Business Ethics Decision Making For Personal Integrity 4th Edition By Hartman – Test Bank

Chapter 10 Ethical Decision Making: Corporate Governance, Accounting, and Finance Key

True / False Questions

1. Financial analysts rely on gatekeepers but are not gatekeepers themselves.

FALSE

Several important business professions, for example, attorneys, auditors, accountants, and financial analysts function as gatekeepers.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-01 Explain the role of accountants and other professionals as “gatekeepers.”
Topic: Professional Duties and Conflicts of Interest

2. The most basic ethical issue facing professional gatekeepers and intermediaries in business contexts involves conflicts of interest.

TRUE

The most basic ethical issue facing professional gatekeepers and intermediaries in business contexts involves conflicts of interest.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-01 Explain the role of accountants and other professionals as “gatekeepers.”
Topic: Professional Duties and Conflicts of Interest

3. A large boost in share price increases a firm’s equity leverage for external expansion.

TRUE

A large boost in share price—even for the short term—serves as an effective defense to hostile takeovers and boosts a firm’s equity leverage for external expansion.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-02 Describe how conflicts of interest can arise for business professionals.
Topic: Professional Duties and Conflicts of Interest

4. The Sarbanes-Oxley Act is intended to provide protection where oversight did not previously exist.

TRUE

Sarbanes-Oxley strived to respond to the scandals by regulating safeguards against unethical behavior. Because one cannot necessarily predict each and every lapse of judgment, no regulatory “fix” is perfect. However, the act is intended to provide protection where oversight did not previously exist.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-03 Outline the requirements of the Sarbanes-Oxley Act.
Topic: The Sarbanes-Oxley Act of 2002

5. While the Sarbanes-Oxley Act is an internal mechanism to ensure ethical corporate governance, the Committee of Sponsoring Organizations (COSO) is an external mechanism.

FALSE

Sarbanes-Oxley and the European Union 8th Directive are external mechanisms that seek to ensure ethical corporate governance, but there are internal mechanisms as well. One way to ensure appropriate controls within the organization is to utilize a framework advocated by the Committee of Sponsoring Organizations (COSO).

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-04 Describe the COSO framework.
Topic: The Internal Control Environment

6. Risk assessment provides assessment capabilities to uncover vulnerabilities of a firm.

FALSE

Risk assessment addresses risks that may hinder the achievement of corporate objectives.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-04 Describe the COSO framework.
Topic: The Internal Control Environment

7. Risk assessment and ongoing monitoring are elements that comprise the control structure of the Sarbanes-Oxley Act.

FALSE

The elements that comprise the control structure of the COSO framework are control environment, risk assessment, control activities, information and communications, and ongoing monitoring.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-04 Describe the COSO framework.
Topic: The Internal Control Environment

8. COSO is one of the first efforts to address corporate culture in a quasi-regulatory framework in recognition of its significant impact on the satisfaction of organizational objectives.

TRUE

COSO is one of the first efforts to address corporate culture in a quasi-regulatory framework in recognition of its significant impact on the satisfaction of organizational objectives.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Define the “control environment” and the means by which ethics and culture can impact that environment.
Topic: The Internal Control Environment

9. The COSO controls and the Sarbanes-Oxley requirements must be supported by a culture of accountability.

TRUE

Both internal factors such as the COSO controls and external factors such as the Sarbanes-Oxley requirements must be supported by a culture of accountability.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Define the “control environment” and the means by which ethics and culture can impact that environment.
Topic: The Internal Control Environment

10. A board member has the right to use information obtained through her or his position as a board member for personal gain.

FALSE

A board member may never use information obtained through her or his position as a board member for personal gain. The duty of loyalty requires faithfulness; a board member must give undivided allegiance when making decisions affecting the organization.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-06 Discuss the legal obligations of a member of a board of directors.
Topic: Going beyond the Law: Being an Ethical Board Member