Chapter_01_5e_SM - Chapter 1 Governance Ethics and...

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Chapter 1 Governance, Ethics, and Managerial Decision Making Multiple Choice 1. (LO 1 – Corporate governance) Answer: D 2. (LO 1 – Corporate governance) Answer: D 3. (LO 2 – Internal control and COSO) Answer: D 4. (LO 2 – Internal control and control environment) Answer: B 5. (LO 2 – Internal control and control activities) Answer: C 6. (LO 3 – Ethics) Answer: D 7. (LO 3 – Ethics) Answer: B 8. (LO 4 – Stakeholder analysis) Answer: D 9. (LO 4 – Responsibility to stakeholders) Answer: C 10. (LO 5 – Codes of ethics) Answer: A 1 - 1
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Solutions Manual 11. (LO 6 – Responses to ethics violations) Answer: D 12. (LO 7 – Fraud) Answer: B 13. (LO 7 – Fraud) Answer: B 14. (LO 8 – The fraud triangle) Answer: D 15. (LO 8 – The fraud triangle) Answer: B Concept Questions 16. (LO 1 – Forces that shape corporate governance) Student responses will vary. 17. (LO 1 – Corporate governance) Students should not agree with this statement. One set of corporate governance processes will not be appropriate for all companies. A company should tailor governance processes to fit the particular circumstances. 18. (LO 2 – Internal control and control environment) The control environment captures the attitude about internal control held by a company’s owners and managers. The control environment is important because it indicates how owners and management are likely to address control-related matters and overall operational decisions. 19. (LO 2 – General authorization vs. specific authorization and Internal control) General authorizations occur for recurring and routine transactions such as inventory reordering, establishing credit limits for new customers and so forth. Specific authorizations occur on a case-by-case basis as circumstances warrant. Examples might include the purchase of a large and expensive production machine or the granting of a special discount to a customer. 1 - 2
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Chapter 1: Governance, Ethics, and Managerial Decision Making 20. (LO 1 – Establishing an ethical business environment) Failing to establish an ethical work environment may lead management and/or employees to act in ways that do not coincide with the goals and objectives of the organization, including fraudulent financial reporting or misappropriation of assets. Also, the lack of an ethical business environment may lead to harsher penalties under federal sentencing guidelines. 21. (LO 3 – Forces that shape corporate governance) Student responses will vary. 22. (LO 4 – Stakeholder analysis) A stakeholder analysis approach enables a company to identify important stakeholders, understand their needs and the company’s responsibilities to those stakeholders, and carefully evaluate decision alternatives while considering social, ethical, legal and economic matters. 23.
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Chapter_01_5e_SM - Chapter 1 Governance Ethics and...

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