Deck 4: Ethics and Company Culture

Question 1

An underwater mortgage is not enforceable.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

An industry practice that permits bill-padding is ethical.

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

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

Timothy Mayopoulos was not fired by Bank of America.

Question 16

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

Question 17

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

Question 18

Incentive plans influence employees' choices on ethical dilemmas.

Question 19

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

Question 20

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

Question 21

Most ethical lapses are sudden and not foreseen.

Question 22

FINOVA was a second-tier lender.

Question 23

Ethical lapses involve gradual decision processes.

Question 24

EBITDA is a GAAP method of financial reporting.

Question 25

FINOVA eventually declared bankruptcy.

Question 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

Warren Buffett bought FINOVA in bankruptcy.

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

The WorldCom stock frenzy is unique in business history.

Question 36

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

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

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 39

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

Question 40

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 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

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

Question 43

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

Question 44

Both Kozlowski and Tyco were generous in their philanthropic activities.

Question 45

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

Question 46

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

Question 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

No HealthSouth board members did business with Scrushy or HealthSouth.

Question 53

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 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

David Duncan was indicted on obstruction charges and convicted.

Question 60

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

Question 61

Autocratic leaders do not contribute to false financial reporting.

Question 62

Materiality is generally defined by accountants as a percentage range.

Question 63

Some recording artists use bankruptcy as a means for avoiding contract obligations.

Question 64

WorldCom's accounting issues involved capitalization of ordinary expenses.

Question 65

With respect to #68, 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 66

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

Question 67

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

Question 68

Royal Dutch had overstated its reserves by 22%.

Question 69

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 70

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

Question 71

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

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

Bankruptcies are on the increase.

Question 74

Legal declaration of bankruptcy requires only a statement that debts exist.

Question 75

Enron used "mark to market" accounting.

Question 76

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

Question 77

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

Question 78

If bankruptcy declaration is legal, then it is ethical.

Question 79

With respect to #68, a customer who agreed to help you with your shifting would not be engaged in unethical behavior.

Question 80

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