Question 1

A predatory loan:

Accepted Answer

A predatory loan is a loan that exceeds certain interest limitations or contains certain loan structures that are designed to take advantage of borrowers. This type of loan can be illegal and is often targeted at low-income individuals who may not fully understand the terms of the loan. State and local laws can also play a role in regulating predatory lending practices. Therefore, option A is the correct answer.

Question 2

Dennis Kozlowski, Mark Swartz and Mark Belnick of Tyco:

Accepted Answer

The answer of Dennis Kozlowski, Mark Swartz and Mark Belnick...

Question 3

How many CFOs did Scrushy have at HealthSouth from 1998 through 2003?

Accepted Answer

Richard Scrushy had five CFOs at HealthSouth from 1998 through 2003.

Question 4

Prior to the Enron collapse, how many employees did Andersen have?

Accepted Answer

Prior to the Enron collapse, Andersen had 36,000 employees.

Question 5

Who else did David Duncan consult about the off-the-book entities?

Accepted Answer

The answer of Who else did David Duncan consult about...

Question 6

The KELP program at Tyco:

Accepted Answer

The KELP program at Tyco was poorly supervised and administered, as there were instances of executives granting themselves and other employees interest-free loans without proper approval or disclosing these loans in financial statements. However, there is no evidence that the program was abused or that it violated federal law at the time. Embezzlement implies intentional theft, which may not apply in this case.

Question 7

Arthur Andersen was convicted of what crime in relation to its work on Enron?

Accepted Answer

Arthur Andersen was convicted of obstruction of justice for its role in the Enron scandal, specifically for destroying documents related to its audit of Enron.

Question 8

You work in the finance division of a NYSE company. You have just learned that your supervisor has been using information on quarterly returns, prior to the time they are made public, to trade in the company's stock. You:

Accepted Answer

Using insider information to trade on a company's stock is illegal and violates SEC regulations. It is the responsibility of all employees to report such activities. Choosing not to do so could result in legal and ethical consequences for both the supervisor and the employee.

Question 9

What Enron accounting practice did Arthur Andersen label as medium to high risk?

Accepted Answer

Enron's use of Special Purpose Entities (SPEs), mark-to-market accounting, and having officers act as principals of other firms doing business with Enron were all practices that Arthur Andersen considered to be of medium to high risk. These practices were part of the complex web of financial maneuvers that ultimately led to Enron's downfall, highlighting significant risks and ethical concerns.

Question 10

How did Andersen's lead defense lawyer describe David Duncan?

Accepted Answer

David Duncan was described by Andersen's lead defense lawyer as "a client pleaser."

Question 11

Who recorded phone conversations with Scrushy in order to document numbers manipulation?

Accepted Answer

William Owens recorded phone conversations with Scrushy in order to document numbers manipulation.

Question 12

Who reminded employees of Andersen's document destruction policy?

Accepted Answer

Nancy Templeton, the Andersen lawyer, reminded employees of the document destruction policy in an email communication.

Question 13

The "Monday morning beatings" referred to:

Accepted Answer

The "Monday morning beatings" referred to staff meetings with Scrushy about numbers performance, where the focus was on discussing and scrutinizing the financial performance and numbers.

Question 14

WorldCom's accounting scandal resulted from:

Accepted Answer

WorldCom's accounting scandal primarily involved the capitalization of ordinary expenses, which is not a standard accounting practice, and was partly attributed to a downturn in the telecommunications market demand. This combination led to the company's financial downfall.

Question 15

The total restatement of revenues at HealthSouth was:

Accepted Answer

According to the context, the total restatement of revenues at HealthSouth was $2.5 billion.

Question 16

What auditor practice was stopped by Sarbanes-Oxley?

Accepted Answer

Sarbanes-Oxley stopped joint audit and consulting contracts for the same companies, as it was seen as a conflict of interest for the auditor.

Question 17

What was part of HealthSouth's vision statement?

Accepted Answer

The answer of What was part of HealthSouth's vision statement?
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Question 18

Which of the following is not a conflict of interest?

Accepted Answer

Being a physician while serving on the board of a healthcare company is not necessarily a conflict of interest, as long as the director is able to separate their personal interests from those of the company. However, the other options listed involve financial ties or personal relationships that could potentially influence the director's decision-making in favor of their own interests rather than those of HealthSouth and its shareholders.

Question 19

The HealthSouth "Pristine Audit" focused on:

Accepted Answer

The answer of The HealthSouth "Pristine Audit" focused on:
...

Question 20

Which of the following is not a form of earnings management?

Accepted Answer

All of the choices listed are examples of earnings management.

Quiz 4: Ethics and Company Culture