Question 1:

2E1-AT03

Joseph Krohn, Chairman of Quantum Financing Co., has directed Human Resources to
implement ongoing ethics training. Krohn considers this training critically important as it:
lessens the penalty if the corporation is convicted of improper conduct.
only applies to lower level employees most likely to behave unethically.
will guarantee improper conduct will not occur.
absolves the corporation from prosecution for improper conduct.

Section 406 of the 2002 Sarbanes/Oxley Act requires publicly held companies to disclose
whether the company has a code of ethics for is officers and senior executives. A benefit of
such a code is the possible lessening of penalties it the company is convicted of improper
conduct.
Question 2:
2E1-AT01

The Foreign Corrupt Practices Act is a U.S. law that prohibits U.S. companies from:
making "corrupt" payments to foreign officials for the purpose of obtaining or retaining business.
exporting to countries that do not comply with US human rights regulations.
selling products for corrupt, unethical, or illegal purposes.
making products in overseas markets that do not comply with the same safety and environmental
regulations as for domestically produced products.

The 1977 Foreign Corrupt Practices Act is a U.S. law that forbids U.S. companies from
obtaining contracts or business through the payment of bribes.
Question 3:
2E1-CQ03

Julie is the Senior Management Accountant for Hazelton Manufacturing; a multi-national

telecommunications company. In an effort to expand operations overseas, Hazelton
encourages senior management to offer payment to foreign officials to win business. These
payments are classified as normal commission expenses by the accounting department. Julie
recently questioned whether these payments should be classified as commission expense
since they appear to be bribes to foreign officials. When Julie discussed the situation with the
Chief Financial Officer, he stated these payments were not illegal and were expected within
these foreign countries.
When all employees are hired, they are required to sign the company code of conduct. In
addition, the company provides annual ethics training to all employees and each employee is
evaluated based on compliance with operational goals and ethical expectations. The company
provides an anonymous whistleblower hotline for employees to report concerns to

management. Julie believes that the company she works for has an ethical organizational
culture.
Identify a method of monitoring ethical compliance commonly referred to as the human
performance feedback loop utilized in the Hazelton Manufacturing case.
All employees are required to read and sign a company code of ethics.
A whistleblowing hotline is provided to report ethics concerns.
Employees are evaluated on compliance with operational goals and ethical expectations.
Employees complete annual ethics training.

Methods to monitor ethical compliance include human performance feedback loops and survey
tools. Annual employee reviews should evaluate the individual's compliance with ethical
expectations, along with operational goals.
Question 4:
2E1-LS03

Identify which items below may communicate to employees a corporate responsibility for
ethical conduct:
I. Defining organizational values.
II. Leading by example.
III. Communicating legal acts.
IV. Improving ethical compliance.

I, II, and III, only.

I, II and IV, only.
II and IV, only.
I and III, only.

There are five primary categories for management to focus on in order to effectively maintain
the desired ethical atmosphere. These can communicate a corporate responsibility for ethical
conduct and are; defining values, leadership by example, ethics and internal controls, practical
application, and measuring and improving ethical compliance.
Question 5:
2E1-LS01

IMA's Statement of Management Accounting "Values and Ethics: From Inception to Practice"
identifies that ongoing training should include all of the following except:
How ethics affects specific jobs and processes.

Requiring each employee to sign the code of conduct.

What action is taken when an ethical issue is identified.
Penalties when noncompliance with the code of ethics is proven.

The SMA specifies that ongoing training should include the following expectations:
General employee behavior and personal conduct.
How ethics are built into work management methods.
How ethics affects specific jobs, processes, activities, and relationships.
How the organization monitors compliance with code.
What routes are open to employees who have compliance issues.
What action is taken when a complaint or issue is identified.
The actions and penalties once noncompliance is proven.
Question 6:
2E1-CQ01

Julie is the Senior Management Accountant for Hazelton Manufacturing; a multi-national

telecommunications company. In an effort to expand operations overseas, Hazelton
encourages senior management to offer payment to foreign officials to win business. These
payments are classified as normal commission expenses by the accounting department. Julie
recently questioned whether these payments should be classified as commission expense
since they appear to be bribes to foreign officials. When Julie discussed the situation with the
Chief Financial Officer, he stated these payments were not illegal and were expected within
these foreign countries.
When all employees are hired, they are required to sign the company code of conduct. In
addition, the company provides annual ethics training to all employees and each employee is
evaluated based on compliance with operational goals and ethical expectations. The company
provides an anonymous whistleblower hotline for employees to report concerns to
management. Julie believes that the company she works for has an ethical organizational
culture.
Identify a requirement of the U.S. Foreign Corrupt Practices Act (FCPA) relevant in the
Hazelton Manufacturing case.
The Act requires senior financial officers to follow a code of ethics.

The Act forbids an American company to pay bribes to foreign government officials.
The Act requires employee training for maintaining an ethical organizational culture.
The Act requires a company to provide a whistleblowing hotline to report ethics concerns.

The FCPA forbids an American company doing business in another country to pay bribes to a
foreign government to obtain contracts or secure business.
Question 7:
2E1-LS02

A Whistle-blowing Framework or ethics helpline can assist in maintaining an ethical

organizational culture. Which of the following is not a benefit of a whistleblowing framework or
ethics helpline?
Whistle-blowing framework may enable the ability to collect, analyze, and summarize existing and
potential ethical problems.
Whistle-blowing helplines may help discover fraud within an organization.
Whistle-blowing helplines may be perceived as a snitch-line.
Whistle-blowing helplines may provide a confidential way to report ethical violations.

If perceived as a snitch-line, employees may be reluctant to use them and would then not be
considered a benefit.
Question 8:
2E1-LS04

What are three tools available to measure and improve ethical compliance?
I. Human performance feedback loop
II. Survey tools
III. Whistle-blowing framework
IV. Employee training
II and IV, only.
I, II and IV, only.
I and III, only.
I, II, and III, only.

Employee training is a key part of maintaining an ethical organizational culture; both at time of
hire and as an ongoing process. The other three answers are the primary tools available to
measure ethical compliance in an organization which may lead to revisions in the training
program(s).
Question 9:
2E1-AT02

Which of the following actions will most likely result in a successful foreign business venture in
Islamic countries?

Adhere to Islamic beliefs.

Have property in an Islamic nation.
Employ Islamic people.
Behave in a manner that is consistent with Islamic ethics.

Successful operation by a company operating in a foreign country is a function of how well the
company adapts to the host country's culture. Successful adaptation includes behaving in a
manner that is consistent with host country's ethics.
Question 10:
2E1-CQ02

Julie is the Senior Management Accountant for Hazelton Manufacturing; a multi-national

telecommunications company. In an effort to expand operations overseas, Hazelton
encourages senior management to offer payment to foreign officials to win business. These
payments are classified as normal commission expenses by the accounting department. Julie
recently questioned whether these payments should be classified as commission expense
since they appear to be bribes to foreign officials. When Julie discussed the situation with the
Chief Financial Officer, he stated these payments were not illegal and were expected within
these foreign countries.
When all employees are hired, they are required to sign the company code of conduct. In
addition, the company provides annual ethics training to all employees and each employee is
evaluated based on compliance with operational goals and ethical expectations. The company
provides an anonymous whistleblower hotline for employees to report concerns to
management. Julie believes that the company she works for has an ethical organizational
culture.
Identify a requirement of Section 406 of the Sarbanes-Oxley Act relevant in the Hazelton
Manufacturing case.
The Act requires a company to provide a whistleblowing hotline to report ethics concerns.
The Act requires employee training for maintaining an ethical organizational culture.
The Act requires senior financial officers to follow a code of ethics.
The Act forbids an American company to pay bribes to foreign government officials.

The Sarbanes-Oxley Act, Section 406 requires companies to adopt (or explain why they have
not adopted) a code of ethics for senior financial officers.