Business Ethics Second Quiz

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1. A ______ is the process that directs and controls organizations. 
A. corporate management
B. corporate guidance
C. corporate governance
D. corporate control

2. Before the development of ______, managers and owners of organizations were the same people. 
A. venture capitalists
B. proprietorships
C. partnerships
D. large corporations

3. Managers carry accountability to ______. 

A. the owner's interests only
B. the public's interests only
C. the government's interests only
D. both the owner's and the public's interests
 
4. The owners of a corporation are typically a fragmented group consisting of all of the following,
except: 
A. individual public shareholders
B. the government
C. employees
D. other companies
 
5. A board of directors typically consists of ______. 
A. inside members
B. shareholder members
C. outside members
D. both inside and outside members
 
6. Who oversees the governance of an organization? 
A. The board of directors
B. The audit committee
C. The frontline managers
D. The compensation committee
 
7. Who is responsible for overseeing the financial reporting process of an organization? 
A. The board of directors
B. The audit committee
C. The frontline managers
D. The compensation committee
 

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8. The ______ is responsible for overseeing the financial reporting process of an organization and is
staffed by members of the board of directors plus independent or outside directors. 
A. board of directors
B. audit committee
C. frontline managers
D. compensation committee
 
9. The ______ is an operating committee staffed by members of the board of directors plus independent
or outside directors, and they are responsible for setting the compensation for the CEO and other senior
executives. 
A. board of directors
B. audit committee
C. frontline managers
D. compensation committee
 
10. The corporate ______ is responsible for monitoring the ethical business practices of an organization. 
A. board of directors
B. audit committee
C. governance committee
D. frontline managers
 
11. ________ was the focus of the Cadbury report. 
A. Internal governance
B. Shareholder model
C. Stakeholder model
D. The triple bottom line
 
12. In contrast to the Cadbury report's focus on internal governance, the ______ included a code of
corporate practices and conduct that went beyond the corporation itself. 
A. King report
B. Shareholder model
C. Stakeholder model
D. King II

13. _____ formally recognized the need to move the stakeholder model forward and to consider a triple
bottom line instead of a single bottom line of profitability. 
A. King report
B. Shareholder model
C. Stakeholder model
D. King II

14. The Cadbury report argued for a guideline of ______. 

A. "comply or resign"
B. "comply or else"
C. "comply or explain"
D. "explain or else"

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 15. The set of guidelines that requires companies to abide by a set of operating standards or face stiff
financial penalties refers to _______. 
A. "comply or explain"
B. "comply or resign"
C. "explain or else"
D. "comply or else"
 
16. The set of guidelines that requires companies to abide by a set of operating standards and to explain
why they choose not to refers to ________. 
A. "explain or else"
B. "comply or explain"
C. "comply or else"
D. "comply or resign"
 
17. Which of the following describes the first step in a policy of disregarding the corporate governance
model? 
A. Merge the roles of chief executive officer and chairman of the board into one individual.
B. Separate the roles of chief executive officer and chairman of the board into different individuals.
C. Hire outside individuals to sit on the board of directors.
D. Assign the senior management team of the firm to serve on the board of directors.

18. __________________ is a reason to merge the roles of the chief executive officer and the chairman
of the board? 
A. Extensive company knowledge
B. Efficiency
C. Ethical reasoning
D. Effectiveness

19. What would be a negative consequence of merging the roles of the chief executive officer and the
board of directors? 
A. Extensive company knowledge
B. Efficiency
C. Ethical reasoning
D. Effectiveness
 
20. To be truly effective, a board of an organization must do all of the following, except: 
A. Mix up roles
B. Ensure individual accountability
C. Create a climate of trust
D. Give peer performance evaluations

21. Which of the following is NOT a step to being a truly effective board? 

A. Create a climate of trust and candor.
B. Foster a culture of "rubber stamping."
C. Let the board assess leadership talent.
D. Ensure individual accountability.

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22. Which of the following is NOT a question on Walter Salmon's checklist to assess the quality of an
organization's board? 
A. Are the insiders limited to the CEO, the COO, and the CFO?
B. Is your board the right size (15 to 20 members)?
C. Do you take the right measures to build trust among directors?
D. Are there three or more outside directors to every insider?

23. Even with a board that passes all of the tests and meets all of the established criteria, ethical
misconduct still comes down to ______. 
A. the corporate culture
B. the situation
C. the personalities involved
D. the environment
 
24. The fiduciary responsibility of a manager is ultimately based on ______. 
A. educational background
B. experience
C. charisma
D. trust

25. A commitment to good corporate governance can make a company ______. 

A. less profitable
B. unattractive to investors
C. more profitable
D. as profitable as a commitment to bad corporate governance

26. By passing the FCPA, Congress sent a message that U.S. companies should compete solely on the
basis on ______ and ______ in overseas markets. 
A. price; product quality
B. personnel; bribery
C. payments; uniqueness
D. uniqueness; government support
 
27. Under ________, the FCPA requires corporations to fully disclose any and all transactions conducted
with foreign officials and politicians, in line with the SEC provisions. 
A. Prohibition
B. Disclosure
C. Exclusion
D. Prevention
 
28. Under ____, the FCPA incorporates the wording of the Bank Secrecy Act and the Mail Fraud Act, to
prohibit the movement of funds overseas for the express purpose of conducting a fraudulent scheme. 
A. Disclosure
B. Exclusion
C. Facilitation
D. Prohibition
 

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29. Payments that are acceptable (legal) provided they expedite or secure the performance of a routine
governmental action refer to _______. 
A. facilitation payments
B. prohibition payments
C. disclosure payments
D. governmental payments

30. Any regular administrative process or procedure, excluding any action taken by a foreign official in
the decision to award new or continuing business, refers to _______. 
A. routine executive procedures
B. routine administrative action
C. routine governmental action
D. practical managerial procedures
 
31. Which of the following is NOT a routine government action? 
A. Providing permits qualifying a person to do business in a foreign country
B. Processing governmental papers
C. Providing police protection relate to the transit of goods across a country
D. Influencing a government official to obtain a government or business contract
 
32. Penalties under the books and record-keeping provisions of the FCPA can reach up to _______ for an
individual and up to _______ for organizations. 
A. $25 million; $75 million
B. $5 million and 20 years imprisonment; $25 million
C. $5 million and 10 years imprisonment; $50 million
D. $10 million and 10 years imprisonment; $50 million
 
33. The SEC may bring civil fines of up to ______ per violation under the FCPA. 
A. $100,000
B. $50,000
C. $25,000
D. $10,000
 
34. The key distinction in identify a bribe was ______. 
A. whether the payment to foreign officials is to expedite or secure the performance of a routine
governmental action
B. the exclusion of any action taken by a foreign official in the decision to award new or continuing
business
C. if it is a grease payment
D. if to obtain a permit, license, or other official documents with foreign officials
 

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35. ____ are payments of money or anything else of value to influence or induce any foreign official to
act in a manner that would be in violation of his or her lawful duty. 
A. grease payment
B. lawful payment under foreign laws
C. bribe
D. recordkeeping provision
 
36. Facilitating payments to foreign officials in order to expedite or secure the performance of a routine
governmental action is known as a ______. 
A. grease payment
B. lawful payment under foreign laws
C. bribe
D. recordkeeping provision
 
37. The FSGO established a definition of an organization that was so ______ as to prompt the
assessment that "no enterprise is exempt." 
A. narrow
B. broad
C. well-defined
D. contracted
 
38. The Federal Sentencing Guidelines for Organizations requires organizations to ______. 
A. report any grease payments of their employees and agents
B. police other companies to help prevent and detect criminal activity
C. report grease payments that they witness in other companies
D. police themselves to prevent and detect the criminal activity of their employees
 
39. Which of the following is NOT a step in calculating a fine sentenced by the FSGO? 
A. The culpability score
B. The total fine amount
C. The determination of the base fine
D. The determination of the mitigating factors
 
40. All of the following are aggravating factors of the culpability score, except: 
A. the organization willfully obstructed justice
B. the organization had an effective program to prevent and detect violations of law
C. the current offense violated a judicial order, injunction, or condition of probation
D. high-level personnel were involved in or tolerated the criminal activity
 
41. The culpability score of an organization is _____. 
A. the percentage of companies in an industry that act unethically
B. the calculation of a base fine
C. the calculation of a degree of blame or guilt
D. percentage of high-level personnel involved in the criminal activity
 

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42. The ______ is a fine that is set high enough to match all the organization's assets and basically put
the organization out of business. 
A. prohibition payment
B. recordkeeping provision
C. disclosure payment
D. death penalty
 
43. The formula used to calculate the total fine sentenced by the FSGO is ______. 
A. the base fine multiplied by the culpability score
B. the base fine plus the culpability score
C. the base fine minus the culpability score
D. the base fine divided by the culpability score
 
44. The maximum penalty that a judge can administer for FSGO violations is ______. 
A. a $2 million penalty
B. a penalty that is worth a quarter of the organization's assets
C. a penalty that is worth half of the organization's assets
D. a penalty that is worth the full amount of the organization's assets
 
45. An effective compliance program includes all of the following, except: 
A. Management oversight
B. Consistent discipline
C. Coercive action
D. Compliance with standards and procedures
 
46. ______ was hailed as one of the most important pieces of legislation governing the behavior of
accounting firms and financial markets since the SEC legislation of the 1930s. 
A. The U.S. Federal Sentencing Guidelines for Organizations
B. The Ethics Resource Center
C. The Sarbanes-Oxley Act
D. The Foreign Corrupt Act
 
47. The _____ is a legislative response to the corporate accounting scandals and contains almost over 50
subsections covering every aspect of the financial management of businesses. 
A. Sarbanes-Oxley Act
B. U.S. Federal Sentencing Guidelines for Organizations
C. Ethics Resource Center
D. Foreign Corrupt Practices Act
 
48. All of the following are covered under Title II: Auditor Independence, except: 
A. prohibits specific "nonaudit" services of public accounting firms as violations of auditor independence
B. requires the external auditor to report to the client's audit committee on specific topics
C. requires auditors to disclose all other written communications between management and themselves
D. requires audit committees to be independent and undertake specified oversight responsibilities
 

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49. _______ requires senior auditors to rotate off an account every five years and junior auditors every
seven years. 
A. Title III of the Sarbanes-Oxley Act
B. Title II of the U.S. Federal Sentencing Guidelines for Organizations
C. Title II of the Sarbanes-Oxley Act
D. The Ethics Resource Center
 
50. Title II of the Sarbanes-Oxley Act requires senior auditors ______. 
A. to rotate off an account every five years, and junior auditors every seven years
B. to remain with an account for at least five years and junior auditors for seven years
C. to rotate off an account every five years, and junior auditors every seven years
D. to remain with an account for at least two years