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Has SOX accomplished its intended goal of reliable financial reporting by public companies?


A) Yes, as the CEO and CFO are certifying that financial statements contain no material misstatements.
B) Maybe, as very few defendants have been charged with false certification, and fewer still have been convicted.
C) Maybe, as laws are needed but they serve as only a minimum standard of ethical conduct and may not lead to ethical conduct.
D) No, as the SEC has unsuccessfully sought to collected disgorgement of bonuses and other compensations of officers.

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Backdating of stock options is unethical because:


A) It favors top executives over other company employees with respect to the number of options
B) It purposefully manipulates the option criteria that determine their value
C) It changes the exercise price on options to benefit top executives
D) It changes the exercise date on options to benefit top executives

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Trust in business is important because:


A) Management needs to feel confident that employees will carry out organizational objectives
B) Stakeholders need to feel confident that relationships with organizations will be consistent and reliable
C) Stakeholders rely on management to produce shareholder returns
D) Management needs to feel confident that those with relationships with the organization do what they say

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Proper tone at the top includes all of the following except:


A) Communicating compliance and ethics messaging to employees
B) Regularly reminding employees of the importance of ethical behavior
C) Rarely enforcing the code of conduct
D) Modeling the company's values

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C

An ethical corporate culture includes:


A) Zero tolerance for individual and collective mistakes
B) An explicit statement of values.
C) A focus on results over process
D) A culture of do what I say, not what I do

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B

The key fraud issue in the Franklin Industries Whistleblowing Case is:


A) Fraudulent financial statements were covered-up
B) Corporate culture pressured an employee to go along with fraud
C) Retaliation for reporting an embezzlement fraud
D) Recording revenues too soon led to fraudulent statements

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Under the Sarbanes-Oxley Act, which of the following bodies must contain members that are 100% independent of management?


A) Board of directors
B) Audit committee
C) Internal auditors
D) Board of supervisors

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Tommy Hubbs is the new controller of XYZ Corporation. Recently, Hubbs was approached by Carol Franks, the CFO, and told in no uncertain terms to record $100,000 in revenue at the end of 2015 even though the sale was not made until January 3, 2016. Hubbs contacts a good friend who used to be the controller of XYZ and is told the environment of the company is one of loyalty at all costs. His friend shares that he left the company because of differences on numerous accounting issues. The friend advises Hubbs to let it go this one time to show he is a team player. Assume Hubbs decides not to go along with Franks' dictum. Prepare an outline to help him give voice to his values and attempt to change hearts and minds of those in XYZ that might block proper accounting. Use the following to guide students on what is expected of them in answering this question. As you read the case, think about the following series of questions for the protagonist to address after identifying the right thing to do including: ā€¢ How can they get it done effectively and efficiently? ā€¢ What do they need to say, to whom, and in what sequence? ā€¢ What will the objections or push-back be and, then? ā€¢ What would they say next? What data and examples do they need?

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To assist you in the process of analyzin...

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The ACFE found that the most common way that fraud is first detected is:


A) Internal audit
B) Internal controls
C) External audit
D) Tip

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In the business world, the term disgorgement means:


A) To give up one's meal after eating
B) To return profits earned illegally
C) To return ill-gotten gains
D) To give up one's board position after a fraud incident

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External auditor communications with the audit committee include each of the following except:


A) Matters related to why certain accounting policies are considered critical
B) Shareholder returns
C) Significant estimates made by management
D) Significant unusual transactions

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According to the ACFE survey, the most common type of occupational fraud scheme is:


A) Corruption
B) Fraudulent billing
C) Illegal gratuities
D) Asset misappropriation

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Is whistleblowing a moral practice? How might you evaluate whether it is or is not?

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A broad view of whistleblowing is the di...

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The level of care expected of a reasonable person under similar circumstances in meeting one's fiduciary duty is called:


A) Duty of loyalty
B) Duty of care
C) Transparency
D) Fairness

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A strong and effective internal control environment can be enhanced by:


A) Financial statements that present fairly financial position and results of operations
B) Giving the internal auditors direct and unrestricted access to the audit committee
C) Having the internal auditors report to the external auditors
D) Having the external auditors report to the audit committee

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B

What are the five elements of the framework for understanding ethical decision making in business?


A) Ethical issue sensitivity; individual factors; organizational factors; opportunity; and business ethics intentions and evaluations.
B) Individual factors; organizational factors; opportunity; moral character; and business ethics intentions, behavior, and evaluations.
C) Ethical issue intensity; individual factors; organizational factors; opportunity; and business ethics intentions, behavior, and evaluations.
D) Organizational factors; opportunity; moral judgment; individual values; and business ethics intentions, behavior, and evaluations.

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Examples of improper asset valuation includes all of the following except:


A) Manipulating reserves
B) Changing the useful life of assets
C) Recording sales that never took place
D) Manipulating estimates of fair market value

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The Clawback rule allows:


A) protection for whistleblowers from retaliation
B) recovering compensation from CEOs who engage in financial statement misconduct
C) compensation for whistleblowers
D) protections for CEOs who act in good faith

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What is the main fiduciary duty of the board of directors?


A) Maximize profits for the company
B) Monitor executive compensation
C) Safeguard the interests of corporation and its shareholders
D) Allow high risk accounting practices

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What is the ethical issue in the Rite Aid Inventory Surplus Fraud case?


A) The surplus inventory sales and kickback involved collusion between two officers of the company. When Foster wanted to stop the scheme, he was blackmailed in continuing the fraud.
B) Rite-Aid had a comprehensive corporate governance system that complied with all the requirements of Sarbanes-Oxley.
C) The internal auditor found and blew the whistle on the surplus inventory sales and kickback cover-up.
D) Vice Presidents of the company were involved in a material, nine year surplus inventory sales and kickback scheme.

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