27

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

Question 28

The WorldCom stock frenzy is unique in business history.

Question 29

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 30

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

Question 31

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

Question 32

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

Question 33

FINOVA eventually declared bankruptcy.

Question 34

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

Question 35

Warren Buffett bought FINOVA in bankruptcy.

Question 36

Most ethical lapses are sudden and not foreseen.

Question 37

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 38

FINOVA was a second-tier lender.

Question 39

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

Question 40

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

Question 41

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

Question 42

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

Question 43

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

Question 44

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

Question 45

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

Question 46

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

Question 47

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

Question 48

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

Question 49

Recording artists and Hollywood actors have used bankruptcy as a means of being relieved of contract obligations.

Question 50

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 51

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

Question 52

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

Question 53

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

Question 54

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

Question 55

Both Kozlowski and Tyco were generous in their philanthropic activities.

Question 56

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

Question 57

The trend in international markets is away from regulating insider trading.

Question 58

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

Question 59

David Duncan was indicted on obstruction charges and convicted.

Question 60

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

Question 61

The cost of options must be accounted for in the company's revenue statements.

Question 62

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

Question 63

With respect to #74, a customer who agreed to help you with your shifting would not be engaged in unethical behavior.

Question 64

With respect to #74, suppose 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 65

Enron used "mark to market" accounting.

Question 66

No officers at Royal Dutch were aware of the reserves overstatements.

Question 67

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

Question 68

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

Question 69

Options can be priced at the time of the grant at whatever price the board establishes.

Question 70

Royal Dutch had overstated its reserves by 22%.

Question 71

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.

Question 72

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 73

Executive compensation disclosures include information about conflicts of interest between directors and CEOs.

Question 74

Royal Dutch's restatement of its reserves did not affect its revenues.

Question 75

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

Question 76

Materiality is generally defined by accountants as a percentage range.

Question 77

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

Question 78

No HealthSouth board members did business with Scrushy or HealthSouth.

Question 79

Royal Dutch's share price was not affected by its restatement of its reserves.

Question 80

Corporate takeovers and mergers are unethical per se.