MBA5005
Law & Ethics for Managers
Comprehensive Final Test (Qns & Ans)
2025
1. Which of the following is a fundamental principle of
corporate governance?
- A) Maximizing short-term profits
- B) Transparency and accountability
- C) Reducing employee benefits
- D) Minimizing corporate taxes
- ANS: B) Transparency and accountability
©/2025
, - Rationale: Corporate governance is built on transparency
and accountability to ensure that the interests of all stakeholders
are protected.
2. What is the primary purpose of the Sarbanes-Oxley Act of
2002?
- A) To deregulate the financial industry
- B) To enhance corporate transparency and prevent accounting
fraud
- C) To reduce corporate taxes
- D) To promote international trade
- ANS: B) To enhance corporate transparency and prevent
accounting fraud
- Rationale: The Sarbanes-Oxley Act was enacted to improve
corporate governance and financial disclosures and prevent
accounting fraud.
Fill-in-the-Blank Questions
3. The __________ principle requires managers to act in the best
interests of the company and its shareholders.
- ANS: fiduciary
- Rationale: The fiduciary principle obligates managers to
prioritize the interests of the company and its shareholders.
©/2025
,4. __________ is the legal concept that holds companies
accountable for the actions of their employees and agents.
- ANS: Vicarious liability
- Rationale: Vicarious liability holds companies responsible
for the actions of their employees and agents performed within the
scope of their employment.
True/False Questions
5. True or False: Insider trading is illegal because it involves
trading based on non-public, material information.
- ANS: True
- Rationale: Insider trading is illegal as it involves the use of
non-public, material information for trading, giving an unfair
advantage.
6. True or False: A company can be held legally liable for
discriminatory practices even if the discrimination was
unintentional.
- ANS: True
- Rationale: Companies can be held liable for discriminatory
practices regardless of intent if the practices have a discriminatory
impact.
©/2025
, Multiple Response Questions
7. Which of the following are elements of an effective
compliance program? (Select all that apply)
- A) Regular employee training
- B) Clear and accessible policies
- C) Infrequent audits
- D) Strong reporting mechanisms
- ANS: A) Regular employee training, B) Clear and accessible
policies, D) Strong reporting mechanisms
- Rationale: Effective compliance programs include regular
training, clear policies, and robust reporting mechanisms to ensure
adherence to legal and ethical standards.
8. Which of the following actions are considered breaches of
ethical conduct in management? (Select all that apply)
- A) Conflict of interest
- B) Transparency in financial reporting
- C) Accepting bribes
- D) Fair treatment of employees
- ANS: A) Conflict of interest, C) Accepting bribes
©/2025
Law & Ethics for Managers
Comprehensive Final Test (Qns & Ans)
2025
1. Which of the following is a fundamental principle of
corporate governance?
- A) Maximizing short-term profits
- B) Transparency and accountability
- C) Reducing employee benefits
- D) Minimizing corporate taxes
- ANS: B) Transparency and accountability
©/2025
, - Rationale: Corporate governance is built on transparency
and accountability to ensure that the interests of all stakeholders
are protected.
2. What is the primary purpose of the Sarbanes-Oxley Act of
2002?
- A) To deregulate the financial industry
- B) To enhance corporate transparency and prevent accounting
fraud
- C) To reduce corporate taxes
- D) To promote international trade
- ANS: B) To enhance corporate transparency and prevent
accounting fraud
- Rationale: The Sarbanes-Oxley Act was enacted to improve
corporate governance and financial disclosures and prevent
accounting fraud.
Fill-in-the-Blank Questions
3. The __________ principle requires managers to act in the best
interests of the company and its shareholders.
- ANS: fiduciary
- Rationale: The fiduciary principle obligates managers to
prioritize the interests of the company and its shareholders.
©/2025
,4. __________ is the legal concept that holds companies
accountable for the actions of their employees and agents.
- ANS: Vicarious liability
- Rationale: Vicarious liability holds companies responsible
for the actions of their employees and agents performed within the
scope of their employment.
True/False Questions
5. True or False: Insider trading is illegal because it involves
trading based on non-public, material information.
- ANS: True
- Rationale: Insider trading is illegal as it involves the use of
non-public, material information for trading, giving an unfair
advantage.
6. True or False: A company can be held legally liable for
discriminatory practices even if the discrimination was
unintentional.
- ANS: True
- Rationale: Companies can be held liable for discriminatory
practices regardless of intent if the practices have a discriminatory
impact.
©/2025
, Multiple Response Questions
7. Which of the following are elements of an effective
compliance program? (Select all that apply)
- A) Regular employee training
- B) Clear and accessible policies
- C) Infrequent audits
- D) Strong reporting mechanisms
- ANS: A) Regular employee training, B) Clear and accessible
policies, D) Strong reporting mechanisms
- Rationale: Effective compliance programs include regular
training, clear policies, and robust reporting mechanisms to ensure
adherence to legal and ethical standards.
8. Which of the following actions are considered breaches of
ethical conduct in management? (Select all that apply)
- A) Conflict of interest
- B) Transparency in financial reporting
- C) Accepting bribes
- D) Fair treatment of employees
- ANS: A) Conflict of interest, C) Accepting bribes
©/2025
