Business & Professional Ethics for Directors, Executives & Accountants, 6e

Multiple Choice Questions

Chapter 1 The Ethics Environment

1) The difference between what the public thinks it is getting in audited financial statements and
what the public is actually getting is known as:
a.
b.
c.
d.
e.

Credibility gap
Expectations gap
Audit gap
Stewardship gap
None of the above

ANSWER: b
2) Which of the following is not a trend described in Chapter 1 as having an impact on the
ethics of business?
a.
b.
c.
d.
e.

Directors legal liability

Managements stated intention to protect reputation
Auditors legal liability
Managements assertions to shareholders on the adequacy of internal controls
Managements stated intention to manage risk

ANSWER: c
3) Which corporate report discusses subjects that include environmental, health and safety,
philanthropic and other social impacts?
a.
b.
c.
d.
e.

Corporate annual report

Corporate social responsibility report
Corporate quarterly report
Corporate stakeholder report
Corporate ethics committee report

ANSWER: b
4) Professional Accountants, in their fiduciary role, owe their primary loyalty to:
a.
b.
c.
d.
e.

The accounting profession

The client
The general public
Government regulations
All of the above
Business & Professional Ethics for Directors, Executives & Accountants, 5e,
L.J. Brooks & P. Dunn, Cengage Learning, 2010

ANSWER: c
5) Ethical corporate behavior is expected to lead to:
a.
b.
c.
d.
e.

Higher profitability in the short-term

Higher profitability both in the short-term and long-term
Lower profitability in the long-term
Higher profitability in the long-term
Lower profitability both in the short-term and long-term

ANSWER: d
6) Examining the interests of stakeholders is probably required for:
a.
b.
c.
d.
e.

High short-term profits

Optimal medium and longer-term profits
Continuing support from stakeholder groups
Effective risk management
All of the above

ANSWER: a
7) A value that is almost universally respected by stakeholder groups is:
a.
b.
c.
d.
e.

Super norm
Alfa norm
Value norm
Hypernorm
General norm

ANSWER: d
8) Since the mid-1990s, both management and auditors have become increasingly:
a.
b.
c.
d.
e.

Profit management oriented

Ethics oriented
Value management oriented
Risk management oriented
Marketing oriented

ANSWER: d or b
9) The following are determinants of reputation:
a. Trustworthiness and Responsibility
Business & Professional Ethics for Directors, Executives & Accountants, 5e,
L.J. Brooks & P. Dunn, Cengage Learning, 2010

b.
c.
d.
e.

Credibility, Responsibility and Relevance

Responsibility and Impartiality
Relevance and Impartiality
Relevance, Credibility and Responsibility

ANSWER: a
10) The following would be a key control function of the Board of Directors:
a.
b.
c.
d.
e.

Set guidance and boundaries

Appoint CEO
Approve the sale of companys assets
Decide on the companys auditor
All of the above

ANSWER: e
11) Companies attempt to manage the risk of something happening that will have a negative or
positive impact on the companys objectives, such as:
a.
b.
c.
d.
e.

Credit risks
Litigation risk
Reputation risk
Ethics risks
All of the above

ANSWER: e
12) Most large corporations do not consider these risks in a broad and comprehensive way:
a.
b.
c.
d.
e.

Operational risks
Reputational risks
Credit risks
Market risks
Ethics risks

ANSWER: e
13) The following are examples of ethics risks faced by employees:
a.
b.
c.
d.
e.

Honesty and integrity

Fairness and compassion
Integrity and responsibility
Fairness and integrity
Responsibility and honesty

Business & Professional Ethics for Directors, Executives & Accountants, 5e,
L.J. Brooks & P. Dunn, Cengage Learning, 2010

ANSWER: b
14) Not reporting environmental issues is an example of:
a.
b.
c.
d.
e.

Lack of transparency
Lack of integrity
Lack of accuracy
All of the above
None of the above

ANSWER: b
15) Incomplete disclosure of the companys revenue recognition policy is an example of:
a.
b.
c.
d.
e.

Lack of transparency
Lack of integrity
Lack of accuracy
All of the above
None of the above

ANSWER: a
16) This philosophical approach requires that an ethical decision depends upon the duty, rights,
and justice involved:
a.
b.
c.
d.
e.

Consequentialism
Virtue ethics
Duty ethics
Righteousness
Deontology

ANSWER: e
17) The Moral Standards Approach focuses on the following dimensions of the impact of a
proposed action:
a.
b.
c.
d.
e.

Net benefit to society, fair to all stakeholders, whether it is right

Net benefit to society and whether it is legal
Net benefit to society, fair to all stakeholders, whether it is legal
Fair to most stakeholders and whether it is right
Net benefit to society, fair to most stakeholders, whether it is right

ANSWER: a
18) This organization is developing an international code of conduct for professional accountant:

Business & Professional Ethics for Directors, Executives & Accountants, 5e,
L.J. Brooks & P. Dunn, Cengage Learning, 2010

a.
b.
c.
d.
e.

International Accounting Standards Board

European Federation of Accountants
Financial Accounting Standards Board
Public Accounting Oversight Board
International Federation of Accountants

ANSWER: e
19) The following is a fundamental factor in having an effective ethical corporate culture:
a.
b.
c.
d.
e.

Tone at the top

Efficient oversight by the companys Board of Directors
Workplace ethics
Code of conduct
Ethics risk management programs

ANSWER: a or c
20) Effective crisis management could represent:
a.
b.
c.
d.
e.

An opportunity to avoid costs

An opportunity to change employees perspectives on risk
An opportunity to enhance the companys reputation
All of the above
None of the above

ANSWER: c

Business & Professional Ethics for Directors, Executives & Accountants, 5e,
L.J. Brooks & P. Dunn, Cengage Learning, 2010