15.2 Corporate Responsibility for Ethical Behavior Flashcards
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. Ensures ethical behavior by all employees.
C. Shields the organization from liability in cases of loss of stockholder value due to fraud.
D. Eases the investigative process performed by police and prosecutors in cases of suspected fraud.
A. Provides employees with guidance for handling unfamiliar situations.
“Values and Ethics: From Inception to Practice” states, in part, “. . . what does an employee do when unplanned events occur? What reference does an individual look to for help in making decisions? . . . This is why it is important to have a defined set of organizational values and code of ethics – they create the ‘touchstone’ against which every unanticipated decision must be judged. Failure to have every individual in the organization know and understand these values and ethical code leads to inconsistency and, in the worst cases, unethical or fraudulent behavior.” (IV. Values, Ethics, and Accounting.)
Which of the following ethics-related leadership actions best support the effective deployment of a code of ethics by managers and supervisors?
A. Establishing a code of conduct, deploying ethics training, and monitoring ethical behavior.
B. Setting a good example, keeping promises and commitments, and supporting others in adhering to ethics standards.
C. Hiring ethical employees, identifying gaps between ethical behavior and actual behavior, and punishing ethical lapses.
D. Implementing internal controls, establishing a whistleblower framework, and developing survey tools.
A. Establishing a code of conduct, deploying ethics training, and monitoring ethical behavior.
If no defined code of conduct and ethical behavior is developed, employees will act on their own beliefs and values, or they will observe and emulate the behavior they see around them on a daily basis. Therefore, organizational behavior must drive the individual behavior of employees to meet the defined expectations of the wider organization. Accordingly, the choice that best supports the effective deployment of a code of ethics is establishing a code of conduct, deploying ethics training, and monitoring ethical behavior.
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. 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.
C. If an organization has a strong code of ethical conduct in place, the role of employee training can be downplayed.
D. Paying attention to “whistleblowers” plays a significant role in maintaining an effective ethical atmosphere.
D. Paying attention to “whistleblowers” plays a significant role in maintaining an effective ethical atmosphere.
“Values and Ethics: From Inception to Practice” states, in part, “A whistleblowing framework (e.g., an ethics helpline) is an important component in maintaining an ethical organizational culture. An effective feedback system includes having a confidential framework for employees to report possible violations of the organization’s code of ethics and to receive advice on the ethical aspects of challenging decisions. Statistics show that a large number of occupational fraud cases are detected through an employee “hotline” or other reporting method . . . ” (IX. Measuring and Improving Ethical Compliance.)
Which one of the following is a true statement regarding organizational ethics?
A. A comprehensive framework of corporate ethical behavior is a prerequisite for an effective system of internal control.
B. An effective system of internal control is a prerequisite for corporate ethical behavior.
C. If a functioning system of ethical behavior is in place, an organization is able to devote fewer resources to developing human capital.
D. “Organizational culture” is determined mostly by the industry(ies) in which the firm operates.
A. A comprehensive framework of corporate ethical behavior is a prerequisite for an effective system of internal control.
A comprehensive framework of corporate ethical behavior is a prerequisite for an effective system of internal control. “Values and Ethics: From Inception to Practice” states, in part, “CEOs and CFOs have to place their own integrity on the line by attesting to compliance with an adequate level of internal controls (as well as all other certifications). Creating a thorough, integrated system for developing, implementing, sustaining, and monitoring ethical performance within the organization will allow executives to make such declarations with confidence that a code of ethics is the foundation of the organization’s culture and is fully integrated into the thinking process of every employee and business partner.” (IX. Measuring and Improving Ethical Compliance.)
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. Organizational transparency.
B. Leadership by example.
C. Measurement of ethical compliance.
D. Alignment of internal controls with ethical standards.
B. Leadership by example.
“Tone at the top” plays an important role in determining an organization’s ethical environment. For a code of ethics to be effective, its application must be demonstrated by those in positions of power and leadership. Leaders must be seen living and managing by the code of ethics.
Essential elements in the development of an organization’s ethics policy include all of the following except
A. Articulation of organizational values.
B. Input from the board of directors in addition to management and employees.
C. Allowances for exceptional circumstances.
D. Relevance to day-to-day implementation.
C. Allowances for exceptional circumstances.
No allowances should be made for exceptional circumstances. Otherwise, every circumstance could become exceptional.
The formal code of ethical conduct for a company should do all of the following except
A. Effectively communicate acceptable values to all employees.
B. Reflect only the legal standards of conduct of employees and the organization.
C. Provide guidance on compliance requirements for domestic and international operations.
D. Provide guidance on behavior for employees when making decisions.
B. Reflect only the legal standards of conduct of employees and the organization.
A code of ethics should go beyond the legal standards of conduct.
Which of the following statements describes 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. I and II only.
B. II and IV only.
C. III and IV only.
D. I, III, and IV only.
A. I and II only.
The collection, analysis, and summarization of ethics issues can provide insight into the operation of its code of ethics and the degree to which employees are following it. In addition, tracking and monitoring issues raised through a whistleblowing framework creates opportunities to enhance and improve internal control. For instance, a large number of fraud cases are reported through a whistleblowing framework, which can highlight areas where internal controls were lacking.
Which of the following best describes the purpose of the European Union’s General Data Protection Regulation (GDPR)?
A. To penalize social media companies for selling personal data without user consent.
B. To protect individuals from companies using their purchasing history data to customize product offerings.
C. To prevent the biased use of data in artificial intelligence predictive models.
D. To strengthen an individual’s control and rights over his or her personal data.
D. To strengthen an individual’s control and rights over his or her personal data.
The GDPR specifies rules relating to the protection of individuals within the European Union with regard to the processing and free movement of their personal data. It protects the right to the protection of personal data.
An organization has established a customer data usage policy and incorporated this policy into its employee ethics code. One characteristic of this policy is the promise to its customers to be “transparent.” Which of the following is the best description of transparency in data usage?
A. A promise by the company to protect the customers’ privacy and not sell their personal data to others.
B. A guarantee that all algorithms created using customer data will be free of bias.
C. An open description of how the company intends to use the customers’ personal data.
D. An acknowledgment by the company that the customers own their own personal data.
C. An open description of how the company intends to use the customers’ personal data.
The ethical use of customer personal data should address transparency, which is how the organization intends to use the data.
The least important criterion for an organization to implement an ethical code of conduct is to
A. Provide guidance in external decision making.
B. Establish the legal boundaries within which the organization operates.
C. Establish a framework for ethical management.
D. Provide guidance in internal decision making.
B. Establish the legal boundaries within which the organization operates.
Ethics are separate from legal boundaries, so the establishment of legal boundaries would be irrelevant to the decision to implement an ethical code of conduct.
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 appoints an ethics officer to monitor and report to management on employee compliance.
B. Management follows ethical principles in decisions made on behalf of the organization.
C. Management keeps promises and commitments made to employees, customers, and vendors.
D. Management supports employees in adhering to ethics standards.
A. Management appoints an ethics officer to monitor and report to management on employee compliance.
This approach does not involve employees at all and projects the image that employees need to be supervised because they are likely to be unethical. This can discourage some employees.
A 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. A means for the collection, analysis, and summarization of ethical issues.
B. A confidential means for employees to report possible violations.
C. Opportunities to enhance and improve internal controls.
D. A method for defining the organization’s behavioral values.
D. A method for defining the organization’s behavioral values.
An effective feedback system includes having a confidential framework for employees to report possible violations of the organization’s code of ethics. Whichever approach an organization chooses, the collection, analysis, and summarization of ethics issues can provide insight into the operation of its code of ethics and the degree to which employees are following it. In addition, tracking and monitoring issues raised through a whistleblowing framework creates opportunities to enhance and improve internal controls. However, a whistleblowing framework does not define the organization’s behavioral values.
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. No requirement for philanthropy because a corporation’s primary responsibility is long-term profitability.
D. Paying taxes legally owed after using any tax avoidance opportunities in the applicable statutes.
A. Mitigative actions to reduce negative environmental effects of operations.
A company should evaluate its effects on the environment and take any necessary action. For example, companies should reduce plastic pollution and avoid contributing to climate change.
