Cengage Advantage Books Business Law Text And Cases The First Course 13th Edition by Roger LeRoy Miller – Test Bank

 

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Sample Questions Are Posted Below

 

Chapter 5

 

 

Business Ethics

 

 

 

TRUE/FALSE QUESTIONS

 

B1.      Ethics is as well defined as the law.

 

answer:     F                               PAGES:   Introduction

BUSPROG: Ethics                                    AICPA: BB-Critical Thinking

 

B2.      Unless a corporation violates a law, its actions do not raise questions about the role of corporations and the effect of corporate ethics on profit.

 

            ANSWER:     F                               PAGES:   Introduction

BUSPROG: Ethics                                    AICPA: BB-Risk Analysis

 

B3.      Originally, the only goal or duty of a corporation was to maximize profits.

 

answer:     T                               PAGES:   Section 1

BUSPROG: Analytic                                AICPA: BB-Critical Thinking

 

B4.      An overemphasis on long-run profit maximization is the most common reason that ethical problems occur in business.

 

ANSWER:     F                               PAGES:   Section 1

BUSPROG: Analytic                                AICPA: BB-Critical Thinking

 

B5.      The study of business ethics is concerned with the purposes of a business and how that business achieves those purposes.

 

ANSWER:     T                               PAGES:   Section 1

BUSPROG: Ethics                                    AICPA: BB-Critical Thinking

 

B6.      An action may be legal but not ethical.

 

ANSWER:     T                               PAGES:   Section 1

BUSPROG: Analytic                                AICPA: BB-Critical Thinking

 

B7.      Acting in good faith gives a business firm a better chance of defending its actions in court.

 

answer:     T                               PAGES:   Section 1

BUSPROG: Analytic                                AICPA: BB-Legal

 

B8.      Company codes are not law.

 

ANSWER:     T                               PAGES:   Section 1

BUSPROG: Ethics                                    AICPA: BB-Risk Analysis

 

B9.      Ethics is based more on research than judgment.

 

answer:     F                               PAGES:   Section 1

BUSPROG: Analytic                                AICPA: BB-Legal

 

B10.    Compared to business ethics, employee ethics is not an important issue.

 

ANSWER:     F                               PAGES:   Section 2

BUSPROG: Ethics                                    AICPA: BB-Critical Thinking

 

B11.    Religious rules generally are absolute with respect to the behavior of their adherents.

 

answer:     T                               PAGES:   Section 3

BUSPROG: Ethics                                    AICPA: BB-Critical Thinking

 

B12.    Under the principle of rights theory, one person’s principles are as “right” as another’s.

 

ANSWER:     F                               PAGES:   Section 3

BUSPROG: Ethics                                    AICPA: BB-Critical Thinking

 

 

 

B13.    According to utilitarianism, it does not matter how many people suffer a negative effect from an act.

 

answer:     F                               PAGES:   Section 3

BUSPROG: Ethics                                    AICPA: BB-Critical Thinking

 

B14.    The concept of corporate social responsibility is imposed on corporations by law.

 

answer:     f                               PAGES:   Section 3

BUSPROG: Ethics                                    AICPA: BB-Critical Thinking

 

B15.    Corporations can demonstrate corporate social responsibility by promoting goals that society deems worthwhile.

 

answer:     T                               PAGES:   Section 3

BUSPROG: Ethics                                    AICPA: BB-Critical Thinking

 

B16.    It is always clear what is ethical in a given situation.

 

answer:     F                               PAGES:   Section 4

BUSPROG: Ethics                                    AICPA: BB-Critical Thinking

 

B17.    Managers must apply the same standards to themselves as they do to the company’s employees.

 

ANSWER:     T                               PAGES:   Section 4

BUSPROG: Ethics                                    AICPA: BB-Critical Thinking

 

B18.    The Sarbanes-Oxley Act requires companies to set up confidential systems so that employees and others can “raise red flags” about suspected illegal or unethical auditing and accounting practices.

 

answer:     T                               PAGES:   Section 4

BUSPROG: Analytic                                AICPA: BB-Risk Analysis

 

B19.    Given today’s global communications network, most companies can assume that their actions in other nations will go unnoticed.

 

ANSWER:     F                               PAGES:   Section 5

BUSPROG: Diversity                               AICPA: BB-Critical Thinking

 

B20.    Some provisions of U.S. bribery laws are directed toward accountants.

 

answer:     T                               PAGES:   Section 5

BUSPROG: Analytic                                AICPA: BB-Critical Thinking

 

 

MULTIPLE-CHOICE questions

 

B1.      In studying the business law, students also review ethics in a business context. Ethics includes the study of what constitutes

 

1. right or wrong behavior.
2. financially rewarding behavior.
3. legal behavior.
4. religious behavior.

 

answer:     A                              PAGES:   Section 1

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B2.      In making business decisions, Ridgeline Utility Service Company and other corporations should strive to be “good citizens” by evaluating

 

1. the legal implications of each decision.
2. the public relations impact.
3. the safety risks for consumers and employees.
4. all of the choices.

 

ANSWER:     D                              PAGES:   Section 1

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B3.      Corporate Security Company provides other firms with security services. Questions of what is ethical involve the extent to which Corporate Security has

 

1. a legal duty beyond those duties mandated by ethics.
2. an ethical duty beyond those duties mandated by law.
3. any duty beyond those mandated by both ethics and the law.
4. any duty when it is uncertain whether a legal duty exists.

 

answer:     B                              PAGES:   Section 1

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B4.      Desdemona works for eInnovation, Inc. Her job includes putting “spin” on the firm’s successes and failures. In this context, ethics has to do with how businesspersons, in making their decisions, apply

 

1. legal doctrine.
2. moral and ethical principles.
3. corporate guidelines.
4. financial priorities.

 

answer:     B                              PAGES:   Section 1

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B5.      Green Hybrid Auto Corporation pays its executives an excessive amount relative to what lower-level employees at the company receive and to what executives at competitive companies are paid. Green Hybrid’s pay scale is most likely to be challenged as

 

1. illegal.
2. unprofitable.
3. unconscionable.
4. unethical.

 

answer:     D                              PAGES:   Section 1

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B6.      Ronelle, the human resources director for Small Business Solutions, Inc., at­tempts to comply with the law in dealing with applicants and employ­ees. One of the challenges Ronelle faces is that the legality of an action is

 

1. always clear.
2. never clear.
3. only sometimes clear.
4. usually clear.

 

ANSWER:     C                              PAGES:   Section 1

                  BUSPROG: Reflective                             AICPA: BB-Legal

 

 

 

B7.      Brewster, the chief executive officer of Cog & Gear Lubricants Corporation, wants to en­sure that Cog & Gear’s activities are legal and ethical. The best course for Brewster and Cog & Gear is to act

 

1. in good faith.
2. out of ignorance of the law.
3. with regard for the firm’s shareholders only.
4. in their own self-interest.

 

answer:     A                              PAGES:   Section 1

                  BUSPROG: Reflective                             AICPA: BB-Decision Modeling

 

B8.      Situations in which employers face ethical issues with respect to social media platforms include

 

1. conducting an Internet search to discover what a job candidate has posted.
2. judging a job candidate based on what he or she does outside the work environment.
3. rejecting a job candidate if he or she does not participate in any social media.
4. all of the choices.

 

answer:     D                              PAGES:   Section 2

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B9.      Ryland, an officer for Sports Park, Inc., attempts to apply a duty-based approach to ethical reasoning in conflicts that occur on the job. This approach is based on the idea that a person must

 

1. achieve the greatest good for the most people.
2. avoid unethical behavior regardless of the consequences.
3. conform to society’s ethical standards.
4. place his or her employer’s interest first.

 

answer:     B                              PAGES:   Section 3

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

 

 

B10.    Dyan, the owner of Expert Restoration Services, Inc., adheres to the “principle of rights” theory. Under this theory, a key factor in determining whether a business decision is ethical is how that decision

 

1. compares to religious principles.
2. affects the rights of others.
3. effects consequences that would follow if everyone in society acted the same way.
4. supports the right to make a profit.

 

ANSWER:     B                              PAGES:   Section 3

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B11.    Steaks n’ Fries Restaurant Company’s decision makers view a particular risk in the consumption of Steaks n’ Fries’ products as open and obvious. Continuing to market the products without explicitly telling consumers of the risk could be justified from a perspective of

 

1. duty-based ethics.
2. corporate social responsibility.
3. religious ethical principles.
4. outcome-based ethics.

 

answer:     D                              PAGES:   Section 3

                  BUSPROG: Reflective                             AICPA: BB-Risk Analysis

 

B12.    Ross, a research manager for Stock & Bond Investments, Inc., adheres to utilitarian ethics. Ross will determine that an action is morally cor­rect when it produces the greatest good for

 

1. Ross.
2. Stock & Bond Investments.
3. the fewest people.
4. the most people.

 

answer:     D                              PAGES:   Section 3

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

 

 

B13.    Palette Paints, Inc. expends funds and takes steps to ensure that all employees are safe on the job, that all products are safe for consumers, and that the environmental impact of the corporation is minimal. Palette Paints appears to believe in the concept of

 

1. the moral minimum.
2. corporate social responsibility.
3. “grey areas” in the law.
4. government oversight.

 

answer:     B                              PAGES:   Section 3

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B14.    Digital Analytics, Inc., considers the impact of its corporate decisions on various groups and often acts in the interest of a group that has a greater stake in a decision than Digital’s shareholders. This approach is most likely to attract potential employees who are

 

1. investors focused on short-term profits.
2. older professionals.
3. information technology specialists.
4. recent college graduates.

 

answer:     D                              PAGES:   Section 3

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B15.    Comfort Foods Corporation makes and markets its products nationwide. To be considered socially responsible when making a business decision, Comfort Foods must take into account the needs of

 

1. its customers and the community only.
2. its employees and owners only.
3. its employees, owners, customers, creditors, suppliers, and the community.
4. no one.

 

answer:     C                              PAGES:   Section 3

                  BUSPROG: Reflective                             AICPA: BB-Risk Analysis

 

 

 

B16.    GetTogether, A Social Media Company encourages its managers to behave ethically, reasoning that lower-level employees will take their cues from management. One of the most important ways to create and maintain an ethical workplace is for GetTogether’s management to

 

1. demonstrate a commitment to ethical decision making.
2. discreetly engage in unethical or illegal acts.
3. look the other way when an employee engages in an unethical act.
4. direct employees to “do as we say, not as we do.”

 

ANSWER:     A                              PAGES:   Section 4

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B17.    Ricardo suspects his supervisor Simone of unethical accounting practices. But Ricardo does not want to report Simone if she will find out who reported her and fire Ricardo. An important feature of online reporting systems like EthicsPoint is that an employee reporting unethical behavior

 

1. can do so anonymously.
2. is financially compensated if he or she is fired as a result of a report.
3. must fully identify themselves when making a report.
4. must have additional employee support to make a report.

 

answer:     A                              PAGES:   Section 4

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B18.    Lowell runs Medical Debt Collection Agency. He collects debts by misrepresenting the facts and pretending to be licensed to perform various occupations. Lowell’s conduct most likely warrants

 

1. an admonition for unethical behavior but no other sanctions.
2. an injunction plus other sanctions.
3. no sanctions but no praise.
4. praise for the aggressive approach to collecting debts.

 

answer:     B                              PAGES:   Section 4

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B19.    Discount Mart Corporation contracts with companies in developing nations to produce goods, because the wage rates in those nations are significantly lower than those in the United States. Discount Mart takes steps to avoid bad publicity by monitoring its suppliers’ workplaces to make sure that the employees are not mistreated. Discount Mart is

 

1. acting unethically in its pursuit of good publicity.
2. acting unethically in its pursuit of profits.
3. acting unethically by monitoring its suppliers.
4. not acting unethically.

 

ANSWER:     D                              PAGES:   Section 5

                  BUSPROG: Reflective                             AICPA: BB-Critical Thinking

 

B20.    Petro Refining Corporation makes payments to potential customers, suppliers, and others with whom they might do business, including foreign private companies and the representatives of foreign labor organizations.  If Petro knows that these payments will be passed on to a foreign government, this practice is

 

1. illegal if the payments violate the Foreign Corrupt Practices Act.
2. legal if a third party acts as a “go-between.”
3. legal if private parties are involved on both sides of the deal.
4. legal if the payments are intended to facilitate business.

 

ANSWER:     A                              PAGES:   Section 5

                  BUSPROG: Ethics                                    AICPA: BB-Critical Thinking

 

 

ESSAY questions

 

B1.      Precision Tool Corporation sells a product that is capable of seriously injuring consumers who misuse it in a foreseeable way, even though the label warns against the misuse. Does the firm have an ethical duty to take this product off the market? What con­flicts might arise if the firm stops selling this product?

 

ANSWER:     Ethical behavior can sometimes generate sufficient goodwill to warrant practicing it out of a desire for increased profits. By the same to­ken, unethical behav­ior can sometimes generate enough bad publicity to warrant avoiding it out of the same desire. A business firm’s activities that are perceived as ethical and receive wide publicity can benefit the firm’s owners in the short run and even in the long run if the firm’s enhanced public image continues to attract more consumers to its products. There is nothing unethical about making a profit. It is the behavior that generates the profit that can be questionable. Business ethics thus has a practical element. A business firm should act in its best interest. A firm inter­ested in profits should also be interested in the public’s opinion. Of course, it is not a company’s fault when consumers mis­use its product despite the warning. If continuing to sell a product is not a strict violation of the law, stopping its sale would likely re­duce profits. This could affect the firm’s owners, employees, and others. But suspending sales could re­duce injuries, and it could lead to increased profits from the sales of other products, if the suspension stops negative publicity. When a busi­ness en­tity decides to re­spond to what it sees as a moral or ethical obliga­tion by removing a product from the market, an ethi­cal conflict is raised be­tween the firm and its employees and between the firm and its share­holders. This conflict arises directly out of the impact that the decision has on the firm’s profits. If meeting this perceived obligation in­creases the firm’s profitability, then all parties “win,” and the dilemma would be easily re­solved in favor of “doing the right thing.”

 

PAGES:         Section 1

                  BUSPROG: Reflective                             AICPA: BB-Decision Modeling

 

B2.      Carney & Deb, Accountants, perform a variety of tasks for their clients—financial statements and tax returns, for example. To accomplish these tasks, Carney & Deb collects their clients’ personal and financial information. Carney & Deb can store the personal and financial information of its clients on any electronic device, including a smartphone, a tablet, a flash drive, a laptop, and a copier. When Carney & Deb upgrades its storage media, the information is transferred between devices.  Does Carney & Deb have an ethical obligation to its clients with respect to this information? If so, what are the ethics in the situation?

 

ANSWER:     Yes, Carney & Deb, the accounting firm in this question, have an ethical obligation to its clients with respect to their personal and financial information.

Ethics is the study of what constitutes right and wrong behavior, focusing on morality and the way in which ethical principles are derived or the way in which such principles apply to conduct in daily life. Sometimes the issues that arise concern fairness, justice, and “the right thing to do.”

To answer the question of the accountants’ ethical obligation, it should be noted that the confidentiality of their clients’ sensitive personal and business information is at stake. The accountants have an ethical duty to ensure that reasonable security precautions are taken to preserve this confidentiality and protect this information. In the first instance, the accountants need to understand where they are putting the information, assess what the risks are of that location, and consider whether or not it is appropriate to put the data there. For example, putting sensitive information on an unencrypted flash drive would be a bad idea. In the second instance, client confidentiality needs to be maintained when a storage device is disposed of. The device should be sanitized, or wiped clean of sensitive data, before the device is discarded.

 

PAGES:         Section 1

                  BUSPROG: Reflective                             AICPA: BB-Decision Modeling