Ethics And Compliance In The Corporation Chapter 5 Test Bank

Package Title: Godfrey Test Bank

Course Title: Ethics and Business WileyPLUS

Chapter Number 5

Question type: Multiple-Choice

1) Which of the following terms is defined as adherence to rules, laws, standards, and policies?

a) compliance

b) ethics

c) regulation

d) goodwill

Title: Chapter 5 Test Bank, Question 01

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: Compliance means “adherence to, or conformance with, rules, laws, standards, and policies” and implies an obligation to uphold pertinent codes of conduct.

2) Which of the following best represents the difference between ethics and compliance?

a) Those who commit ethical violations are punished. Those who fail to comply with conduct standards are not.

b) Ethics involves proactively following a set of moral principles. Compliance involves reacting to set boundaries.

c) Ethics is most effective when people voluntarily adhere to norms of behavior. Compliance is most effective following punishment.

d) Ethical behavior is more important to society than to business. Compliance is more important to business than society.

Title: Chapter 5 Test Bank, Question 02

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: Ethical behavior is guided proactively by a set of moral principles. Obedience to these principles is unenforceable. Compliance is guided by rules, laws, policies, and standards. Failure to comply leads to penalties.

3) Which of the following is the best example of compliance?

a) Aaron remains with his company through a public scandal because he believes loyalty is important.

b) Though Benito dislikes his coworker, he treats him with respect.

c) Carley politely refuses vendor gifts since they violate company policy.

d) Dao values integrity, so she tells her supervisor about her recent and costly mistake.

Title: Chapter 5 Test Bank, Question 03

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: Ethical behavior is guided proactively by a set of moral principles. Obedience to these principles is unenforceable. Compliance is guided by rules, laws, policies, and standards. Failure to comply leads to penalties.

4) You are watching a movie about the trial of two marines accused of killing another marine. As the story progresses, you learn that the two marines were ordered by their colonel to haze the now-deceased marine because he was not performing up to the regiment’s standards. Which of the following best describes the behavior of the two marines?

a) The two marines complied with the colonel’s orders and acted ethically.

b) The two marines failed to comply with the colonel’s orders and acted unethically.

c) The two marines failed to comply with the colonel’s orders but acted ethically.

d) The two marines complied with the colonel’s orders but acted unethically.

Title: Chapter 5 Test Bank, Question 04

Difficulty: Hard

Bloomcode: Evaluation

Min: 2

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: Ethical behavior is guided proactively by a set of moral principles. Obedience to these principles is unenforceable. Compliance is guided by rules, laws, policies, and standards. Failure to comply leads to penalties.

5) Which of the following was the first large-scale regulation of business and forms the foundation of today’s regulation of mergers and acquisitions?

a) Federal Trade Commission

b) Consumer Financial Protection Bureau

c) Securities Acts of 1933 and 1934

d) Sherman Antitrust Act

Title: Chapter 5 Test Bank, Question 05

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: Enacted in the late nineteenth century, the Sherman Antitrust Act was the first to regulate business on a large scale and was used to break up monopolies. It forms the foundation of today’s regulation of mergers and acquisitions.

6) Which of the following best describes the similarity between the Sherman Antitrust Act and the Securities Acts?

a) their focus on environmental concerns

b) their usefulness in breaking up monopolies

c) the use of transparency in company reports as behavioral control

d) the impact of social activism on federal law

Title: Chapter 5 Test Bank, Question 06

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The Sherman Antitrust Act and the Securities Acts of 1933 and 1934 established an important precedent that underpins many compliance regimes: Making companies transparently report their activities is a powerful check on behavior.

7) All of the following were enacted in response to concerns of the 1960s and 1970s EXCEPT

a) Foreign Corrupt Practices Act

b) Clean Air Act

c) Clean Water Act

d) Sarbanes-Oxley Act

Title: Chapter 5 Test Bank, Question 07

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The 1960s and 1970s saw instances of corporate misbehavior and environmental concerns, resulting in the Foreign Corrupt Practices Act and the Clean Air and Clean Water Acts.

8) While listening to her local news, Frances hears a story about a government recall of a spray-on sunscreen found to contain low levels of benzene. Which agency sought to protect public health by issuing that recall?

a) Federal Trade Commission

b) Food and Drug Administration

c) Environmental Protection Agency

d) Bureau of Alcohol, Tobacco, Firearms and Explosives

Title: Chapter 5 Test Bank, Question 08

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The Food and Drug Administration protects public health, including food, drugs, medical devices, and cosmetics.

9) Graham grew up on a tobacco farm. In college, he rolled his own cigarettes and sold them to fellow students. Now he is attempting to have packages of his cigarettes sold in local bars and convenience stores. Which government agency would attempt to prohibit Graham from illegally trafficking his cigarettes?

a) Bureau of Alcohol, Tobacco, Firearms and Explosives

b) Federal Trade Commission

c) Environmental Protection Agency

d) Drug Enforcement Administration

Title: Chapter 5 Test Bank, Question 09

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The Bureau of Alcohol, Tobacco, Firearms and Explosives protects against violent criminals, weapons, illegal trafficking, and terrorism.

10) While planning a family trip, Hector reads an online article warning of potential safety hazards in vacation rental homes. Which government agency most likely wrote or contributed information to this article?

a) Food and Drug Administration

b) Consumer Product Safety Commission

c) Environmental Protection Agency

d) Consumer Financial Protection Bureau

Title: Chapter 5 Test Bank, Question 10

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The Consumer Product Safety Commission protects against risk of injury or death from consumer product use.

11) Isobel is interviewing for a job as an accounting supervisor. She knows the hiring manager will not discriminate against her because she uses a wheelchair. Which government agency protects Isobel from this type of discrimination?

a) Securities and Exchange Commission

b) Federal Trade Commission

c) Equal Employment Opportunity Commission

d) Federal Energy Regulatory Commission

Title: Chapter 5 Test Bank, Question 11

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The Equal Employment Opportunity Commission protects against discrimination in employment based on race, color, sex, national origin, age, or disability.

12) Which government agency provides Jamal with the confidence to invest in the U.S. stock market?

a) Federal Trade Commission

b) Environmental Protection Agency

c) Consumer Financial Protection Bureau

d) Securities and Exchange Commission

Title: Chapter 5 Test Bank, Question 12

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The Securities and Exchange Commission protects investors, maintains fair and orderly markets, and facilitates capital formation.

13) A commercial airplane crashes into an open field. Which government agency would investigate?

a) Bureau of Alcohol, Tobacco, Firearms and Explosives

b) Consumer Product Safety Commission

c) Environmental Protection Agency

d) Federal Aviation Administration

Title: Chapter 5 Test Bank, Question 13

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The Federal Aviation Administration provides a safe and efficient aerospace system.

14) After a massive chemical spill by a local plant, Katerina is concerned with the safety of her drinking water. Which government agency would ensure her protection?

a) Consumer Product Safety Commission

b) Federal Trade Commission

c) Environmental Protection Agency

d) Federal Energy Regulatory Commission

Title: Chapter 5 Test Bank, Question 14

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The Environmental Protection Agency protects human health and the natural environment.

15) Based on your reading about Enron, which of the following conclusions can you draw?

a) Arthur Andersen complied with accounting standards but behaved unethically.

b) Fraud is more easily hidden by publicly traded companies than private ones.

c) The collapse of a large and successful company, like Enron, requires that unethical behavior permeate all levels of the organization.

d) Unethical behavior by company leadership can affect thousands of other unsuspecting people.

Title: Chapter 5 Test Bank, Question 15

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: Unethical behavior by Enron executives caused shareholders to lose over $60 billion and caused more than 20,000 employees to lose their jobs.

16) Which of the following led to the passage of the Sarbanes-Oxley Act (SOX)?

a) the Great Recession of 2007–2009

b) the collapse of Enron and Arthur Andersen due to fraudulent behavior

c) social activism and concern for the natural environment

d) the abundance of large monopolies

Title: Chapter 5 Test Bank, Question 16

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The collapse of Enron and Arthur Andersen, as well as other fraudulent behaviors by corporate executives, led to the passage of SOX in 2002, which sought to strengthen accounting and information controls.

17) Which statement most accurately describes the Sarbanes-Oxley Act (SOX)?

a) Special purpose entity accounting is required of all businesses.

b) Company CEOs are held to higher ethical standards than other employees.

c) Company CEOs may be legally accountable for accounting errors.

d) Accounting firms are legally required to act as both auditors and consultants.

Title: Chapter 5 Test Bank, Question 17

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: SOX worked to strengthen internal accounting and information controls within an organization. Company CEOs are required to sign and verify the accuracy of public accounting information.

18) The compliance/regulatory response to the Great Recession of 2007–2009 was the Dodd–Frank Act, which established all of the following EXCEPT

a) Commodity Futures Trading Commission

b) Consumer Financial Protection Bureau

c) Financial Stability Oversight Council

d) Volcker Rule

Title: Chapter 5 Test Bank, Question 18

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The compliance/regulatory response to the Great Recession of 2007–2009 was the Dodd–Frank Act, which established the Financial Stability Oversight Council, the Consumer Financial Protection Bureau, and the Volcker Rule.

19) Erica is a first-time home buyer. Though she is anxious about taking on the responsibility of a mortgage, she has a thorough understanding of her subsequent obligations because of the

a) Commodity Futures Trading Commission

b) Consumer Financial Protection Bureau

c) Financial Stability Oversight Council

d) Volcker Rule

Title: Chapter 5 Test Bank, Question 19

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The Consumer Financial Protection Bureau was established to prevent predatory mortgage lending and to make it easier for consumers to understand the obligations they incurred when taking out a mortgage.

Question type: Short Answer

20) Briefly describe the evolution of corporate compliance.

Title: Chapter 5 Test Bank, Question 20

Difficulty: Medium

Bloomcode: Analysis

Min: 5

AACSB: Ethics

Learning Objective: LO 5.1 Describe the evolution of corporate compliance.

Section Reference: Sec: 5.1 The Evolution of Compliance

Solution: The United States evolved from having simple rules to commonplace corporate compliance programs over centuries. Business regulation began in the late nineteenth century with the Sherman Antitrust Act, which sought to break up monopolies. Following the “trust-busting” era of the early 1900s were the Food and Drug Administration and the Federal Trade Commission.

For much of the twentieth century, the creation of government regulatory agencies came in waves. The Securities Exchange Act of 1934 created the Securities and Exchange Commission.

The vast majority of regulatory agencies began in the 1960s and 1970s due to corporate misbehavior and environmental concerns. These decades gave rise to the current Bureau of Alcohol, Tobacco, Firearms and Explosives; the Consumer Product Safety Commission; the Drug Enforcement Administration; and the Environmental Protection Agency.

The early twenty-first century was mired in several corporate scandals. These brought about the passage of the Sarbanes-Oxley Act, which reformed accounting procedures and held corporate CEOs personally responsible for the accuracy of public information.

Most recently, the Great Recession of 2007–2009 resulted in the passage of the Dodd–Frank Act, which overhauled the financial services industry.

Question type: Multiple-Choice

21) The Federal Sentencing Guidelines for Organizations help define punishment for organizations convicted of a crime. They include all of the following EXCEPT

a) jail time for CEOs

b) probation

c) community service

d) hefty fines

Title: Chapter 5 Test Bank, Question 21

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: The Federal Sentencing Guidelines for Organizations define punishment for organizations convicted of a crime, which may range from probation to community service to the payment of hefty fines.

22) Which of the following considerations was added in the 2004 amendment to the Federal Sentencing Guidelines for Organizations?

a) compliance

b) corporate culture

c) corporate culpability for unlawful employee conduct

d) consistent enforcement of disciplinary measures

Title: Chapter 5 Test Bank, Question 22

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: The 2004 amendment to the Federal Sentencing Guidelines for Organizations broadened the guidelines to include ethics as well as compliance. For the first time, corporate culture was a specific point of reference.

23) If a company is convicted of a federal crime and can prove that it had effective compliance and ethics programs in place, then

a) the conviction may be overturned

b) it may avoid all punishment

c) it may receive a reduced sentence

d) only the guilty employees will be punished

Title: Chapter 5 Test Bank, Question 23

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: If a company convicted of a federal crime can prove that, in spite of its violation of the law, it had effective compliance and ethics programs in place, then it may receive a reduced sentence.

24) Which of the following was added in the 2004 amendment to the Federal Sentencing Guidelines for Organizations to clarify and detail compliance efforts?

a) training and communication guidelines

b) monitoring strategies

c) protection and detection procedures

d) a whistleblower system

Title: Chapter 5 Test Bank, Question 24

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: The 2004 amendment to the Federal Sentencing Guidelines for Organizations added ten items that add clarity and detail to compliance efforts. These included a whistleblower system—a mechanism for anonymous reporting.

25) Which government agency provided more guidance about corporate compliance efforts relative to the Federal Sentencing Guidelines for Organizations in 2017 and 2020?

a) Department of Justice

b) Department of Homeland Security

c) Federal Trade Commission

d) Securities and Exchange Commission

Title: Chapter 5 Test Bank, Question 25

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: Government agencies continue to issue additional guidance about corporate compliance efforts, most notably the Department of Justice in 2017 and 2020.

26) Meghan was convicted of accepting bribes in exchange for contract awards. Under what conditions is her employer culpable for her actions?

a) only if someone knew about Meghan’s actions before her conviction

b) only if someone approved Meghan’s actions before her conviction

c) Meghan’s employer is culpable, even if it did not know about or approve her actions.

d) Meghan’s employer is not culpable under any conditions.

Title: Chapter 5 Test Bank, Question 26

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: The Federal Sentencing Guidelines for Organizations are built on the premise that organizations create a context that either encourages or discourages ethical conduct. As such, an employer can be held responsible for the acts of employees.

27) ABC Company executives and managers act as role models for the rest of the company. Recently, to promote fairness, a human resources director stripped the names from resumes before the hiring manager saw them and a procurement specialist refused a bribe. These behaviors, and similar others, are publicized at company meetings. ABC is attempting to

a) alert employees to criminal behavior

b) create an organizational culture of ethics and compliance

c) earn “credits” with the Department of Justice

d) encourage whistleblowing

Title: Chapter 5 Test Bank, Question 27

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: The 2004 amendment to the Federal Sentencing Guidelines for Organizations promoted organizational cultures that encourage a commitment to compliance with the law and ethical conduct.

28) While conducting a search for a new chief information officer, you learn that one candidate was terminated from his last job for sexual harassment. You eliminate his resume from consideration. This scenario describes which of the 1991 Federal Sentencing Guidelines for Organizations’ “seven hallmarks of an effective compliance program”?

a) response and prevention

b) monitoring

c) high-level oversight

d) due care

Title: Chapter 5 Test Bank, Question 28

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: The Federal Sentencing Guidelines for Organizations are built on the premise that organizations create a context that either encourages or discourages ethical conduct. As such, an employer can be held responsible for the acts of employees.

29) Naji procures services for the local government. To ensure that he is soliciting at least three competitive vendor bids, Naji is required to present each bid at a department meeting. This scenario describes which of the 1991 Federal Sentencing Guidelines for Organizations’ “seven hallmarks of an effective compliance program”?

a) prevention and detection procedures

b) due care

c) consistent enforcement

d) training and communication

Title: Chapter 5 Test Bank, Question 29

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: One of the “seven hallmarks of an effective compliance program” in the original Federal Sentencing Guidelines for Organizations was prevention and detection, which establishes standards and procedures to prevent and detect criminal conduct.

30) Recent college graduate Olivia was hired to oversee compliance at a large insurance company. She quickly discovered that her colleagues dismissed her concerns about noncompliant actions due to her entry-level position. Which of the 1991 Federal Sentencing Guidelines for Organizations’ “seven hallmarks of an effective compliance program” is missing in this scenario?

a) response and prevention

b) consistent enforcement

c) monitoring

d) high-level oversight

Title: Chapter 5 Test Bank, Question 30

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: One of the “seven hallmarks of an effective compliance program” in the original Federal Sentencing Guidelines for Organizations was high-level oversight, which assigns specific individuals within high-level personnel an overall responsibility to oversee compliance.

31) XYZ Company discovers that several employees have used their corporate expense accounts to pay for expensive personal items. XYZ then creates a system of sign-offs for all expense accounts to stop further misconduct. This scenario describes which of the 1991 Federal Sentencing Guidelines for Organizations’ “seven hallmarks of an effective compliance program”?

a) prevention and detection

b) response and prevention

c) high-level oversight

d) due care

Title: Chapter 5 Test Bank, Question 31

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: One of the “seven hallmarks of an effective compliance program” in the original Federal Sentencing Guidelines for Organizations was response and prevention, which encourages reasonable steps to respond to and prevent further similar criminal conduct.

32) You and your college roommate Parker have formed a small accounting firm. Parker says you do not need to worry about the Federal Sentencing Guidelines for Organizations or compliance programs. What is your best response?

a) You will not have to worry about the Federal Sentencing Guidelines for Organizations’ guideposts for compliance efforts until you have more than 50 employees.

b) You will not have to worry about the Federal Sentencing Guidelines for Organizations’ guideposts for compliance efforts until you have more than 500 employees.

c) The Federal Sentencing Guidelines for Organizations regarding compliance efforts are important for businesses of all sizes.

d) Following the Federal Sentencing Guidelines for Organizations is mandated by the Department of Justice.

Title: Chapter 5 Test Bank, Question 32

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: The Federal Sentencing Guidelines for Organizations’ “seven hallmarks of an effective compliance program” are important guideposts for every business, from small to gigantic.

33) Human resources manager Quinn is reviewing candidate profiles for a new chief financial officer and specifically seeks out information about prior legal violations. In this scenario, Quinn is abiding by which of the ten additions to the 2004 amendment to the Federal Sentencing Guidelines for Organizations?

a) history of violations

b) conduct and internal control

c) leadership accountability

d) risk assessment

Title: Chapter 5 Test Bank, Question 33

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: One of the 10 additionns to the 2004 amendment to the Federal Sentencing Guidelines for Organizations was History of Violations, which encourages a search for a history of engaging in violations of the law.

34) During orientation, human resources manager Ricardo has a group of new hires watch videos about the company’s ethics program. Each also receives a desk copy of regulations and standards. In this scenario, Ricardo is abiding by which of the 10 additions to the 2004 amendment to the Federal Sentencing Guidelines for Organizations?

a) leadership accountability

b) conduct training

c) encourage employees

d) conduct and internal control

Title: Chapter 5 Test Bank, Question 34

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: One of the 10 additions to the 2004 amendment to the Federal Sentencing Guidelines for Organizations was conduct training, which includes both training of dissemination of materials within an effective compliance and ethics program.

35) Sadie is in charge of implementing a compliance and ethics program at her consumer products company. As a high-level manager, she has the authority to mandate participation, adherence to standards, and enforcement of penalties. This scenario describes which of the 10 additions to the 2004 amendment to the Federal Sentencing Guidelines for Organizations?

a) risk assessment

b) whistleblower system

c) resources and authority

d) tone at the top

Title: Chapter 5 Test Bank, Question 35

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: One of the 10 additions to the amendments to the FSGO in 2004 was resources and authority, which emphasized the importance of adequate resources and authority for those responsible for implementing a compliance and ethics program.

36) At his new job, Tristan is able to access a database detailing the standards of conduct and internal control systems that promote compliance with the law. This scenario describes which of the 10 additions to the 2004 amendment to the Federal Sentencing Guidelines for Organizations?

a) tone at the top

b) resources and authority

c) evaluation of programs

d) conduct and internal control

Title: Chapter 5 Test Bank, Question 36

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: One of the 10 additions to the 2004 amendment to the Federal Sentencing Guidelines for Organizations was conduct and internal control, which sought to provide better descriptions of compliance standards and procedures.

37) Urban knew that his company discouraged accepting expensive vendor gifts, but he was not sure if he could allow a vendor representative to buy his lunch while they discussed potential business. Urban followed company procedure and sent an email seeking clarification on his dilemma. This scenario describes which of the 10 additions to the 2004 amendment to the Federal Sentencing Guidelines for Organizations?

a) encourage employees to report

b) whistleblower system

c) evaluation of programs

d) conduct and internal control

Title: Chapter 5 Test Bank, Question 37

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: One of the 10 additions to the 2004 amendment to the Federal Sentencing Guidelines for Organizations was encouragement of employees to report actual violations and to seek guidance about potential violations.

38) When Violet discovered that some employees were falsifying public reports to inflate company stock prices, she used the company tip line to report the violation anonymously. This scenario describes which of the 10 additions to the 2004 amendment to the Federal Sentencing Guidelines for Organizations?

a) encourage employees to report

b) whistleblower system

c) evaluation of programs

d) conduct and internal control

Title: Chapter 5 Test Bank, Question 38

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: One of the 10 additions to the 2004 amendment to the Federal Sentencing Guidelines for Organizations in 2004 was a whistleblower system, which required a mechanism for anonymous reporting.

39) You and your friend Liam are viewing a news report about a national bank executive who was arrested for using company assets to procure real estate assets for himself and an overseas government official—a violation of the Foreign Corrupt Practices Act. The bank is arguing that it followed the Federal Sentencing Guidelines for Organizations by employing an effective compliance and ethics program, so it should receive a light punishment. A bank representative discusses the frequent emails it sends and the once-a-year teleconferences required of all employees. The rep notes that the offending employee attended all teleconferences without fail. Liam says he thinks the bank has made a good case for itself with the Department of Justice. What is your best response?

a) You note that the bank’s compliance program may not be all that effective considering employees can merely delete emails or choose to perform other tasks while on a teleconference. You think the bank should receive a harsher punishment.

b) You agree with Liam. The bank has a strong compliance program in place, which the offending employee completed. As a result, the bank should receive a reduced sentence.

c) Even one violation proves a company’s compliance program ineffective; therefore, the company should receive a harsh punishment.

d) Since no other bank employees have been arrested, the compliance program is likely effective; therefore, the bank should receive no punishment.

Title: Chapter 5 Test Bank, Question 39

Difficulty: Hard

Bloomcode: Evaluation

Min: 3

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: If a company convicted of a federal crime can prove that, in spite of its violation of the law, it had effective compliance and ethics programs in place, then it may receive a reduced sentence. Corporations continue to see guidance about what the U.S. government deems “effective” and therefore worthy of “credit” in the event of a punishable event.

Question type: Short Answer

40) You and five former work colleagues have opened your own financial services company. Why is it important to understand and implement Federal Sentencing Guidelines for Organizations?

Title: Chapter 5 Test Bank, Question 40

Difficulty: Medium

Bloomcode: Analysis

Min: 5

AACSB: Ethics

Learning Objective: LO 5.2 Discuss the objectives for the Federal Sentencing Guidelines for Organizations and the role these guidelines play in corporate compliance programs.

Section Reference: Sec: 5.2 The Federal Sentencing Guidelines for Organizations

Solution: Organizations create a context, via their culture, that either encourages or discourages ethical conduct. When an employee acts in an unlawful manner, an employer can be held responsible for those actions—even if the employer was unaware or disapproved of such actions.

The Federal Sentencing Guidelines for Organizations are a set of rules that define punishment for organizations convicted of a crime, which may range from probation to community service to the payment of hefty fines. However, if an organization can prove that, despite its violation of law, it had an effective compliance and ethics program, then it may receive a reduced sentence.

Question type: Multiple-Choice

41) According to a 2019 survey by the Ethics & Compliance Initiative, 45% of employees report having witnessed an ethical violation or compliance issue. Of those, how many chose not to report the violations?

a) 34%

b) 51%

c) 75%

d) 96%

Title: Chapter 5 Test Bank, Question 41

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: According to a 2019 survey by the Ethics & Compliance Initiative, of the 45% of employees who witnessed an ethical violation, 34% of them chose not to report.

42) According to a 2019 survey by the Ethics & Compliance Initiative, employees most commonly reported ethical violations

a) through a helpline or hotline

b) to their direct supervisors

c) to human resources

d) to the legal department

Title: Chapter 5 Test Bank, Question 42

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: According to a 2019 survey by the Ethics & Compliance Initiative, employees most commonly reported ethical violations to their direct supervisors.

43) All of the following are benefits of using online training for a compliance program versus in-person training EXCEPT

a) eco-friendliness

b) flexibility

c) hands-on learning

d) timeliness

Title: Chapter 5 Test Bank, Question 43

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Compared to in-person training, online compliance training saves time and money, is flexible and eco-friendly, and allows for more engaging learning material and updated content.

44) Which of the following would be a suitable disciplinary measure for an employee who violated compliance policies?

a) unfavorable work hours

b) retaliation

c) retraining

d) suspension

Title: Chapter 5 Test Bank, Question 44

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: When employees violate policies, appropriate disciplinary measures include termination, suspension, lack of promotion, and/or a note in the HR file.

45) Investing in compliance programs tends to result in

a) a very high return on investment

b) an increase in market share

c) damage to the firm’s reputation

d) business losses

Title: Chapter 5 Test Bank, Question 45

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Investing in compliance results in a long-term return on investment.

46) All of the following are processes undertaken by compliance departments EXCEPT

a) creating a system for employees to report potential violations

b) conducting training sessions and disseminating materials

c) hiring employees without a propensity for unethical behavior

d) enforcing compliance through incentives and disciplinary measures

Title: Chapter 5 Test Bank, Question 46

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Compliance departments undertake four processes: creating systems for employee reporting, conducting training, monitoring conduct, and enforcement.

47) Wyatt works at a warehouse for a large online retailer and notices another employee stealing small, expensive electronics. Wyatt’s employer has a formal structure for reporting such ethical violations. According to research, Wyatt is most likely to

a) report the incident via an email

b) report the incident using a telephone hotline

c) begin stealing himself

d) ignore the violation

Title: Chapter 5 Test Bank, Question 47

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: According to a 2019 survey by the Ethics & Compliance Initiative, of the 45% of employees who witnessed an ethical violation, 66% chose to report it. In organizations with a formal reporting structure, 39.5% of employees will use a telephone hotline to report a tip.

48) A global consumer products manufacturer uses an external call center to handle international calls for its compliance department. Employee Xavier spends much of his day collecting calls, emails, and online forum information. What will he do with the information next?

a) investigate each issue

b) create an action plan for management

c) develop a set of appropriate punishments

d) sort the tips and concerns into categories

Title: Chapter 5 Test Bank, Question 48

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: The compliance department oversees a process that first collects complaints and tips from employees and then sorts those tips into categories. Issues are investigated. Appropriate action is taken as warranted.

49) Yael works in her company’s compliance department. She recently categorized all the recent complaints and tips. If she follows the standard process, what will she likely do next?

a) investigate each issue

b) create an action plan for management

c) develop a set of appropriate punishments

d) focus on the collection of more tips

Title: Chapter 5 Test Bank, Question 49

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: The compliance department oversees a process that first collects complaints and tips from employees and then sorts those tips into categories. Issues are investigated. Appropriate action is taken as warranted.

50) Zeke learns that his manager is using proprietary company information for personal gain. According to research by the Ethics and Compliance Initiative, why might Zeke decide to keep the information to himself?

a) to use it for blackmail later

b) fear of retaliation

c) fear of guilt by association

d) to use the scheme for his own personal gain

Title: Chapter 5 Test Bank, Question 50

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Most employees fear retaliation if they report some issue within the company, especially if they report the wrongdoing of their manager.

51) Anele referred to his political views on social media. The next day, his supervisor mocked and harassed him for them. Under what conditions might Anele be more inclined to report his supervisor to someone at the company for noncompliance?

a) if there were a company hotline or helpline

b) if the company culture valued employees’ freedom of speech

c) if the company had a policy preventing retaliation

d) if other employees were harassed similarly

Title: Chapter 5 Test Bank, Question 51

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Companies can encourage employees to report ethical violations by having easy-to-understand policies that prevent retaliation.

52) Bella works in the compliance department and has assumed responsibility for the company’s sexual harassment policy. After writing and publishing the policy, the first thing Bella must do is

a) enforce the policy

b) monitor how well company employees are complying

c) motivate employees and managers to attend training sessions

d) create training materials to further explain those policies

Title: Chapter 5 Test Bank, Question 52

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: After putting compliance policies in place, organizations must create training materials to further explain those policies.

53) Which of the following employees would benefit most from live, classroom-style training on compliance policies?

a) Charlie, who works as an ER nurse

b) Divia, who works in IT

c) Ellie, who works in management overseas

d) Fiona, who works on a production line

Title: Chapter 5 Test Bank, Question 53

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: In-person training is especially useful for hands-on activities, such as some types of training for medical personnel.

54) Gabe manages a group of advertising creative professionals and actively has discouraged them from “wasting valuable work time” attending the company’s compliance training sessions. Gabe himself has skipped all sessions. What is the best way to motivate Gabe to attend compliance training with his employees?

a) provide refreshments

b) raffle off prizes

c) withhold performance raises

d) use peer pressure

Title: Chapter 5 Test Bank, Question 54

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Strong cultural and financial incentives are used to motivate managers and employees to attend compliance training.

55) Growing ABC Company has recently formed a compliance department. When discussing the department’s mission and goals, Heather says the best time to train employees about compliance issues is

a) right after an ethical “scandal”

b) during the employee onboarding process

c) during work downtime

d) at their yearly performance review

Title: Chapter 5 Test Bank, Question 55

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Employee onboarding training happens when it is most valuable—before employees run into issues.

56) Which of the following best describes the difference between compliance training and monitoring?

a) the need for written policies

b) the use of electronic equipment

c) the benefit of compliance professionals

d) the frequency of occurrence

Title: Chapter 5 Test Bank, Question 56

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Training is an episodic event, but monitoring and reporting are tasks that must be done constantly.

57) Which of the following compliance employees is engaged in monitoring employees?

a) Isadore checks the company hotline daily.

b) Jazmine eats lunch with the same group of colleagues each day.

c) Kendall discusses company policies and procedures during employee orientation.

d) Lance attends all executive board meetings.

Title: Chapter 5 Test Bank, Question 57

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Monitoring takes various forms, from surveillance of employees via video cameras to a hotline that indicates where things are not working well.

58) After attending an out-of-town conference, Margot submits her expense report for reimbursement. Upon review, her manager Nick finds several personal expenses that should not be included, which is grounds for termination according to compliance standards. Nick discusses the situation with Margot, who then revises and resubmits the report. What is the most likely reason for Nick’s lenient response?

a) Company culture does not support disciplinary actions for noncompliance with the code of conduct.

b) Margot included those expenses by mistake.

c) Nick thinks termination is too harsh a punishment.

d) Margot and Nick have not been trained on compliance standards.

Title: Chapter 5 Test Bank, Question 58

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Enforcement of compliance violations can be challenging due to benign, thoughtless mistakes.

59) You and your fellow managers at XYZ Manufacturing are frustrated because employees rarely report workplace injuries and accidents. During a meeting to decide how to encourage compliance, one manager suggests offering monetary incentives for proper reporting. You disagree. What is your best and most convincing response?

a) Your organizational culture frowns on incentives.

b) Incentives are a long-term fix and you need change in the short term.

c) Incentives mask the reason for doing the right thing.

d) Incentives will reduce the amount of revenue the compliance department produces.

Title: Chapter 5 Test Bank, Question 59

Difficulty: Hard

Bloomcode: Evaluation

Min: 3

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Many people question the appropriateness of incentivizing employees: If we reward people for doing what is right, what does that say about our theory of human nature?

Question type: Short Answer

60) You are attending a meeting about how much money to invest in your company’s compliance department. What is your best response?

Title: Chapter 5 Test Bank, Question 60

Difficulty: Medium

Bloomcode: Analysis

Min: 5

AACSB: Ethics

Learning Objective: LO 5.3 Identify the important elements of a corporate ethics and compliance department and discuss the key responsibilities of those working in this area.

Section Reference: Sec: 5.3 Effective Compliance Programs: Processes and Responsibilities

Solution: Ethics and compliance functions do not produce revenue, so they are typically awarded bare-minimum budgets. This strategy is short-sighted. Money invested up front in these functions will help protect the company if it gets into trouble. By reducing the potential for fines, business loss, lawsuits, reputation damage, negative press, and decreased market share, investing in compliance often results in a very high long-term return on investment.

Question type: Multiple-Choice

61) The key compliance policy of an organization is referred to as a/an

a) code of conduct

b) organizational chart

c) mission statement

d) values map

Title: Chapter 5 Test Bank, Question 61

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: The key compliance policy of any public company is embodied in a code of conduct.

62) According to recent data, about how many organizations use a code of conduct accessible to all employees?

a) 26%

b) 49%

c) 62%

d) 94%

Title: Chapter 5 Test Bank, Question 62

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: Recent data indicate that more than 94% of organizations use a code of conduct accessible to all employees.

63) All of the following are names used in place of “code of conduct” EXCEPT

a) code of business ethics

b) employee principles

c) code of ethical conduct

d) standards of business conduct

Title: Chapter 5 Test Bank, Question 63

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: Codes use a variety of names, such as code of conduct, code of business ethics, standards of business conduct, and code of ethical conduct.

64) In addition to referring to expectations for employee behavior, a code of conduct also references

a) employee concerns

b) diversity issues

c) company values

d) government agencies

Title: Chapter 5 Test Bank, Question 64

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: A code of conduct articulates the values the organization wishes to foster.

65) Which of the following required a code of conduct for all publicly traded companies?

a) Sarbanes-Oxley Act

b) Consumer Financial Protection Bureau

c) Sherman Antitrust Act

d) Federal Trade Commission

Title: Chapter 5 Test Bank, Question 65

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: The Sarbanes-Oxley Act made it law for a public company to have a code of conduct.

66) What is the best similarity between a code of conduct and a mission statement?

a) the embodiment of a company’s culture

b) the inclusion of a company’s core values

c) the inclusion of tangible behaviors and actions

d) the focus on aspirations

Title: Chapter 5 Test Bank, Question 66

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: A code of conduct and a mission statement both include core values.

67) Which of the following best describes the difference between a code of conduct and a mission statement?

a) the impact on corporate culture

b) the formality with which it is written

c) the subject matter on which it focuses

d) the intended audience

Title: Chapter 5 Test Bank, Question 67

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: A code of conduct is about tangible behaviors and actions, while a mission statement focuses on what the organization sets out to do.

68) Which of the following statements would be more suited to a mission statement than a code of conduct?

a) Please refrain from interfering with the safe operation of vehicles.

b) Indecent exposure is forbidden.

c) Vulgar or threatening language will not be tolerated.

d) Accelerate the transition to sustainable energy.

Title: Chapter 5 Test Bank, Question 68

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: A code of conduct is about tangible behaviors and actions, while a mission statement focuses on what the organization sets out to do.

69) Which of the following statements would be more suited to a code of conduct than a mission statement?

a) Accept only consumable vendor gifts.

b) Offer customers the lowest possible prices.

c) Build a cost-effective payment system.

d) Spread ideas.

Title: Chapter 5 Test Bank, Question 69

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: A code of conduct is about tangible behaviors and actions, while a mission statement focuses on what the organization sets out to do—its value proposition for its stakeholders.

70) A code of conduct

a) is most appropriate for executive-level employees

b) is most appropriate for entry-level employees

c) summarizes company policies and expected employee behaviors

d) exhaustively covers all aspects of each company policy and expected employee behavior

Title: Chapter 5 Test Bank, Question 70

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: A code of conduct covers many company policies in a summary fashion.

71) Because a code of conduct references a multitude of stand-alone policies, it is often compared to a/an

a) blanket

b) inverted triangle

c) caboose

d) umbrella

Title: Chapter 5 Test Bank, Question 71

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: Because a code of conduct references a multitude of stand-alone policies, it is often called an umbrella document.

72) Oscar is reading his company’s code of conduct online and would like more information on the safeguarding of information. How is he most likely to find it?

a) via a hotline number included at the top

b) via an intranet link included in the text material

c) by meeting with a compliance department employee

d) by reading through his old employee onboarding materials

Title: Chapter 5 Test Bank, Question 72

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: Online codes of conduct often contain intranet links to the actual policies.

73) Phoebe is reading a printed copy of her company’s code of conduct and wants more information about countering corruption. How is she most likely to find it?

a) by reading the entire policy to which the printed material refers

b) by meeting with a compliance department employee

c) via a hotline number included at the top

d) via an intranet link included in the text material

Title: Chapter 5 Test Bank, Question 73

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: Printed codes of conduct often contain a statement of referral to the entire written policy.

74) XYZ is a privately held company with an exhaustive policy manual. Why would it want to create a code of conduct as well?

a) The Sarbanes-Oxley act requires it.

b) It reminds employees of the punishments attached to ethical violations.

c) It links a company’s mission and principles with conduct standards in an accessible and useful format.

d) Templates available on the Internet make creation quick and easy.

Title: Chapter 5 Test Bank, Question 74

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: A well-written code of conduct clarifies an organization’s mission and principles, linking them with standards of professional conduct.

75) Why have online codes of conduct become more visually appealing in recent years?

a) Templates for creation now are free and easy to use.

b) The more engaging the code, the more likely all employees will read it and comply.

c) The code is used to convey further the organizational culture.

d) Codes are increasingly being written by younger, tech-savvy employees.

Title: Chapter 5 Test Bank, Question 75

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: Engaging code documents are intended to be read, understood, and followed by employees with all levels of education and background.

76) Which of the following employees would be most likely to write the introduction to a new, online code of conduct?

a) Pranay, a newly employed HR representative

b) Queenie, a compliance manager

c) Rachael, the CEO’s executive assistant

d) Scott, the chief operating officer

Title: Chapter 5 Test Bank, Question 76

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: New online codes of conduct typically have inviting introductions by the CEO or another executive of the company.

77) Your company has just updated its code of conduct and placed it on the company intranet for all to view. How do you expect the document to be written?

a) using legal terms matching the regulatory environment

b) in a manner understandable by all employees

c) using business terms appropriate for the sector

d) at a twelfth-grade reading level

Title: Chapter 5 Test Bank, Question 77

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: Codes of conduct used to be dry and boring legal documents but are now engaging and written to be understood by employees of all backgrounds.

78) Which of the following accurately describes how a code of conduct can benefit an employee of the organization that issued it?

a) Employees can be more successful because they know how they are expected to act.

b) Employees can use the information to earn extra money and promotional incentives.

c) Employees can use the information to better choose among potential employers.

d) Employees can better their employment status by reporting ethical violations.

Title: Chapter 5 Test Bank, Question 78

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: By setting roles and expectations, employees know how to act at work and can be more successful in their roles.

79) Which of the following statements best describes the relationships among compliance departments, compliance program processes, and codes of conduct?

a) A code of conduct is a tool used by the compliance department to communicate expected employee behaviors. The department then uses compliance program processes to uphold the code.

b) A code of conduct is used to determine the need for an entire compliance department. Once established, the department uses compliance program processes to uphold the code.

c) Compliance program processes drive the creation of a code of conduct, which is governed by the compliance department.

d) A well-written code of conduct and proper compliance program processes eliminate the need for a compliance department.

Title: Chapter 5 Test Bank, Question 79

Difficulty: Hard

Bloomcode: Evaluation

Min: 2

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: A compliance department uses compliance program processes to uphold the expected employee behaviors described in the code of conduct.

Question type: Short Answer

80) Your start-up company is growing and you have recently hired 25 new employees. In a meeting with your business partners, you suggest creating a code of conduct. How would you describe it?

Title: Chapter 5 Test Bank, Question 80

Difficulty: Medium

Bloomcode: Analysis

Min: 5

AACSB: Ethics

Learning Objective: LO 5.4 Define the elements of a corporate code of conduct.

Section Reference: Sec: 5.4 Codes of Conduct

Solution: Codes of conduct used to be dry and boring legal documents, but are now engaging and written to be understood by employees of all backgrounds.

Solution: A code of conduct is an online or hard copy document that briefly describes the expectations your company has for its employees. It is written to be understood by every employee, regardless of education or background, and provides ways to further explore the policies and procedures it discusses in brief.

Question type: Multiple-Choice

81) In an organization with an update-to-date formal structure, who most likely manages compliance?

a) general counsel

b) chief financial officer

c) chief ethics and compliance officer

d) director of human resources

Title: Chapter 5 Test Bank, Question 81

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: Today, many ethics and compliance departments are led by a chief ethics and compliance officer (CECO).

82) In a traditional formal structure, corporate compliance would have been managed by a

a) chief legal officer

b) chief compliance officer

c) chief ethics and compliance officer

d) director of human resources

Title: Chapter 5 Test Bank, Question 82

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: Traditionally, the general counsel (GC) or chief legal officer (CLO) also managed compliance.

83) Today, all of the following would be considered C-suite executives EXCEPT

a) chief executive officer

b) director of human resources

c) chief ethics and compliance Officer

d) chief financial officer

Title: Chapter 5 Test Bank, Question 83

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: C-suite refers to executive-level managers within a company, denoted by the term chief.

84) Company A has a chief compliance officer who reports to the board of directors’ audit committee. A department of six employees report directly to the chief ethics and compliance officer. In Company A, the chief ethics and compliance officer and the six-employee department assume general responsibility for monitoring and enforcing compliance. This demonstrates

a) a misaligned compliance program

b) both a formally and informally structured compliance program

c) a formally structured compliance program

d) an informally structured compliance program

Title: Chapter 5 Test Bank, Question 84

Difficulty: Easy

Bloomcode: Comprehension

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: Effective ethics and compliance departments have formal and informal structural elements. Formal elements are noted by reporting responsibilities.

85) In the informal structure of compliance in an organization, who is responsible for compliance?

a) compliance department employees

b) the chief executive

c) the chief ethics and compliance officer

d) everyone

Title: Chapter 5 Test Bank, Question 85

Difficulty: Easy

Bloomcode: Knowledge

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: Effective ethics and compliance departments have formal and informal structural elements. In an informal structure, everyone is responsible for compliance.

86) ABC Company traditionally has tasked its general counsel with managing compliance, but now is creating a compliance department headed by a chief ethics and compliance officer. What is the most likely reason for this change?

a) The responsibilities for overseeing law and compliance are distinct and require dedicated leadership of their respective spheres of authority.

b) The legal department does not have the authority to enforce employee behaviors.

c) Employees without law degrees are interested in enforcing compliance.

d) Employees do not respect the authority of the general counsel but will defer to the combined efforts of dedicated compliance department employees.

Title: Chapter 5 Test Bank, Question 86

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: The head of the legal department traditionally managed compliance, but given the complexity and professionalism required to run a compliance program, organizations are forming compliance departments and naming chief ethics and compliance officers.

87) Tasha was recently named the chief ethics and compliance officer for her organization. In her first meeting with the chief executive officer, Tasha expresses her concerns about reporting to the company’s chief legal officer. What most likely concerns Tasha?

a) It will undermine her authority with company employees.

b) The objectives and obligations to the company for these two roles might conflict.

c) Working as a part of the legal department will burden her with extra work.

d) Employees will seek the chief legal officer’s opinion on compliance matters.

Title: Chapter 5 Test Bank, Question 87

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: When ensuring the company complies with multiple regulations, the chief ethics and compliance officer and chief legal officer may end up at odds.

88) Chief ethics and compliance officer Vance investigated allegations of tax fraud at his company and found facts to support them. Within days, the news media reports the story. Vance suggests that the chief executive officer admit these findings publicly and then describe the remedial and preventive steps the company is taking. He believes this will improve public opinion. Which of the following company employees is most likely to disagree?

a) director of human resources

b) chief financial officer

c) chief legal officer

d) public relations manager

Title: Chapter 5 Test Bank, Question 88

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: When ensuring the company complies with multiple regulations, the chief ethics and compliance officer and chief legal officer may end up at odds.

89) Which of the following accurately describes a leading practice for the placement and independence of a chief ethics and compliance officer (CECO)?

a) The CECO’s budget should be shared with the internal audit department.

b) The CECO should report to one or more management-level officials.

c) The CECO should be invited to attend pertinent executive-level meetings.

d) The CECO’s termination requires the approval of the human resources department.

Title: Chapter 5 Test Bank, Question 89

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: As a leading practice, the chief ethics and compliance officer should have explicit guarantees of being invited to high-level meetings where matters pertinent to compliance are discussed.

90) The board of directors at Company B has promoted Whitney to chief ethics and compliance officer. She will lead its newly created compliance department. According to leading practices, to whom should Whitney report?

a) the board of directors

b) the audit committee of the board of directors

c) the CEO

d) the human resources director

Title: Chapter 5 Test Bank, Question 90

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: Best practices suggests that a chief ethics and compliance officer have a functional reporting line directly to the audit committee of the board of directors rather than to the chief executive officer or other management-level official.

91) For various reasons, employees at all levels in Company Z have lost respect for and faith in chief ethics and compliance officer Xenon. According to leading practices, who can terminate Xenon’s employment with Company Z?

a) general counsel

b) director of accounting

c) human resources

d) audit committee

Title: Chapter 5 Test Bank, Question 91

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: Best practices suggests that a chief ethics and compliance officer have protections of tenure in office; therefore, most companies require that the CECO can only be fired by the audit committee or agreement from the full board of directors.

92) Yvette tells you all about her new job as the chief ethics and compliance officer, which requires monitoring, training, and communicating with all levels of employees. You remind Yvette of another responsibility, which is to

a) ensure compliance with government regulations

b) review and sign off on accounting audits

c) promote a positive image for the company

d) create a company mission statement focused on ethics

Title: Chapter 5 Test Bank, Question 92

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: The chief ethics and compliance officer and team must work to ensure compliance with a vast array of regulations, in addition to activities that include monitoring, training, and communicating with all levels of employees.

93) What does the “informal structure” of corporate compliance mean?

a) The corporation has no formal organizational reporting structure.

b) Everyone in the organization is responsible for creating a compliant and ethical corporation.

c) The chief ethics and compliance officer reports to each C-suite executive.

d) There are no standardized incentives or punishments for compliance.

Title: Chapter 5 Test Bank, Question 93

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: The reality is that it truly takes the combined efforts of every employee to make a compliant and ethical corporation.

94) By incorporating both a formal and informal element to its compliance program, a company

a) often creates confusing reporting relationships

b) decreases the likelihood that employees will report violations

c) links ethics and compliance together and promotes conscientious decision making and accountability among all employees

d) creates the need for a chief ethics and compliance officer who reports directly to the audit committee of the board of directors

Title: Chapter 5 Test Bank, Question 94

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: It takes everyone following formal rules and informal norms of conduct to create an ethical and compliant organization.

95) The “informal structure” of an organization is most similar to

a) corporate hierarchies with accountability based on formal job titles

b) codes of conduct detailing a company’s core principles

c) government regulations that outline required ethical actions

d) shared norms for behavior and reciprocal accountability regardless of formal job titles

Title: Chapter 5 Test Bank, Question 95

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: In an informal structure, employees who follow established norms of behavior help create an ethical and compliant organization.

96) Company C has a policy stating that employees are forbidden from commenting about corporate matters to the press or on social media. On Twitter, employee Zack jokes with his friends about what his chief executive officer may or may not have known about a sexual harassment scandal at rival Company X. Zack’s actions will most likely affect

a) Zack alone

b) Zack and the chief executive officer of Company C only

c) current employees and management of Company X only

d) current employees, future employees, customers, and competitors of Companies C and X

Title: Chapter 5 Test Bank, Question 96

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: One person’s noncompliant actions can affect an entire industry of people.

97) In its mission statement, Company K claims to value integrity and honesty. Yet while a few company employees openly brag about cheating on their expense reports, management has ignored the issue. What is the most likely result?

a) The company will adjust its mission statement.

b) The organizational culture will be more accepting of dishonest work behaviors.

c) The chief ethics and compliance officer will ensure that the employees and the offending managers are terminated.

d) The chief ethics and compliance officer will discover the misdeeds when reviewing company financials.

Title: Chapter 5 Test Bank, Question 97

Difficulty: Medium

Bloomcode: Application

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: It only takes one employee’s dishonorable actions to turn a company in a different direction.

98) What is the most likely reason for an employee to challenge corporate policies and standards?

a) The employee does not understand the need for compliance.

b) The employee does not value the compliance incentives.

c) The employee’s values do not match those of the corporation.

d) The employee lacks the ability to understand the rules.

Title: Chapter 5 Test Bank, Question 98

Difficulty: Medium

Bloomcode: Analysis

Min: 1

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: Part of the challenge in regulating behavior is that each individual employee has his or her own set of values. Yet, the company is asking that employees accept and live by the corporation’s values.

99) XYZ Company has created a compliance department and named a chief ethics and compliance officer to lead it. Based on your reading, which of the following will make XYZ’s compliance program most effective?

a) an organizational culture that supports its compliance efforts

b) relaxed government regulation

c) an understanding of the federal sentencing guidelines for organizations

d) incentives and disciplinary measures

Title: Chapter 5 Test Bank, Question 99

Difficulty: Hard

Bloomcode: Evaluation

Min: 2

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: An effective compliance program has two elements: a formal program and a culture that supports those efforts.

100) Why are formal and informal structural elements important to compliance programs?

Title: Chapter 5 Test Bank, Question 100

Difficulty: Medium

Bloomcode: Analysis

Min: 5

AACSB: Ethics

Learning Objective: LO 5.5 Describe the role of a chief ethics and compliance officer in a typical organization.

Section Reference: Sec: 5.5 The Structure of Ethics and Compliance Departments

Solution: The formal structure of a compliance program involves an ethics and compliance department, headed by a chief ethics and compliance officer, reporting to an audit committee of the board of directors. This department is charged with enforcing the formal rules of the organization and of the relevant government agencies.

The informal structure of a compliance program involves everyone in the organization upholding the company’s principles through conscientious decision making and reciprocal accountability. Here, employee norms of behavior help create an organizational culture that advances ethics and compliance.