Chapter 2: Ethics 31
Chapter 2
Ethics
True/False Questions
1. Ethics is the branch of philosophy that focuses on what constitutes right and wrong behavior.
ANSWER: T PAGE: 14 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
2. Ethics focuses on the way in which moral principles apply in daily life.
ANSWER: T PAGE: 14 TYPE: N
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
3. Ethics is not concerned with the way in which moral principles are derived.
ANSWER: F PAGE: 14 TYPE: N
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
4. Corporate decisions affect only those who own or operate a company.
ANSWER: F PAGE: 15 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
5. The unethical conduct of corporate management is unlikely to affect the behavior of lower-level employees.
ANSWER: F PAGE: 15 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
6. Corporate activities can affect the welfare of society as a whole.
answer: T PAGE: 15 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
7. To foster ethical behavior among employees, managers should apply ethical standards to which they are committed.
answer: T PAGE: 16 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
8. If a firm’s managers do not violate obvious ethical norms, employees will be likely to follow their example.
ANSWER: T PAGE: 16 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
9. Even if a firm’s managers act unethically, employees are not likely to follow their example.
ANSWER: F PAGE: 16 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
10. Ethical codes of conduct, more than management’s behavior, set the ethical tone of a firm.
answer: F PAGE: 16 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
11. Corporations owe ethical duties to their shareholders and their employees.
ANSWER: T PAGE: 16 TYPE: +
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
12. A choice benefiting one of several groups to whom a firm owes ethical duties may adversely affect another group.
ANSWER: T PAGE: 16 TYPE: +
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
13. Corporate ethical policies must be clearly communicated to be effective.
ANSWER: T PAGE: 16 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
14. Corporations owe legal duties to their shareholders and their employees.
ANSWER: T PAGE: 16 TYPE: N
Objective: AACSB Analytic Skill Level: AICPA Legal
15. Management is constantly faced with ethical trade-offs.
ANSWER: T PAGE: 16 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
16. Corporate ethical policies and programs must be coordinated and monitored to be effective.
ANSWER: T PAGE: 16 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
17. An ethical issue involving conflicting duties can only be resolved by establishing which duties take priority over others.
answer: T PAGE: 16 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
18. Simply obeying the law does not fulfill all ethical obligations.
ANSWER: T PAGE: 18 TYPE: +
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
19. An action may be unethical but not illegal.
ANSWER: T PAGE: 18 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
20. The legality of a particular action is always clear.
answer: F PAGE: 18 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
21. In the interest of preserving personal freedom, the law codifies all ethical requirements.
ANSWER: F PAGE: 18 TYPE: +
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
22. The minimal acceptable standard for ethical behavior is compliance with the law.
answer: T PAGE: 18 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
23. Ignorance of the law will always excuse a business from liability for a violation of that law.
answer: F PAGE: 18 TYPE: =
Objective: AACSB Analytic Skill Level: AICPA Legal
24. It is not possible to violate the law without realizing it.
answer: F PAGE: 19 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
25. Acting in good faith gives a business firm a better chance of defending its actions in court.
answer: T PAGE: 19 TYPE: N
Objective: AACSB Reflective Skill Level: AICPA Legal
26. Duty-based ethics may be based on religious precepts or philosophical reasoning.
answer: T PAGE: 20 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
27. No ethical standards involve an element of compassion.
answer: f PAGE: 20 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
28. Duty-based ethical standards imply that people have basic rights.
answer: T PAGE: 20 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
29. Under the principle of rights theory, one person’s set of values is as “right” as another’s.
ANSWER: F PAGE: 21 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
30. If an action is ethical from an outcome-based perspective, it is ethical from a duty-based perspective.
answer: f PAGE: 21 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
31. According to utilitarianism, an action that affects a minority adversely is morally wrong.
answer: f PAGE: 21 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
32. In ethical terms, a cost-benefit analysis is an assessment of the negative and positive effects of alternative actions on individuals.
answer: T PAGE: 21 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Risk Analysis
33. According to utilitarianism, it does not matter how many people benefit from an act.
answer: F PAGE: 21 TYPE: =
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
34. Bribery of foreign government officials is neither an ethical nor a legal issue.
answer: F PAGE: 22 TYPE: +
Objective: AACSB Ethics Skill Level: AICPA Critical
Thinking
35. Some U.S. bribery laws are directed toward accountants.
answer: T PAGE: 23 TYPE: =
Objective: AACSB Analytic Skill Level: AICPA Legal
multiple choice questions
1. In studying business law, Professor Smith’s students also study ethics in a business context. Ethics is the study of what constitutes
a. financially rewarding behavior.
b. legal behavior.
c. religious behavior.
d. right or wrong behavior.
answer: D PAGE: 14 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
2. Tim works for Universal Sales Company. His job includes putting “spin” on the company’s successes and failures. In this context, ethics consist of
a. questions of rightness and wrongness.
b. the firm’s quarterly revenue.
c. whatever is legal.
d. whatever is explainable.
answer: A PAGE: 14 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
3. Mack is sales manager for National Products, Inc. Compared to Mack’s personal activities, his business activities involve
a. more complex ethical standards.
b. simpler ethical standards.
c. the same ethical standards.
d. no ethical standards.
ANSWER: C PAGE: 14 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
4. Products Manufacturing Company (PMC) markets its products throughout the United States. When making a decision, PMC must take into account the needs of
a. its employees only.
b. its owners and shareholders only.
c. society, consumers, and the community only.
d. all of the above.
answer: D PAGE: 15 TYPE: +
Objective: AACSB Reflective Skill Level: AICPA Risk Analysis
5. Delta Data, Inc., needs to reduce costs by downsizing. In determining which employees to let go, a business’s priority is always
a. its ethical duty to long-term employees.
b. its profit margin.
c. the legality of discharging older workers.
d. none of the above.
ANSWER: D PAGE: 16 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Risk Analysis
6. A common ethical dilemma faced by the management of General Business Corporation involves the effect that its decision will have on
a. one group as opposed to another.
b. the firm’s competitors.
c. the government.
d. all of the above.
ANSWER: A PAGE: 16 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Risk Analysis
7. By simply obeying the law, the management of International Chemical Corporation, and other business firms, fulfill
a. all personal and business ethics obligations.
b. all business ethics obligations.
c. a moral minimum of ethics obligations.
d. no ethics obligations.
ANSWER: C PAGE: 18 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
8. Global Clothing Corporation, like other businesses, has duties prescribed by
a. ethics only.
b. the law only.
c. ethics and the law.
d. none of the above.
answer: C PAGE: 18 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
9. Jill lies to her family. According to legal and ethical principles, this is
a. illegal.
b. unethical.
c. illegal and unethical.
d. none of the above.
ANSWER: B PAGE: 18 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
10. Eagle Manufacturing Corporation could demonstrate a commitment to ethical behavior by
a. complying with the law only.
b. implementing ethical programs only.
c. making a profit only.
d. complying with the law, establishing ethics codes, and making money.
answer: D PAGE: 18 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
11. First Financial Corporation provides other firms with capital to expand operations. Questions of what is ethical involve the extent to which First Financial has
a. a legal duty beyond those duties mandated by ethics.
b. an ethical duty beyond those duties mandated by law.
c. any duty beyond those mandated by both ethics and the law.
d. any duty when it is uncertain whether a legal duty exists.
answer: B PAGE: 18 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
12. Eve, the chief executive officer of Federated Corporation (FC), wants to ensure that FC’s activities are legal and ethical. The best course of Eve and FC is to act in
a. good faith.
b. ignorance of the law.
c. regard for the firm’s shareholders only.
d. their own self interest.
answer: A PAGE: 19 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
13. Owen, the human resources director for Personnel Corporation, attempts to comply with the law in dealing with job applicants and employees. One of the challenges Owen faces is that the legality of an action is
a. always clear.
b. never clear.
c. sometimes clear.
d. usually clear.
ANSWER: C PAGE: 19 TYPE: +
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
14. If the U.S. government bans the sale, in the United States, of Whirligig, a child’s toy, on the ground that it is dangerous, it would be
a. illegal to sell the toy outside the United States.
b. illegal and unethical to sell the toy outside the United States.
c. legal but may be unethical to sell the toy outside the United States.
d. none of the above.
ANSWER: C PAGE: 19 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
15. Many consumers misuse the products of Midwest Manufacturing, Inc., and are injured. In terms of responsibility for the consequences, Midwest may have
a. an ethical duty only.
b. a legal duty only.
c. an ethical and a legal duty.
d. neither an ethical nor a legal duty.
answer: A PAGE: 19 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
16. Matt, vice-president of sales for Natural Resources, Inc., adheres to religious ethical standards. Their application involves an element of
a. compassion.
b. cost-benefit analysis.
c. discretion.
d. utilitarianism.
ANSWER: A PAGE: 20 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
17. Kay follows certain religious principles. With respect to the behavior of Kay and other adherents of her religion, its principles are most likely
a. absolute.
b. changeable.
c. flexible.
d. vague.
ANSWER: A PAGE: 20 TYPE: N
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
18. Dana, an accountant for Electronic Communications Corporation attempts to apply the duty approach to ethical reasoning in conflicts that occur on the job. This approach is based on the idea that a person must
a. achieve the greatest good for the most people.
b. avoid unethical behavior regardless of the consequences.
c. conform to society’s ethical standards.
d. place his or her employer’s interest first.
answer: B PAGE: 20 TYPE: +
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
19. Tina, the chief financial officer for USA Products Corporation, attempts to apply Christian precepts in making ethical decisions and in doing business. In applying duty-based ethical standards that are derived from a religious source, Tina would consider the motive behind an act to be
a. irrelevant.
b. the least important consideration.
c. the most important consideration.
d. the only consideration.
answer: A PAGE: 20 TYPE: +
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
20. In business negotiations, Beth, the chief executive officer of Design Associates, Inc., follows “The Golden Rule,” which
a. encourages the accumulation of as much personal wealth as possible.
b. mandates compassionate treatment of others in all situations.
c. permits taking advantage of others in financial terms.
d. requires an increase of business profits over a certain period.
ANSWER: B PAGE: 20 TYPE: +
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
21. Biotech Research Associates asks its employees to consider ethical behavior from both the “categorical imperative” perspective and the Golden Rule approach. Unlike the latter, the categorical imperative
a. allows a person to control the behavior of persons who behave unethically.
b. does not permit individuals to submit to the dictates of an unjust government.
c. focuses on personal survival.
d. forces a person to consider the consequences of his or her actions if everyone behaved in a similar way.
answer: d PAGE: 20 TYPE: =
Objective: AACSB Reflective Skill Level: AICPA Critical
Thinking
22. Global Sales Corporation suggests that its employees apply the “categorical imperative” to ethical issues that arise at work. This requires that the employees