CAF-7 · Chapter 6
Ethical Decision Making Models MCQs with Answers
15 multiple-choice questions on Ethical Decision Making Models for CAF-7 Business Insights and Analysis. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
In Tucker’s 5-question model for ethical decision-making, the question 'Is it fair?' primarily considers the impact of a decision on:
- A) The shareholders and the profitability of the company
- B) The legal framework and regulatory authorities
- C) All stakeholders, including employees, customers, and the local community
- D) The environmental footprint of the organization
Show answer & explanation
Answer: C) All stakeholders, including employees, customers, and the local community
In Tucker's model, 'Is it fair?' relates to fairness values and assesses whether the decision is equitable and just for all stakeholders involved, not just the shareholders or the company itself.
Question 2
A CFO discovers that the company's new product has a minor safety defect. Fixing it would cost millions, while ignoring it might only result in a few minor customer complaints. Under Tucker's model, the decision to ignore the defect might pass the 'Is it profitable?' test, but it will most directly fail which other question?
- A) Is it sustainable?
- B) Is it right?
- C) Is it legal?
- D) Is it environmentally friendly?
Show answer & explanation
Answer: B) Is it right?
The question 'Is it right?' relates to personal and corporate moral values. Selling a product with a known safety defect fundamentally violates personal and professional integrity, failing the 'right' test regardless of profitability.
Question 3
Which of the following represents the first step in the American Accounting Association (AAA) 7-step model for ethical decision making?
- A) Identify the major principles, rules, and values
- B) Specify the alternatives
- C) Determine the facts of the case
- D) Define the ethical issues
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Answer: C) Determine the facts of the case
The first step of the AAA model is to establish exactly what has happened or is happening by determining the objective facts of the case before any ethical analysis or alternative generation begins.
Question 4
An internal auditor identifies a financial irregularity but is threatened with termination if she reports it. In the AAA model, during which step would she consider her professional obligations of 'integrity' and 'objectivity'?
- A) Step 2: Define the ethical issues
- B) Step 3: Identify the major principles, rules, and values
- C) Step 5: Compare values and alternatives
- D) Step 6: Assess the consequences
Show answer & explanation
Answer: B) Step 3: Identify the major principles, rules, and values
Step 3 of the AAA model involves identifying the relevant professional norms, principles, and values (such as the ICAP Code of Ethics principles of integrity and objectivity) that apply to the situation.
Question 5
According to the ICAP study text, which of the following is the most refined definition of ethics proposed by Trevino and Nelson?
- A) A strict set of legal rules enforced by the government
- B) The principles, norms, and standards of conduct governing an individual or group
- C) The process of maximizing shareholder wealth while avoiding public scandals
- D) The personal beliefs a manager uses to dictate corporate strategy
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Answer: B) The principles, norms, and standards of conduct governing an individual or group
Trevino and Nelson define ethics as the principles, norms, and standards of conduct governing an individual or group. This definition focuses practically on observable conduct and behavioral attributes.
Question 6
In the AAA 7-step model, what is the primary purpose of Step 6: 'Assess the consequences'?
- A) To ensure the decision complies with national laws
- B) To list all possible actions the decision-maker can take
- C) To evaluate both the short-run and long-run, positive and negative implications of each alternative
- D) To define the core ethical dilemma facing the organization
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Answer: C) To evaluate both the short-run and long-run, positive and negative implications of each alternative
Step 6 requires the decision-maker to analyze the implications and consequences of each possible alternative in all respects (short and long run, positive and negative) to overcome the human bias of focusing only on short-term benefits.
Question 7
A factory legally disposes of chemical waste in a nearby river because the country's environmental laws are outdated. However, the waste kills local fish and harms the village's water supply. Under Tucker's model, this action is:
- A) Legal but not sustainable or fair
- B) Right but not profitable
- C) Fair but not legal
- D) Sustainable but not right
Show answer & explanation
Answer: A) Legal but not sustainable or fair
Because the laws are outdated, the action passes the 'Is it legal?' question. However, it fails the 'Is it sustainable?' (environmental values) and 'Is it fair?' (harming local stakeholders) questions.
Question 8
Under Tucker's 5-question model, the question 'Is it sustainable?' relates directly to which type of values?
- A) Market values
- B) Legal values
- C) Environmental values
- D) Personal values
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Answer: C) Environmental values
In Tucker's model, the question 'Is it sustainable?' specifically addresses environmental values and assesses whether the decision promotes sustainable development and ecological preservation.
Question 9
During an ethical dilemma, a manager writes down three distinct possible courses of action she could take to resolve the issue. Which step of the AAA model is she currently performing?
- A) Step 2: Define the ethical issues
- B) Step 4: Specify the alternatives
- C) Step 5: Match norms, principles, and values to options
- D) Step 7: Make the decision
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Answer: B) Step 4: Specify the alternatives
Step 4 of the AAA model is 'Specify the alternatives', which involves brainstorming and listing all the possible distinct courses of action or options available to resolve the dilemma.
Question 10
Which of the following best distinguishes the American Accounting Association (AAA) model from Tucker’s 5-question model?
- A) The AAA model is a brief checklist of questions, while Tucker's model is a detailed step-by-step procedural framework
- B) The AAA model focuses heavily on environmental sustainability, while Tucker's model ignores it
- C) The AAA model is a 7-step procedural framework for evaluating alternatives against principles, whereas Tucker's is a 5-question checklist assessing a specific decision
- D) Tucker's model is exclusively used for accounting errors, while the AAA model is used for general business strategy
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Answer: C) The AAA model is a 7-step procedural framework for evaluating alternatives against principles, whereas Tucker's is a 5-question checklist assessing a specific decision
Tucker's model provides five specific questions to test the viability of a proposed decision. The AAA model provides a comprehensive seven-step process to lay out facts, generate alternatives, and methodically select the best one.
Question 11
A company decides to launch a controversial advertising campaign that technically complies with broadcasting laws but relies on deceptive half-truths. Under Tucker’s model, the campaign passes the 'legal' test but most clearly fails the:
- A) Profitability test
- B) Right test
- C) Environmental test
- D) Feasibility test
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Answer: B) Right test
The 'Is it right?' test appeals to personal and corporate moral values (integrity, honesty). Relying on deceptive half-truths violates basic integrity and honesty, failing the 'right' test.
Question 12
In Step 5 of the AAA model ('Matching norms, principles, and values to options'), what is the expected outcome of the analysis?
- A) Determining the objective facts of the case
- B) Seeing which alternatives accord with the ethical norms and which do not
- C) Calculating the exact financial loss or gain of the decision
- D) Finalizing the decision and implementing it immediately
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Answer: B) Seeing which alternatives accord with the ethical norms and which do not
In Step 5, the norms and principles identified in Step 3 are overlaid onto the alternatives generated in Step 4. The outcome is a clear view of which options align with ethical principles and which violate them.
Question 13
A CEO refuses to recall a defective product because it would cause a massive drop in quarterly earnings and anger the shareholders. According to Tucker's model, the CEO is heavily prioritizing which question over the others?
- A) Is it legal?
- B) Is it fair?
- C) Is it profitable?
- D) Is it sustainable?
Show answer & explanation
Answer: C) Is it profitable?
The 'Is it profitable?' question deals with market values and short-term/long-term financial benefits for shareholders. The CEO is prioritizing this financial aspect over fairness to customers or doing the right thing.
Question 14
What is the final step (Step 7) of the American Accounting Association (AAA) ethical decision-making model?
- A) Assess the consequences
- B) Make the decision
- C) Match principles to options
- D) Consult the legal department
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Answer: B) Make the decision
After establishing facts, generating alternatives, evaluating them against norms, and assessing their consequences, Step 7 is to finally select the best-fit alternative and 'Make the decision'.
Question 15
When applying Tucker’s 5-question model, if a proposed course of action results in a 'No' answer to one of the questions (e.g., it is profitable but not fair), what does this indicate?
- A) The action must be immediately executed regardless of the 'No'
- B) The action is illegal and will result in prosecution
- C) The decision-maker faces an ethical dilemma and must carefully weigh the conflicting values
- D) The action will automatically lead to environmental disaster
Show answer & explanation
Answer: C) The decision-maker faces an ethical dilemma and must carefully weigh the conflicting values
Tucker's model rarely produces a perfect 'Yes' to all five questions. When values conflict (e.g., an action is profitable but not fair), it highlights the core of the ethical dilemma, requiring the decision-maker to justify prioritizing one value over another.