15: (42) Ethical Considerations for the Organization

1: (26) Corporate Ethical Legislation

2: (16) Corporate Responsibility for Ethical Behavior

1: (26) Corporate Ethical Legislation

Question: 1 The Foreign Corrupt Practices Act of 1977 prohibits bribery of foreign officials. Which
of the following statements correctly describes the act’s application to corporations
engaging in such practices?

A. It applies to all domestic corporations engaged in interstate commerce.

B. It applies only to corporations engaged in foreign commerce.

C. It applies only to multinational corporations.

D. It applies only to corporations whose securities are registered under the Securities
Exchange Act of 1934.

Question: 2 Which of the following is a true statement regarding the differences between the FCPA
and the UKBA?

A. The FCPA, but not the UKBA, allows facilitation payments and prohibits
commercial bribery.

B. The FCPA does not apply to commercial bribery or passive bribery, but the UKBA
prohibits both.

C. The FCPA, but not the UKBA, has extraterritorial jurisdiction, and the UKBA, but
not the FCPA, applies to commercial bribery.

D. The UKBA is based on the FCPA, so they have no significant differences.

Question: 3Which one of the following statements concerning the U.S. Foreign Corrupt Practices Act is not true?

A. It requires companies to maintain an adequate system of internal controls.

B. It applies to individuals as well as businesses.

C. It prohibits payments above a materiality threshold to foreign officials to obtain business.

D. It requires companies to keep books and records that accurately reflect the transactions.

Question: 4 The United Kingdom Bribery Act (UKBA) of 2010 is similar to the Foreign Corrupt
Practices Act (FCPA) of 1977 because it prohibits

A. Commercial bribery.

B. Failure to prevent bribery.

C. Passive bribery.

D. Bribery of a foreign official.

Question: 5 With respect to the internal control provisions of the U.S. Foreign Corrupt Practices Act
(FCPA), all of the following statements are true except that

A. Internal controls are used by companies to help provide reasonable assurance

regarding reliability of financial reporting.

B. Access to company assets are permitted in accordance with management’s general

and specific authorization.

C. Good internal controls can help prevent not only FCPA violations, but also other
illegal or unethical conduct.

D. The FCPA prescribes a particular set of internal controls that companies are required
to develop and implement.

Question: 6 Which one of the following statements best characterizes the provisions of the Foreign
Corrupt Practices Act (FCPA)?
 A. The FCPA requires compliance with corporate codes of conduct to be reviewed and
reported on by external auditors.

B. The FCPA requires corporations to keep records and accounts in sufficient detail to
reflect transactions.

C. The FCPA provides for treble damages in civil cases brought under the law.

D. The FCPA provides for criminal penalties for auditors who fail to report a
corporation’s participation in bribery.

Question: 7 Which one of the following is a permitted transaction under the U.S. Foreign Corrupt
Practices Act?

A. Payments to customs officials to enable the release of an oil drilling rig and other
equipment.

B. Payments to expedite routine governmental action.

C. Payments to government officials to circumvent importation rules in countries where

such payments are a customary business practice by multinational competitors.

D. Payments to close friends of government officials to obtain an exception to a

regulation.

Question: 8 Corporations have the responsibility to issue financial statements that are timely,
accurate, and transparent, reflecting all the transactions of the company. Which of the
following documents refer to this responsibility?

I. The IMA Statement of Ethical Professional Practice

II. SOX Section 406: Code of Ethics for Senior Financial Officers
III. IMA’s Statement on Management Accounting “Values and Ethics: From
Inception to Practice”
IV. U.S. Foreign Corrupt Practices Act

A. II and III only.

B. I and II only.
V.

C. II and IV only.

D. I and III only.

Question: 9 A French offshoring company has multiple subsidiaries worldwide, including the U.K.,
and is listed on a U.S. stock exchange. It has been accused of bribery in Panama after
the Department of Justice found unexplained payments to a foreign official during an
investigation. The company states that it did nothing wrong because the payment was
made to facilitate receipt of licenses to which it was entitled. According to the FCPA,
which statement is correct?

A. Although the payment might have been a facilitation payment, it should have been
recorded in the accounts.

B. Facilitation payments are prohibited under the FCPA.

C. Being entitled to certain licenses but not receiving them without extra payment does
not justify facilitation payments.

D. Having a subsidiary in the U.K. means the company is not liable under the FCPA.

Question: 10 Which one of the following statements concerning the code of ethics provisions of
Section 406 of the Sarbanes-Oxley Act (SOX) is not true?

A. It requires that a company disclose changes to its code of ethics.

B. It defines what a code of ethics is for the purpose of the rule.

C. It requires a company to make its code of ethics publicly available either on its
website or in its annual report.

D. It requires that a company’s code of ethics apply uniformly to officers and

employees.

Question: 11 Which of the following corporations are subject to the accounting requirements of the
Foreign Corrupt Practices Act (FCPA)?

A. All domestic corporations engaged in international trade.

B. All corporations whose securities are registered pursuant to the Securities Exchange
Act of 1934.

C. All corporations that have made a public offering under the Securities Act of 1933.

D. All corporations engaged in interstate commerce.

Question: 12 Under the Foreign Corrupt Practices Act (FCPA), an action may be brought that seeks

A. Injunctive relief by a private party.

B. Criminal sanctions against both the corporation and its officers by the Department of
Justice.

C. Treble damages by a private party.

D. Damages and injunctive relief by the Securities and Exchange Commission.

Question: 13 Which of the following issues is addressed by Section 406 of the Sarbanes-Oxley Act?

I. Full, fair, timely, and accurate financial statement disclosure.

II. Whistleblower protection.
III. Form 8-K disclosure of changes to the Ethics Code for Senior Financial
Officers.
IV. Compliance with the U.S. Foreign Corrupt Practices Act.
V. Reporting the existence of an Ethics Code for Senior Financial Officers.

A. III and IV only.

B. I, III, and V only.

VI.

C. I, II, III, and IV only.

D. II, IV, and V only.

Question: 14 What law prohibits U.S. companies from paying bribes to foreign officials for the
purpose of obtaining or retaining business?

A. North American Free Trade Agreement.

B. Federal Ethical Standards Act.

C. Foreign Corrupt Practices Act.

D. Robinson-Patman Act.
Question: 15 Which of the following is not an aspect of the Foreign Corrupt Practices Act of 1977?

A. It subjects management to fines and imprisonment.

B. It requires an internal control system to be developed and maintained.

C. It prohibits bribes to foreign officials.

D. It requires the establishment of independent audit committees.

Question: 16 Which of the following provisions are covered in the U.S. Foreign Corrupt Practices
Act?

I. Illegal payments to foreign officials to assist in obtaining business.

II. Transparency of accounting records reflecting all transactions.
III. Payments to agents for the purpose of influencing foreign officials.
IV. Maintenance of an adequate system of internal controls.

A. I only.

B. II, III, and IV only.

V.

C. I and III only.

D. I, II, III, and IV.

Question: 17 A company is headquartered in the U.S. and has international subsidiaries in several
countries. One of the company’s international subsidiaries created several off-the-book
accounts to pay bribes to foreign officials, and these payments were not properly
reflected in the subsidiary’s books and records. The subsidiary has certain internal
controls in place, but does not utilize the COSO internal controls framework and does
not have a compliance program in place. Based on the information presented, all of the
following are violations by the subsidiary under the internal control provisions of U.S.
Foreign Corrupt Practices Act except the

A. Use of bribery payments.

B. Failure to have internal controls to ensure that transactions were appropriately

recorded.
 C. Failure to use the COSO framework for internal controls.

D. Lack of a compliance program as part of its system of internal controls.

Question: 18 Which of the following best describes an important provision of the U.S. Foreign
Corrupt Practices Act?

A. The CEO and CFO must certify that they have no knowledge of any corrupt practices
occurring in any overseas subsidiaries of U.S. companies.

B. Auditors cannot provide bookkeeping or other services related to the accounting

records or financial statements of the audit client.

C. The internal accounting controls should be examined, and if material weaknesses are
found, controls must be strengthened.

D. Companies must follow the laws of the their home country as well as the laws of the
countries where any foreign subsidiaries are located.

Question: 19 The requirement of the Foreign Corrupt Practices Act of 1977 to devise and maintain
adequate internal control is assigned in the act to the

A. Company as a whole with no designation of specific persons or positions.

B. Director of internal auditing.

C. Chief financial officer.

D. Board of directors.

Question: 20 A major impact of the Foreign Corrupt Practices Act of 1977 is that registrants subject
to the Securities Exchange Act of 1934 are now required to

A. Prepare financial statements in accord with international accounting standards.

B. Keep records that reflect the transactions and dispositions of assets and to maintain a
system of internal accounting controls.

C. Provide access to records by authorized agencies of the federal government.

 D. Produce full, fair, and accurate periodic reports on foreign commerce and/or foreign
political party affiliations.

Question: 21The Foreign Corrupt Practices Act prohibits

A. Bribes to all foreigners.

B. Bribery only by corporations and their representatives.

C. Small bribes to foreign officials that serve as facilitating or grease payments.

D. Bribes to foreign officials to improperly influence official acts.

Question: 22 The U.S. Foreign Corrupt Practices Act is particularly focused on the dealings of
financial institutions and the safeguarding of the global financial system. Financial
institutions must implement robust controls to ensure knowledge of their customers and
the nature of their business transactions and be in a position to prove to regulators a
high level of due diligence. These safeguards are required to minimize all of the
following except

A. Money laundering.

B. Terrorist financing.

C. Insider trading.

D. Extortion and bribery.

Question: 23 Firms subject to the reporting requirements of the Securities Exchange Act of 1934 are
required by the Foreign Corrupt Practices Act of 1977 to maintain satisfactory internal
control. The role of the independent auditor relative to this act is to

A. Attest to the financial statements.

B. Express an opinion on the sufficiency of the client’s internal control to meet the
requirements of the Act.

C. Report clients with unsatisfactory internal control to the SEC.

D. Provide assurances to users as part of the traditional audit attest function that the
client is in compliance with the present legislation.
Question: 24 According to the United Kingdom Bribery Act of 2010 (UKBA),

A. Individuals and organizations violating the act may be fined, but individuals cannot
be imprisoned.

B. Commercial bribery and passive bribery are permitted.

C. A foreign company with only an agent in the U.K. cannot be liable under the act.

D. A commercial organization is liable for failure to prevent a bribe to retain business.

Question: 25Acme Enterprises is a foreign company that lists its common stock on a U.S. stock exchange.
Management believes in making regular payments to officials to encourage securing significant contracts. In
accordance with the anti-bribery provisions of the U.S. Foreign Corrupt Practices Act (FCPA), all of the following
statements are true except

A. Any corrupt payments made by Acme while in the U.S. could be viewed as a violation under the U.S.
Foreign Corrupt Practices Act.

B. Acme can be prosecuted under the U.S. Foreign Corrupt Practices Act even though it is not headquartered
in the U.S.

C. Acme cannot be prosecuted under the U.S. Foreign Corrupt Practices Act if the payments are approved
by management and made in a foreign country.

D. Acme’s officers, directors, employees, or agents can be prosecuted under the U.S. Foreign Corrupt
Practices Act if their actions constitute violations.

Question: 26All of the following are allowed under the anti-bribery provisions of the U.S. Foreign Corrupt
Practices Act except

A. Giving facilitating payments to expedite the processing of a routine governmental action such as business
permits.

B. Providing reasonable lodging expenses to a foreign official.

C. Authorizing employees to pay government officials to obtain government contract bidding, but no actual
payment was made.

D. Providing snacks, beverages, and promotional items at a trade show attended by government officials.
2: (16) Corporate Responsibility for Ethical Behavior

Question: 1 Which one of the following ethics-related actions by management is least effective in
encouraging acceptance by employees of an organization’s code of ethics?

A. Management keeps promises and commitments made to employees, customers, and

vendors.

B. Management follows ethical principles in decisions made on behalf of the

organization.

C. Management supports employees in adhering to ethics standards.

D. Management appoints an ethics officer to monitor and report to management on

employee compliance.

Question: 2 The guidance for corporate action that is socially responsible and sustainable includes

A. Mitigative actions to reduce negative environmental effects of operations.

B. An awareness of and commitment to human rights within the entity but not in the
external parts of the value chain.

C. Paying taxes legally owed after using any tax avoidance opportunities in the
applicable statutes.

D. No requirement for philanthropy because a corporation’s primary responsibility is

long-term profitability.

Question: 3 IMA’s Statement on Management Accounting, “Values and Ethics: From Inception to
Practice,” recommends a defined code of conduct and ethical behavior for all
organizations. One advantage of having such a code is that it

A. Provides employees with guidance for handling unfamiliar situations.

B. Eases the investigative process performed by police and prosecutors in cases of

suspected fraud.

C. Ensures ethical behavior by all employees.

 D. Shields the organization from liability in cases of loss of stockholder value due to
fraud.

Question: 4A company has convened a group of employees to review the company’s code of ethics and propose
revisions and improvements. One of the suggested improvements is the development of a whistleblowing framework
as recommended by IMA’s Statement on Management Accounting, “Values and Ethics: From Inception to
Practice.” This framework will provide all of the following benefits except

A. Opportunities to enhance and improve internal controls.

B. A means for the collection, analysis, and summarization of ethical issues.

C. A method for defining the organization’s behavioral values.

D. A confidential means for employees to report possible violations.

Question: 5Which one of the following is a true statement regarding organizational ethics?

A. “Organizational culture” is determined mostly by the industry(ies) in which the firm operates.

B. A comprehensive framework of corporate ethical behavior is a prerequisite for an effective system of

internal control.

C. If a functioning system of ethical behavior is in place, an organization is able to devote fewer resources to
developing human capital.

D. An effective system of internal control is a prerequisite for corporate ethical behavior.

Question: 6 The management team attended an ethics training session at the IMA Annual
Conference and subsequently made plans to enhance their ethics program. The
president plans to chair a committee of employees to review the company’s behavioral
values, while the CFO intends to review the ethical standards applicable to the Finance
Department. The manager of the Human Resources Department will investigate the
feasibility of establishing a whistleblowing framework that includes a “hotline” for
reporting ethics violations. These activities exemplify

A. Measurement of ethical compliance.

B. Organizational transparency.

C. Leadership by example.
 D. Alignment of internal controls with ethical standards.

Question: 7 The formal code of ethical conduct for a company should do all of the following except

A. Provide guidance on compliance requirements for domestic and international

operations.

B. Provide guidance on behavior for employees when making decisions.

C. Effectively communicate acceptable values to all employees.

D. Reflect only the legal standards of conduct of employees and the organization.

Question: 8 Which one of the following is a true statement regarding organizational ethics?

A. As long as officer and employee behavior meet the requirements of the law, the
organization can be considered to have a functioning system of ethical behavior.

B. Paying attention to “whistleblowers” plays a significant role in maintaining an

effective ethical atmosphere.

C. If an organization has a strong code of ethical conduct in place, the role of employee
training can be downplayed.

D. A strong sense of ethics on the part of employees who are in the best position to
appropriate cash and other assets is the most vital part of a functioning system of
ethical behavior.

Question: 9Which of the following ethics-related leadership actions best support the effective deployment of a
code of ethics by managers and supervisors?

A. Hiring ethical employees, identifying gaps between ethical behavior and actual behavior, and punishing
ethical lapses.

B. Setting a good example, keeping promises and commitments, and supporting others in adhering to ethics
standards.

C. Implementing internal controls, establishing a whistleblower framework, and developing survey tools.

D. Establishing a code of conduct, deploying ethics training, and monitoring ethical behavior.
Question: 10 In order for an ethics code to become a reality in practice, every aspect of a company’s
activity should be affected by the code. Ethical behaviors should focus not only on
clients and customers but also on employees, society at large, shareholders, and
suppliers. All activities, from design and development through after-sales support and
services, should also be considered when applying a company’s ethical principles.
When focusing on society at large, ethical considerations would most likely include

A. Negotiation, problem resolution, delivery, and inventory support.

B. Reputation, risk, cost/benefit, and value-stream return.

C. Environment, resource usage, outage impact, and waste/disposal.

D. Fair value, cycle time, quality, and service warranty.

Question: 11 The least important criterion for an organization to implement an ethical code of
conduct is to

A. Establish a framework for ethical management.

B. Provide guidance in external decision making.

C. Establish the legal boundaries within which the organization operates.

D. Provide guidance in internal decision making.

Question: 12 A company’s code of conduct states, “Our employees are our most valuable asset.”
Which one of the following policies best illustrates that management strives to provide
leadership by example in ethical matters concerning employees?

A. The company relies on supervisors rather than manuals to train employees in their
responsibilities.

B. Management and the board of directors meet annually at a luxury resort for a
strategic planning conference.

C. Final terms on all major purchase and sales contracts are negotiated only by
management.

D. Management declines to accept bonuses earned in any year in which no raises are
given to employees.
Question: 13 Which of the following statements describe the importance of a whistleblowing
framework in maintaining an ethical organizational culture?

I. It provides measurable feedback for determining whether employees are

following a code of ethics.
II. It creates opportunities to enhance and improve internal controls.
III. It empowers management to become better role models for employees.
IV. It helps to identify potential errors or risks at each task level within the
organization.

A. II and IV only.

B. I and II only.
V.

C. I, III, and IV only.

D. III and IV only.

Question: 14 A U.S. publicly traded company issued its corporate social responsibility (CSR) report.
The report included the amount of renewable resources it uses in its products. Which
one of the following is not a reason for making the disclosure?

A. The company may be able to charge a premium and gain customer loyalty.

B. The report can be used to differentiate the company from its competitors.

C. The company was required by law to file a report with this disclosure.

D. The report can be used as a marketing tool for the company’s products.

Question: 15 Which level of corporate social responsibility (CSR) is the most basic?

A. Legal responsibilities.

B. Philanthropic responsibilities.

C. Economic responsibilities.

D. Ethical responsibilities.
Question: 16 Essential elements in the development of an organization’s ethics policy include all of
the following except

A. Relevance to day-to-day implementation.

B. Input from the board of directors in addition to management and employees.

C. Allowances for exceptional circumstances.

D. Articulation of organizational values.