Ethical Accounting – Organizational Ethics and Corporate Governance (C03) Practice Test

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• What is a distinctive feature of Johnson & Johnson's Credo compared to typical codes of ethics?
• Which COSO component focuses on ongoing evaluation and remediation of controls?
• Which term is associated with an earnings-smoothing technique mentioned in the material?
• Why is board independence and diversity important for governance, and what risks do they mitigate?
• Which of the following is NOT a characteristic behavior illustrating the fiduciary duty of the board of directors?
• Which governance mechanism gives shareholders a direct voice in executive compensation decisions?
• A troubling result of the 2013 National Business Ethics Survey is:
• Distinguish between an ethics code and a compliance program in corporate governance.
• Has SOX accomplished its intended goal of reliable financial reporting by public companies?
• Research by Miceli and Near indicates that:
• What is the key fraud issue in the Franklin Industries whistleblowing case?
• Which action best addresses the rationalization element of the fraud triangle?
• According to the ACFE survey, the most common type of occupational fraud scheme is:
• Which component is focused on risk management and reliable financial reporting within governance?
• Which entity is responsible for assessing and reporting on the effectiveness of internal controls under Section 404?
• What is the purpose of control activities in response to identified risks?
• Which statement best captures the overarching lessons from these cases about ethical accounting and governance?
• Which act is known for expanding whistleblower protections and incentives in securities enforcement?
• Which of the following is not an element of an ethical corporate culture?
• Which element characterizes an ethical escalation process within an organization?
• In the Rite Aid surplus fraud scenario, which executive group was implicated in the nine-year scheme?
• Which of the following is not a fraud method to overstate revenues?
• Trust in business is important because:
• What is the purpose of limiting manipulation in non-financial KPIs?
• Which of the following would be a strong candidate to be a board director for XYZ, Inc.?
• Which group is primarily responsible for monitoring the integrity of the financial statements?
• Which of the following is NOT an underlying trait of character of an effective leader identified by Johnson?
• How should data retention and disposal policies intersect with accounting ethics and regulatory requirements?
• The Olympus case highlighted cultural differences between which groups?
• In an ethical culture, which element is most essential for guiding daily actions?
• What is the role of the audit committee in risk oversight?
• The 2013 Ethics Resource Center National Business Ethics Survey indicates each of the following results with respect to how employees view the ethics and ethical practices of organizations they work for except:
• Agency theory can be described as the relationship among which groups?
• How should materiality influence ethical decision-making and financial reporting?
• Which statement best describes ethical tone at the top?
• What risks arise from biased accounting estimates, and how can the organization mitigate them?
• Which statement best describes the relationship between governance and management in ethical oversight?
• What is one method the SEC uses to detect misstatements by companies, CEOs, and CFOs, as discussed in practice context?
• The importance of trust in business is primarily because stakeholders require relationships with organizations to be:
• Which of the following is not typically categorized as a fraud scheme type by major anti-fraud surveys?
• What is the ethical issue at the Rite Aid Inventory Surplus Fraud case?
• Whistleblower channels in procurement should primarily serve to?
• Which item is NOT a COSO Internal Control Framework component?
• Which statement best describes the COSO Control Environment?
• The stakeholder view emphasizes the obligations of management to:
• What is the role of the leader in an organization?
• What was the result of Walmart's annual inventory audit regarding inventory shrinkage?
• Which control is most effective at preventing fraudulent disbursements?
• Under the Sarbanes-Oxley Act, which group must be independent from management?
• What role does sustainability reporting play in corporate governance, and how should ethics influence it?
• Which factor can compromise external auditor independence?
• Which statement best describes 'tone at the top' and why it matters for governance and ethics?
• Which is NOT a component of the Framework for Understanding Ethical Decision Making in Business?
• The Miniscribe fraud was carried out by which of the following?
• What does 'tone at the top' signify in governance and ethical behavior?
• In fraud detection, which method is most commonly used to reveal fraud?
• A strong and effective internal control environment can be enhanced by:
• Which statement best describes how OECD Principles influence organizational ethics and governance?
• Corporate governance structures and relationships are shaped by internal and external mechanisms. Which of the following is an external mechanism?
• What are effective methods for evaluating the effectiveness of ethics training and culture programs?
• What is the primary benefit of a strong ethical culture in reducing fraud risk?
• How is independence safeguarded in an audit committee?
• What does ethical issue intensity describe in decision making?
• Which of the following best represents a red flag in financial reporting?
• Which arrangement best supports independence of internal auditors?
• In the Menendez case, what outcome did the court affirm regarding retaliation against the whistleblower?
• The fraud at Groupon occurred because the company:
• According to the PwC study, compliance officers report to the audit committee and general counsel at about equal rates. Which option best captures this finding?
• Under the Sarbanes-Oxley Act, which group receives legal protection for whistleblowing disclosures?
• What constitutes a robust control environment, and how does it influence financial reporting quality?
• External auditor communications with the audit committee include each of the following except:
• Which factor most strongly signals that ethical culture is integrated into decision-making processes?
• What was identified as the primary ethical issue at United Thermostatic Controls?
• Which of the following best describes the anti-fraud controls that should be integrated into procurement and vendor management processes?
• How should governance respond to ethical crises or reputational risk events?
• Remedies to rein in executive compensation include all but:
• What are common independence threats to auditors, and how can they be mitigated?
• Define professional skepticism and its role in auditing and ethical accounting.
• According to the ACFE Global Fraud Study, which of the following was the most common behavioral indicator of fraud?
• Which case demonstrates governance challenges arising from cross-cultural management differences?
• The most important element of a high ethics organization would be:
• Which description best defines organizational ethics?
• What is the role of independent investigations during a crisis event?
• The ethical dissonance model indicates the optimal fit for an individual with high personal ethics is:
• Agency theory can best be described as:
• What protections should be in place for whistleblowers who report unethical accounting practices?
• Revenue misstatement example: Recording future sales in the current period is an example of which type of revenue misstatement?
• In the decision-making framework, what is the purpose of 'opportunity'?
• How should data privacy and security be integrated into accounting ethics?
• Which practice best supports auditors' independence from a client?
• Tony Menendez cited which Halliburton practice as a non-GAAP accounting method?
• What is the main fiduciary duty of the board of directors?
• In the Bennie and the Jets case, which action was used to influence operating income?
• To prevent conflicts in related-party transactions, which controls are most effective?
• How should non-financial KPIs be governed to prevent ethical lapses or manipulation?
• In the Parable of the Sadhu, which summary best captures the ethical takeaway discussed by Stephen?
• An ethical organization includes the following traits:
• The relationship between the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy and rule of law is known as which concept?
• Discuss implications of accepting non-audit services from an external auditor on independence.
• The Ethical Dissonance Model helps evaluate:
• Which statement best describes the Walmart audit outcome?
• To ensure audit committee independence, the committee should meet separately with each of the following groups except:
• Which ethical tension is highlighted by the Sadhu parable in the context of professional ethics?
• The Olympus case was unique from a corporate governance perspective because it deals with:
• Which governance practice should be implemented to assess and maintain ethical culture across the organization?
• Jodie Fisher's allegations of sexual harassment are made believable due to Mark Hurd's:
• Which combination describes ethical legalism and utilitarianism in decision making?
• Which of the following is NOT a factor that managers use to set the right tone at the top and foster ethical leadership?
• How do IT governance and IT controls intersect with financial reporting ethics?
• How should a company respond to accounting restatements from a governance perspective?
• Differentiate between inherent risk and control risk in audit planning.
• Which feature is associated with fostering an ethical corporate culture?
• Briefly describe the typical steps in a risk management process relevant to ethics and accounting.
• In an ethical governance framework, how does risk assessment influence control activities?
• Why is integrated reporting combining financial and ESG data important for modern governance?
• Which of the following is NOT a component of an effective internal control environment in COSO Internal Control - Integrated Framework?
• How should organizations protect confidentiality and data integrity in accounting information systems?
• In evaluating exposure to potential liability for technology failures in the Bhopal case, which concept was applied?
• What is the role of sustainability reporting in governance?
• How should governance address the ethics of multinational subsidiaries across different regulatory environments?
• Which factors contributed to the believability of Jodie Fisher's harassment allegations against Mark Hurd?
• What are the primary responsibilities of an audit committee and how should it maintain independence?
• What did Miceli and Near identify as whistleblowers' primary expectation?
• What accountability mechanisms should be in place when ethics lapses occur at any level of the organization?
• Which step is NOT part of the prescribed process for deciding whether to report fraud under Section 10A of the Securities Exchange Act?
• What was the fundamental significance of the Menendez v Halliburton, Inc. case?
• Which of the following is NOT an element of internal control over financial reporting?
• In the Groupon incident, the primary internal-control deficiency related to refunds was which area?
• How should conflicts of interest be disclosed and managed in governance and accounting contexts?
• In governance of multinational subsidiaries, what approach balances global standards with local regulations?
• What are the five elements of the framework for understanding ethical decision making in business?
• In a decision scenario about accounting ethics, which factors determine the ethically correct choice?
• A unique aspect of Johnson & Johnson's Credo is that it:
• Compare stakeholder theory with shareholder primacy in guiding organizational ethics and governance.
• Which statement best describes data privacy governance in accounting ethics?
• The business judgment rule refers to which concept?
• What are the implications of an imbalance between deterrence and detection for governance?
• Which term describes the obligation to act with loyalty and avoid conflicts of interest?
• Which of the following is NOT among the seven signs of a pending ethical collapse?
• Lawsuits filed against Johnson & Johnson for product defects years after the Tylenol affair best illustrates that:
• Backdating of stock options is unethical because:
• What best describes the relationship between organizational ethics and corporate governance in improving ethical outcomes?
• DeGeorge thinks that "corporations have a moral obligation not to harm." Which of the following would be one of his criteria for morally permitted whistleblowing?
• Which of the following is NOT an element of the corporate governance system?
• A unique aspect of occupational fraud is:
• The ACFE found that the most common way that fraud is first detected is:
• In the Pinto case, Ford relied on which approaches to ethical reasoning to decide on a course of action regarding the faulty gas tank placement?
• Which indicators should be used to assess the impact of ethics training on behavior?
• Under the Sarbanes-Oxley Act, which body must contain members that are 100% independent of management?
• Which approach best describes the balance between deterrence and detection in fraud governance?
• Which option is NOT one of the conditions that allow internal accountants to become Dodd-Frank whistleblowers?
• Section 302 of the Sarbanes-Oxley Act requires that management:
• In the Bhopal case, in evaluating its exposure to possible future liability due to technology failures, Union Carbide used which of the following concepts?
• In corporate governance, which group is primarily responsible for safeguarding corporate assets and providing oversight?
• The level of care expected of a reasonable person under similar circumstances in meeting one's fiduciary duty is called which?
• Under Section 302, management is required to do which task?
• Which sequence best represents a structured ethical decision-making process in accounting?
• Which statement accurately describes the requirements of Sections 302 and 404 of the Sarbanes-Oxley Act with respect to financial reporting and internal controls?
• What are the common board committees in corporate governance and their primary roles?
• Which statement best reflects the view that SOX serves as a minimum standard rather than a guarantee of ethical behavior?
• Which of the following was the most frequent anti-fraud control identified in the 2014 ACFE Global Fraud Survey?
• Which statement best reflects the distinction between stakeholder theory and shareholder primacy?
• Which statement best reflects the relationship described by the Ethical Dissonance Model?
• An example of revenue overstatement is:
• What is third-party risk management, and what governance controls ensure ethical behavior by vendors and partners?
• How should executive compensation reflect ethical behavior and long-term value creation?
• Which combination best indicates ethical culture within an organization?
• With respect to moral issues in business, Thomas Jones posited that regarding moral issues in business, which is true?
• The Bennie and the Jets case centers on utility rates and the issue of:
• What non GAAP accounting method did Tony Menendez cite in blowing the whistle on Halliburton?
• Which safeguards counter earnings management to protect going-concern and stakeholder trust?
• Which statement best describes Johnson & Johnson's Credo in contrast to traditional codes of ethics?
• Why is ethical leadership essential for sustaining governance and how can boards model ethical behavior?
• Which statement correctly distinguishes internal versus external governance mechanisms?
• Which of the following was not a finding of the ACFE 2014 Report to the Nation on Occupational Fraud?
• Section 10A covers reporting fraud; which description best identifies its scope?
• Which statement best describes the role of Information and Communication in the COSO framework?
• What is the purpose of independent assessments in governance and compliance?
• Which statement best describes independence safeguards for auditors?
• Which of the following is NOT a behavioral indicator of fraud?
• Fraud can be defined as:
• The difference between occupational and financial statement fraud is:
• Which characteristic best describes risk assessment in an ethical governance framework?
• Why are related-party transactions a governance and ethics concern, and what controls should be in place?
• Under the 2010 Dodd-Frank Act, which statement describes whistleblowing by accountants?
• The term disgorgement means:
• The 2012 State of Compliance Study of PwC indicates that:
• As a manager, Lucy focuses on the effectiveness of internal controls over time. Which component of internal control is she engaging in?
• Which statement best describes a distinguishing characteristic of asset misappropriation compared with financial statement fraud?
• The honest services fraud rule that was used by Jeff Skilling was successful because the U.S. Supreme Court ruled that:
• Which of the following is NOT one of the audit committee's responsibilities?
• Which of the following is NOT generally considered an element of agency costs?
• What are key components of an anti-bribery and corruption program in corporate governance?
• Which describes the role of external reporting in governance and how should it align with internal governance processes?
• Why is “middle management” pivotal to the ethical climate, and how can boards influence it?