Q&A Hero

Q: In the Bausch & Lomb case, which of the following was not a technique of the sales force used to meet their numbers? a. Red ball day b. Target numbers c. Selling product in gray markets d. All of the above were sales force tactics

Q: In the Bank of America/Merrill Lynch acquisition case, a federal judge blocked further action by the company:a. Until it could establish that its acquisition did not violate antitrust laws.b. Until it settled any state charges brought against Bank of America.c. Until Mr. Lewis resigned.d. Until there was further information regarding waiver of the attorney/client privilege.

Q: The SEC and Bank of America reached a settlement over charges the SEC brought related to Bank of America's acquisition of Merrill Lynch:a. That resulted in no fine to Bank of America.b. That resulted in a $150 million fine paid by Bank of America.c. That resulted in the dissolution of Bank of America.d. That required Bank of America to cancel its acquisition of Merrill Lynch.

Q: Which of the following was the focus of the Bank of America and Mayopoulos' dust-up during the Merrill Lynch acquisition?a. An accounting practice at Bank of Americab. The termination of outside legal counselc. The disclosure of the extent of losses at Merrilld. Ken Lewis's desire to retire

Q: Following his meeting with the board of Bank of America, general counsel Timothy Mayopoulos:a. Was able to modify the company's public disclosures.b. Was able to go to the SEC.c. Was fired.d. Was given a promotion.

Q: In the Bank of America case, former general counsel Timothy Mayopoulos was meeting with the Board of Bank of America:a. Because SOX requires that counsel report up to the board.b. Because SOX prohibited him from meeting with the CFO.c. Because outside counsel was not permitted to meet with the board.d. Because the SEC required him to do so.

Q: Which of the following is prohibited conduct with respect to stock options?a. Backdatingb. Backdating with limitationsc. Springloadingd. All of the above

Q: What defense did Jerome Kerviel, Joseph Jett, and Nick Leeson share? a. That their managers were aware of their trades and how they were making money b. That they had not been properly trained c. That they were ordered to do what they did d. That they were not subject to securities laws

Q: Jerome Kerviel, Joseph Jett, and Nick Leeson had what in common? a. They all went to jail b. They all bankrupted or nearly bankrupted their companies c. They all embezzled from their companies d. None of the above

Q: "What were they smoking?", was a Fortune headline that referred to:a. Bear Stearns.b. Goldman.c. J.P. Morgan Chase.d. All of the above

Q: An employee who falsified sales figures at his company explained, "I felt I had no choice." The employee's conduct is best explained by:a. A lack of ethics training.b. The company culture.c. The failure to screen him out.d. None of the above

Q: A bad barrel refers to:a. A company culture that directs employees to unethical conduct.b. A bad management team.c. Government.d. None of the above

Q: Which of the following does Saul Gellerman believe is ineffective for preventing company ethical lapses? a. Ethics training b. Screening out unethical employees c. Both a and b d. None of the above

Q: What is managerial ambivalence? a. When a manager is confused about ethics b. When a manager sends inconsistent signals on ethics c. A manager who does not believe in incentive plans for meeting numbers d. A manager who does not see the bottom line as most important

Q: Andrew Fastow is an example of which category of moral development?a. Amoral technicianb. Moral sycophantc. Inherently morald. Moral chameleon

Q: Mother Teresa is an example of which category of moral development?a. Morally superiorb. Moral sycophantc. Inherently morald. Moral postpone

Q: A county commissioner who makes decisions on construction permits and zoning exceptions and approaches a hotel builder to lease space for her clothing store in his new hotel while his application for zoning and construction are pending has done nothing unethical.

Q: There is no difference between taking an LSAT review course and using a law school application consultant.

Q: The Diamond Walnuts case involved shifting earnings and expenses across years.

Q: There have been 35 indictments of teachers and administrators since the discovery that test scores were manipulated.

Q: Executive compensation increases are often awarded despite stock performance.

Q: It is difficult for shareholders to have a voice in executive compensation.

Q: Shareholders have the eventual say in executive compensation.

Q: Home Depot's board refused to terminate CEO Nardelli despite shareholder demands.

Q: Home Depot changed its annual meeting procedures in response to shareholders.

Q: The fact that Dennis Kozlowski was not convicted in his first jury trial shows that he did nothing unethical.

Q: FASB 125 has been eliminated because of Enron and its SPEs.

Q: Acquisition accounting gave Tyco officers flexibility in reporting earnings.

Q: Mark-to-market accounting gave corporate officers discretion in reporting earnings.

Q: Andrew Fastow's role as an officer of an SPE was not a conflict of interest.

Q: Loans to corporate executives are now illegal under Sarbanes-Oxley.

Q: WorldCom's accounting issues involved capitalization of ordinary expenses.

Q: If bankruptcy declaration is legal, then it is ethical.

Q: Some recording artists use bankruptcy as a means for avoiding contract obligations.

Q: Bankruptcies are on the increase.

Q: Legal declaration of bankruptcy requires only a statement that debts exist.

Q: Autocratic leaders do not contribute to false financial reporting.

Q: Materiality is generally defined by accountants as a percentage range.

Q: Enron used "mark to market" accounting.

Q: Booking sales in advance of actual contracts is not a violation of accounting rules.

Q: Earnings management is the use of accounting techniques to smooth earnings.

Q: With respect to #68, a customer who agreed to help you with your shifting would not be engaged in unethical behavior.

Q: With respect to #68, suppose you learn that other divisions within the company have always engaged in this form of earnings shifting. The practice is still an ethical breach.

Q: Your unit has not been able to meet its sales goals for your quarter. Your assistant has suggested that you ship out enough goods to meet the quarterly goals by simply overshipping quantities on customer orders. When the goods are returned, you would simply take the returns in the next quarter after you have had more of an opportunity to meet goals. Your assistant's suggestion is a breach of ethics.

Q: The failure of an auditor to disclose the possible obsolescence of a firm's major product is a judgment call and not an ethical issue.

Q: Removing records from the workplace to prevent access by regulators on a pre-announced inspection is both illegal and unethical.

Q: Royal Dutch's share price was not affected by its restatement of its reserves.

Q: No officers at Royal Dutch were aware of the reserves overstatements.

Q: Royal Dutch's restatement of its reserves did not affect its revenues.

Q: Royal Dutch had overstated its reserves by 22%.

Q: Explain how Ms. Winters began her habit of taking snack food while working at Walmart.

Q: Mr. Scrushy was very generous in giving funds to his home town and charitable causes.

Q: Compare the behaviors of William Aramony with those of Dennis Kozlowski. Are there signals these CEOs send with their behaviors?

Q: No HealthSouth board members did business with Scrushy or HealthSouth.

Q: Compare the New Era and Baptist Foundation cases. What common threads do you see?

Q: The HealthSouth board knew very little about the creative accounting at HealthSouth.

Q: List the types of ethical violations the Department of Interior uncovered in its MMS division?

Q: The cost of options must be accounted for in the company's revenue statements.

Q: Describe John Rigas, the former CEO of Adelphia.

Q: Options can be priced at the time of the grant at whatever price the board establishes.

Q: "Each time I see Jeff [Greenberg] I feel like I have a bull's eye on my forehead," was the statement of a CEO's direct report. Discuss how the culture at MMC was similar to the cultures of HealthSouth, Tyco, MiniScribe, Bausch & Lomb, and others.

Q: The U.S. Supreme Court reversal of the Andersen conviction means that there were no ethical missteps by Andersen.

Q: Make a list of the factors common to the cultures of Enron, WorldCom and Tyco.

Q: David Duncan was indicted on obstruction charges and convicted.

Q: Discuss the dangers in earnings management.

Q: The board waived Enron ethics code provisions at least three times.

Q: Develop a chart on the tone-at-the-top factors you see in HealthSouth and the other companies.

Q: Attorneys who represent publicly traded companies need not report any financial fraud to boards because of attorney-client privilege.

Q: Richard Scrushy said, "Shine a light on someone " it's funny how numbers improve." How does this Scrushy philosophy compare with those of other CEOs in the cases you have studied?

Q: Destruction of documents related to the financial reports of a company carries a 20-year penalty.

Q: "Per Dave " NO more shredding. We have been officially served for our documents." " was the e-mail David Duncan's secretary sent to Andersen employees. Discuss the ethical standard that was being followed during the shredding.

Q: Under Sarbanes-Oxley, audit committees of publicly held companies' boards need not be made up of independent members so long as the majority of the board is independent.

Q: When Enron first proposed its off-the-book entities, David Duncan clearly had concerns. Discuss what he did about those concerns.

Q: Under Sarbanes-Oxley, a company must file an 8-K if it has waived its code of ethics for a financial reporting officer.

Q: List the factors that determine the tone at the top.

Q: Sarbanes-Oxley requires all covered companies to have a code of ethics for financial officers.

Q: Compare Ed Cerullo as a boss to Dennis Kozlowski. Then discuss the culture at Kidder and compare it with the cultures at Tyco, WorldCom, MiniScribe, Bausch and Lomb, and Enron.

Q: The trend in international markets is away from regulating insider trading.

Q: Dennis Kozlowski said, "Money is the only way to keep score." Is this Mr. Kozlowski's credo? Discuss how this view might interfere with his ability to analyze ethical issues.

Q: If the earnings of a company are revealed to be false, the officers who earned bonuses based on these earnings must forfeit them.