NAMA : NADYA ERLIANTI

NIM : 16102018

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. Credibility gap

b. Expectations gap

c. Audit gap

d. Stewardship gap

e. None of the above

(JAWABAN : B)

2) Which of the following is not a trend described in Chapter 1 as having an impact on the ethics of
business?

a. Directors’ legal liability

b. Management’s stated intention to protect reputation

c. Auditors’ legal liability

d. Management’s assertions to shareholders on the adequacy of internal controls

e. Management’s stated intention to manage risk

(JAWABAN : B)

3) Which corporate report discusses subjects that include environmental, health and safety,
philanthropic and other social impacts?

a. Corporate annual report

b. Corporate social responsibility report

c. Corporate quarterly report

d. Corporate stakeholder report

e. Corporate ethics committee report

(JAWABAN : B)

4) Professional Accountants, in their fiduciary role, owe their primary loyalty to:

a. The accounting profession

b. The client

c. The general public

d. Government regulations

e. All of the above

(JAWABAN : C)

5) Ethical corporate behavior is expected to lead to:

a. Higher profitability in the short-term

b. Higher profitability both in the short-term and long-term

c. Lower profitability in the long-term

d. Higher profitability in the long-term

e. Lower profitability both in the short-term and long-term

(JAWABAN : D)

6) Examining the interests of stakeholders is probably required for:

a. High short-term profits

b. Optimal medium and longer-term profits

c. Continuing support from stakeholder groups

d. Effective risk management

e. All of the above

(JAWABAN : A)

7) A value that is almost universally respected by stakeholder groups is:

a. Super norm
b. Alfa norm

c. Value norm

d. Hypernorm

e. General norm

(JAWABAN : D)

8) Since the mid-1990s, both management and auditors have become increasingly:

a. Profit management oriented

b. Ethics oriented

c. Value management oriented

d. Risk management oriented

e. Marketing oriented

(JAWABAN : D)

9) The following are determinants of reputation:

a. Trustworthiness and Responsibility

b. Credibility, Responsibility and Relevance

c. Responsibility and Impartiality

d. Relevance and Impartiality

e. Relevance, Credibility and Responsibility

(JAWABAN : A)

10) The following would be a key control function of the Board of Directors:

a. Set guidance and boundaries

b. Appoint CEO

c. Approve the sale of company’s assets

d. Decide on the company’s auditor

e. All of the above

(JAWABAN : E)
11) Companies attempt to manage the risk of something happening that will have a negative or
positive impact on the company’s objectives, such as:

a. Credit risks

b. Litigation risk

c. Reputation risk

d. Ethics risks

e. All of the above

(JAWABAN : E)

12) Most large corporations do not consider these risks in a broad and comprehensive way:

a. Operational risks

b. Reputational risks

c. Credit risks

d. Market risks

e. Ethics risks

(JAWABAN : E)

13) The following are examples of ethics risks faced by employees:

a. Honesty and integrity

b. Fairness and compassion

c. Integrity and responsibility

d. Fairness and integrity

e. Responsibility and honesty

(JAWABAN : B)

14) Not reporting environmental issues is an example of:

a. Lack of transparency

b. Lack of integrity

c. Lack of accuracy
d. All of the above

e. None of the above

(JAWABAN : B)

15) Incomplete disclosure of the company’s revenue recognition policy is an example of:

a. Lack of transparency

b. Lack of integrity

c. Lack of accuracy

d. All of the above

e. None of the above

(JAWABAN : A)

16) This philosophical approach requires that an ethical decision depends upon the duty, rights, and
justice involved:

a. Consequentialism

b. Virtue ethics

c. Duty ethics

d. Righteousness

e. Deontology

(JAWABAN : E)

17) The Moral Standards Approach focuses on the following dimensions of the impact of a proposed
action:

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

b. Net benefit to society and whether it is legal

c. Net benefit to society, fair to all stakeholders, whether it is legal

d. Fair to most stakeholders and whether it is right

e. Net benefit to society, fair to most stakeholders, whether it is right

(JAWABAN : A)
18) This organization is developing an international code of conduct for professional accountant:

a. International Accounting Standards Board

b. European Federation of Accountants

c. Financial Accounting Standards Board

d. Public Accounting Oversight Board

e. International Federation of Accountants

(JAWABAN : E)

19) The following is a fundamental factor in having an effective ethical corporate culture:

a. Tone at the top

b. Efficient oversight by the company’s Board of Directors

c. Workplace ethics

d. Code of conduct

e. Ethics risk management programs

(JAWABAN : A&C)

20) Effective crisis management could represent:

a. An opportunity to avoid costs

b. An opportunity to change employee’s perspectives on risk

c. An opportunity to enhance the company’s reputation

d. All of the above

e. None of the above

(JAWABAN : C)

Chapter 2 Ethics & Governance Scandals

1) As a result of the spectacular stock market crash in 1929, the government implement the Securities
Act of 1933, the Securities Act of 1934, as well as which of the following acts:

a. Glass-Steagall Act
b. Investment Advisers Act

c. Gramm-Leach-Bliley Act

d. All of the above

e. Only a and b

(JAWABAN : E)

2) In 1984, Edward Freemen published an article on stakeholder theory. Which of the following is not
true?

a. A firm needs the support of its stakeholders to enhance the firm’s reputation.

b. Stakeholder theory took years to mature.

c. Stakeholder theory is not a useful framework for those interested in governance

d. Firms need stakeholders to achieve their corporate objectives.

e. Stakeholder theory occurred at the same time as the rise in social and corporate activism.

(JAWABAN: C)

3) Which of the following is not covered under the Sarbanes-Oxley Act of 2002 (SOX)?

a. The responsibilities of shareholders

b. The responsibilities of the board of directors

c. The responsibilities of management

d. The responsibilities of auditors

e. Conflicts of interest

(JAWABAN : A)

4) The overall requirement of the Internal Revenue Service Circular 230 is to ensure that tax
professionals:

a. Know their clients

b. Always develop tax plans for their clients

c. Make tax planning suggestions that, even if they don’t have a chance of success, will save the
client some money in the short-term

d. Never develop tax shelters

e. Only be professional accountants

(JAWABAN : A)

5) A collateralized debt obligation (CDO):

a. Is an insurance policy that any investor can purchase

b. Is a bond that is secured by a portfolio of mortgages

c. Protects an investor in the event that the issuer of the mortgage defaults on the contract

d. Acts as a hedge against changes in interest rates

e. Were outlawed with the passage of the Dodd-Frank Wall Street Reform and Consumer
Protection Act.

(JAWABAN : B)

6) Which of the following is not a sign of an ethical collapse within an organization, according to
Marianne Jennings?

a. Pressure to meet financial goals

b. Hubris

c. Nepotism, favoritism and hiring sycophants

d. An open and candid organizational culture

e. Weak boards of directors

(JAWABAN : D)

7) The U.S. Federal Sentencing Guidelines were introduced in 1991 to:

a. Help judges formulate sentences.

b. Avoid sentences that are too light.

c. Signal potential sentences to executives and directors.

d. Encourage executives and directors to avoid environmental damage.

e. All of the above.

(JAWABAN : E)
8) Due diligence programs developed to reduce penalties levied under the U.S. Federal Sentencing
Guidelines for environmental harm did not include:

a. Awareness programs for employees.

b. Guidelines for employees.

c. Compliance oversight by corporate officials.

d. Rewards for non-compliance.

e. Encouragement for whistleblowers.

(JAWABAN : D)

9) Which of the following financial crises or fiascos were not related to the Subprime Lending Crisis?

a. Bear Stearns

b. Lehman Brothers

c. Bernie Madoff

d. AIG

e. Galleon Group

(JAWABAN : C)

10) Which was the largest fraud or bankruptcy leading to the crisis of investor confidence in 2002?

a. Enron

b. Global Crossing

c. WorldCom

d. HIH Insurance

e. Xerox

(JAWABAN : C)

11) The crisis in investor confidence in 2002 was caused by:

a. Lack of integrity of business leaders.

b. Manipulation of financial results.

c. Boards of Directors that did not provide proper oversight.

d. Findings of alert auditors

e. All of the above.

(JAWABAN : B)

12) SOX contained sections with regard to the audit and/or audit committee that were designed to:

a. Increase the independence of management.

b. Increase the financial literacy of audit committee members.

c. Limit the conflicts of interest related to the services an auditor can perform.

d. Restrict the ability of auditors to serve on the audit committee.

e. All of the above.

(JAWABAN : B)

13) The U.S. Internal Revenue Service (IRS) implemented Circular 230 to remedy problems found with
regard to the marketing of tax shelters thought to:

a. Have no other purpose except to reduce taxes.

b. Have lower than 50% chance of success if challenged by the IRS.

c. Not be in accordance with client’s needs.

d. Create fictitious losses.

e. All of the above

(JAWABAN : E)

14) Why didn’t investors caught in the Subprime Lending Crisis take earlier note of the risks inherent in
investments known as collateralized debt as obligations (CDOs)?

a. Greed and the desire for high returns.

b. Banks were selling and buying them.

c. Risks were buried in complex, jargon-oriented documents.

d. Risks were diversified over many mortgages.

e. Only three of the above.

(JAWABAN : D)
15) The U.S. Government created the Trouped Asset Relief Program (TARP) to:

a. Bail out investors in U.S. financial firms and institutions.

b. Avoid a worldwide financial crisis.

c. Stimulate the U.S. economy

d. Resolve the financial crisis in Iceland.

e. Make a profit on the ultimate sale assets bought at a low value.

(JAWABAN : C)

16) The Dodd-Frank Wall Street Reform and Consumer Protection Act was created after the Subprime
Lending fiasco to protect consumers from deceptive practices related to:

a. Mortgages

b. Credit cards

c. Cars

d. Financial derivatives

e. All of the above

(JAWABAN : D)

17) A Ponzi scheme, such as Bernie Madoff ran, is:

a. A card game

b. A sound investment scheme

c. A scheme to improve the environment

d. Hard to hide forever

e. None of the above.

(JAWABAN : D)

18) Ralph Nadar contributed to the lack of credibility of corporations by exposing their:

a. Excessive bonus schemes

b. Greed

c. Poor car safety

d. Poor environmental record

e. “Seller beware” attitude of toy manufacturers.

(JAWABAN : C)

19) Freddie Mac and Fannie Mae:

a. Were created to support the U.S. housing market.

b. Stimulated the U.S. Housing Bubble.

c. Provided bailout funds to the U.S. Government

d. Acted in the best interest of consumers

e. Acted in the best interest of lenders

(JAWABAN : E)

20) Which of the following demonstrated extraordinary hubris?

a. Kenneth Lay

b. Bernie Ebbers

c. Arthur Andersen

d. Scott Sullivan

e. All of the above.

(JAWABAN : A)

Chapter 3 Ethical Behavior – Philosophers’ Contributions

1) Ethical dilemmas arise when:

a. Norms and values are in conflict

b. There is only one alternative course of action available

c. Norms and values are not in conflict

d. There are several theories of ethical decision making

e. All of the above

(JAWABAN : A)
2) Individuals may be ethical because of:

a. Religious concerns

b. Emotional attachment to other people

c. Enlightened self-interest

d. None of the above

e. All of the above

(JAWABAN : C)

3) This philosopher argued that self-interest motivates people to form peaceful civil societies:

a. Adam Smith

b. John Locke

c. Thomas Hobbes

d. Jeremy Bentham

e. John Rawls

(JAWABAN : C)

4) This theory argues that the best ethical alternative is the one that will produce the greatest amount
of happiness to the largest number of stakeholders:

a. Deontology

b. Distributive Justice

c. Utilitarianism

d. Moral Imagination

e. Virtue Ethics

(JAWABAN : C)

5) This theory focuses on the moral character of the decision maker:

a. Deontology

b. Distributive Justice

c. Utilitarianism
d. Moral Imagination

e. Virtue Ethics

(JAWABAN : A)

6) This approach focuses on coming up with an innovative solution to an ethical dilemma:

a. Deontology

b. Distributive Justice

c. Utilitarianism

d. Moral Imagination

e. Virtue Ethics

(JAWABAN : D)

7) This theory argues that equals should be treated equally in relationship to their relevant equalities
and differences:

a. Deontology

b. Distributive Justice

c. Utilitarianism

d. Moral Imagination

e. Virtue Ethics

(JAWABAN : B)

8) This theory is concerned with the motivation of the decision maker rather than the consequences of
the decision:

a. Deontology

b. Distributive Justice

c. Utilitarianism

d. Moral Imagination

e. Virtue Ethics

(JAWABAN : A)
9) Two weaknesses of the following approach are (1) it is difficult to determine who demonstrates
integrity in the workplace, and (2) it is difficult to choose between compassion and not betraying
somebody’s trust:

a. Deontology

b. Distributive Justice

c. Utilitarianism

d. Moral Imagination

e. Virtue Ethics

(JAWABAN : E)

10) A problem with this theory is that the categorical imperative does not provide clear guidelines for
deciding what is right and wrong when two or more moral laws conflict and only one can be chosen:

a. Deontology

b. Distributive Justice

c. Utilitarianism

d. Moral Imagination

e. Virtue Ethics

(JAWABAN : A)

11) Minority rights may be violated under this approach:

a. Deontology

b. Distributive Justice

c. Utilitarianism

d. Moral Imagination

e. Virtue Ethic

(JAWABAN : C)

12) This approach presupposes that happiness, utility, pleasure, pain and anguish can be quantified:

a. Deontology

b. Distributive Justice
c. Utilitarianism

d. Moral Imagination

e. Virtue Ethics

(JAWABAN : C)

13) This approach, a variant of utilitarianism, considers an action to be ethically good if it will probably
produce a greater balance of good over evil:

a. Act Utilitarianism

b. Active Utilitarianism

c. Sub-Utilitarianism

d. Consequentialism

e. Virtue Ethics

(JAWABAN : D)

14) Under this approach what is important is that the decision was made for the right reasons:

a. Deontology

b. Distributive Justice

c. Utilitarianism

d. Moral Imagination

e. Virtue Ethics

(JAWABAN : A)

15) This philosopher argued that self-interest leads to economic cooperation:

a. Adam Smith

b. John Locke

c. Thomas Hobbes

d. Jeremy Bentham

e. John Rawls

(JAWABAN : A)
16) There are two aspect of justice, but under this aspect there should be a consistent application of
law:

a. Distributive justice

b. Procedural justice

c. Balance of justice

d. Deontology

e. Teleology

(JAWABAN : B)

17) If managers use moral imagination to determine ethical alternatives, the decisions need to be good
for:

a. The individual

b. The firm

c. Society

d. (a) and (b) only

e. All of the above

(JAWABAN : E)

18) A difficulty in applying this approach is identifying all possible stakeholders impacted by the
decision:

a. Deontology

b. Distributive justice

c. Utilitarianism

d. Procedural justice/Consequentialism

e. Virtue Ethics

(JAWABAN : C)

19) This philosopher argued that social and economic inequalities are just if these inequalities are to
everyone’s benefit:

a. Adam Smith
b. John Locke

c. Thomas Hobbes

d. Jeremy Bentham

e. John Rawls

(JAWABAN : E)

20) According to distributive justice theory, there are three main criteria for determining the just
distribution:

a. Need, fairness, and merit

b. Need, arithmetic equality, and merit

c. Opportunity, fairness, and merit

d. Opportunity, fairness, and arithmetic equality

e. Need, arithmetic equality, and equivalence

(JAWABAN : B)