Sample exam questions for Finance/ethics/BIS

For accounting samples refer to lecture materials

Question 1. 1 MARK

Behaving ethically can______

A. Increase the likelihood of lawsuits and criminal charges

B. Increase transaction costs
C. Lead to higher market values
D. All of the above

Question 2. 1 MARK

Often we can have biases that are beyond our conscious thought. One of these biases is:
A. Reward positive outcomes when the intention and efforts are not sound.
B. Reframe or flip the problem on its head to see if we are viewing the situation in either
positive or negative framework.
C. Redefine the problem from here on and ignore the old problem to avoid escalation of
unnecessary commitment.
D. Develop system review processes that leave you a committed ‘out’ possibility when
trying to ‘cut the losses’.
E. All of the above.

Question 3. 1 MARK

Kahneman and Tversky are the fathers of behavioural finance. In their seminal work in the
1970s they proposed a number of biases as being particularly important. These are:

A. Overconfidence, Status Quo, Framing

B. Representativeness, Availability, Anchoring

C. Representativeness, Status Quo, Framing

D. All of the above.

Question 4. 1 MARK

Ethics is important because it:

A. Represents the rules, laws and policies of society.

B. Represents the opinions of everyone in society as a whole.
C. Is what you think is right and/or wrong.
D. Provides a means of deciding a course of action to achieve goals.
Question 5. 3 MARKS

Is a weak ethical firm likely to have a higher or lower market price to book value per share
relative to an otherwise equivalent more ethical firm? Explain your answer.

Question 6. 4 MARKS

Explain four (4) of the five (5) ethical blind spots as stated in the lectures.

Question 7. 4 MARKS

A company reported $120 million in research expenses on its income statement. An analyst

believes that the total amount of the research expenses should be capitalized. Please list six
accounting adjustments to capitalize research expenses, assuming 3-year straight-line
amortization, 8 months of amortization for the current year, and zero tax rate for the
company.

Question 8. 4 MARKS

We discussed the case study of Harnischfeger in the class. The company made several
changes to its accounting policies. List four kinds of accounting policy changes made by the
managers to boost earnings. Your answers must be directly relevant to Harnischfeger’s
case.