BUS 205
Legal & Ethical Issues in Business
Comprehensive Finals Review (Qns & Ans)
2025
1. Which of the following is a primary function of corporate
governance?
- A. Maximizing short-term profits
- B. Ensuring accountability and transparency
- C. Reducing operational costs
- D. Increasing market share
- ANS: B. Ensuring accountability and transparency
©2024/2025
, - Rationale: Corporate governance involves mechanisms and
processes to ensure accountability, transparency, and ethical
conduct within an organization.
2. What is the main purpose of the Sarbanes-Oxley Act (SOX)?
- A. To regulate environmental practices
- B. To enhance corporate financial disclosures and prevent
fraud
- C. To promote international trade
- D. To standardize marketing practices
- ANS: B. To enhance corporate financial disclosures and
prevent fraud
- Rationale: The Sarbanes-Oxley Act was enacted to improve
the accuracy and reliability of corporate financial reporting and to
prevent corporate fraud.
3. Which of the following best describes the concept of fiduciary
duty?
- A. A duty to maximize profits
- B. A duty to act in the best interest of another party
- C. A duty to comply with environmental regulations
- D. A duty to reduce operational costs
- ANS: B. A duty to act in the best interest of another party
©2024/2025
, - Rationale: Fiduciary duty refers to the obligation to act in
the best interest of another party, such as a company's
shareholders.
4. What is the primary goal of corporate social responsibility
(CSR)?
- A. To maximize shareholder value
- B. To enhance a company's reputation
- C. To contribute to sustainable development
- D. To reduce operational costs
- ANS: C. To contribute to sustainable development
- Rationale: CSR aims to contribute to sustainable
development by addressing social, environmental, and economic
impacts.
5. Which of the following is an example of a conflict of interest?
- A. A manager hiring a qualified family member
- B. A manager using company resources for personal gain
- C. A manager attending a professional development seminar
- D. A manager implementing cost-saving measures
- ANS: B. A manager using company resources for personal
gain
©2024/2025
, - Rationale: A conflict of interest occurs when a manager
uses company resources for personal gain, compromising their
professional responsibilities.
Fill-in-the-Blank Questions
6. The ________ is a legal principle that holds employers liable
for the actions of their employees performed within the scope of
their employment.
- ANS: vicarious liability
- Rationale: Vicarious liability is a legal principle that holds
employers responsible for the actions of their employees when
performed within the scope of their employment.
7. ________ is the practice of using insider information to make
stock trades for personal gain.
- ANS: Insider trading
- Rationale: Insider trading involves using non-public,
material information to make stock trades for personal gain.
8. The ________ is a set of principles and guidelines for ethical
business conduct established by the United Nations.
- ANS: UN Global Compact
©2024/2025
Legal & Ethical Issues in Business
Comprehensive Finals Review (Qns & Ans)
2025
1. Which of the following is a primary function of corporate
governance?
- A. Maximizing short-term profits
- B. Ensuring accountability and transparency
- C. Reducing operational costs
- D. Increasing market share
- ANS: B. Ensuring accountability and transparency
©2024/2025
, - Rationale: Corporate governance involves mechanisms and
processes to ensure accountability, transparency, and ethical
conduct within an organization.
2. What is the main purpose of the Sarbanes-Oxley Act (SOX)?
- A. To regulate environmental practices
- B. To enhance corporate financial disclosures and prevent
fraud
- C. To promote international trade
- D. To standardize marketing practices
- ANS: B. To enhance corporate financial disclosures and
prevent fraud
- Rationale: The Sarbanes-Oxley Act was enacted to improve
the accuracy and reliability of corporate financial reporting and to
prevent corporate fraud.
3. Which of the following best describes the concept of fiduciary
duty?
- A. A duty to maximize profits
- B. A duty to act in the best interest of another party
- C. A duty to comply with environmental regulations
- D. A duty to reduce operational costs
- ANS: B. A duty to act in the best interest of another party
©2024/2025
, - Rationale: Fiduciary duty refers to the obligation to act in
the best interest of another party, such as a company's
shareholders.
4. What is the primary goal of corporate social responsibility
(CSR)?
- A. To maximize shareholder value
- B. To enhance a company's reputation
- C. To contribute to sustainable development
- D. To reduce operational costs
- ANS: C. To contribute to sustainable development
- Rationale: CSR aims to contribute to sustainable
development by addressing social, environmental, and economic
impacts.
5. Which of the following is an example of a conflict of interest?
- A. A manager hiring a qualified family member
- B. A manager using company resources for personal gain
- C. A manager attending a professional development seminar
- D. A manager implementing cost-saving measures
- ANS: B. A manager using company resources for personal
gain
©2024/2025
, - Rationale: A conflict of interest occurs when a manager
uses company resources for personal gain, compromising their
professional responsibilities.
Fill-in-the-Blank Questions
6. The ________ is a legal principle that holds employers liable
for the actions of their employees performed within the scope of
their employment.
- ANS: vicarious liability
- Rationale: Vicarious liability is a legal principle that holds
employers responsible for the actions of their employees when
performed within the scope of their employment.
7. ________ is the practice of using insider information to make
stock trades for personal gain.
- ANS: Insider trading
- Rationale: Insider trading involves using non-public,
material information to make stock trades for personal gain.
8. The ________ is a set of principles and guidelines for ethical
business conduct established by the United Nations.
- ANS: UN Global Compact
©2024/2025
