PRC-3 · Chapter 6
Business Ethics MCQs with Answers
68 multiple-choice questions on Business Ethics for PRC-3 Business & Economic Insights. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
A senior auditor is pressured by the CEO of a client company to ignore a significant financial discrepancy in exchange for a future consulting contract. This scenario creates a conflict with which ethical principle?
- A) Confidentiality
- B) Objectivity
- C) Professional competence
- D) Environmental sustainability
Show answer & explanation
Answer: B) Objectivity
Objectivity demands that professionals do not let bias, conflict of interest, or undue influence of others override their professional or business judgments.
Question 2
An employee working in product development secretly emails the blueprints of a new, unreleased smartphone to a competing company for a large cash payment. What unethical practice is this?
- A) Whistleblowing
- B) Breaching confidentiality and corporate espionage
- C) Conflict of interest
- D) Insider trading
Show answer & explanation
Answer: B) Breaching confidentiality and corporate espionage
Confidentiality prohibits individuals from disclosing sensitive, proprietary corporate information to outside parties without proper authorization.
Question 3
The concept of 'Professional Competence and Due Care' requires an accountant to:
- A) Always charge the highest possible fees
- B) Maintain professional knowledge and skill at the level required to ensure clients receive competent professional service
- C) Never disagree with a client's financial decisions
- D) Share client financial details with competitors
Show answer & explanation
Answer: B) Maintain professional knowledge and skill at the level required to ensure clients receive competent professional service
Professionals have an ongoing duty to maintain their professional knowledge and skill to ensure a competent level of service based on current developments in practice, legislation, and techniques.
Question 4
A production manager chooses to use a supplier whose materials are cheaper but known to be toxic. The manager knows this poses a health risk to consumers but prioritizes high profit margins. What is failing here?
- A) Professional competence
- B) Integrity and business ethics
- C) Insider trading regulations
- D) Confidentiality
Show answer & explanation
Answer: B) Integrity and business ethics
Integrity implies being straightforward and honest in all professional and business relationships, which includes not prioritizing profit over consumer safety and ethical standards.
Question 5
What does a formal 'Code of Ethics' (or Code of Conduct) achieve within an organization?
- A) It provides a detailed manual for operating complex manufacturing equipment
- B) It offers clear guidelines to all employees regarding the ethical standards and behaviors expected by the organization
- C) It guarantees the company will never face a lawsuit
- D) It outlines the exact amount of taxes owed to the government
Show answer & explanation
Answer: B) It offers clear guidelines to all employees regarding the ethical standards and behaviors expected by the organization
A Code of Ethics is a written set of guidelines issued by an organization to its workers and management to help them conduct their actions in accordance with its primary values and ethical standards.
Question 6
A lower-level employee observes the factory manager continually dumping toxic waste in a local river at night to save disposal costs. The employee reports this to the Environmental Protection Agency. This act is called:
- A) Whistleblowing
- B) Insider trading
- C) Breaching confidentiality
- D) Conflict of interest
Show answer & explanation
Answer: A) Whistleblowing
Whistleblowing occurs when a worker reports suspected wrongdoing at work, such as an environmental violation, to the public or authorities.
Question 7
An executive learns in a closed-door meeting that his company will successfully acquire a major rival next week. He immediately buys thousands of shares in his own company before the news goes public. What illegal act has he committed?
- A) Whistleblowing
- B) Corporate lobbying
- C) Conflict of interest
- D) Insider trading
Show answer & explanation
Answer: D) Insider trading
Insider trading is the illegal practice of trading on the stock exchange to one's own advantage through having access to confidential, non-public information.
Question 8
A pharmaceutical firm voluntarily decides to manufacture generic antibiotics at zero profit margin and distribute them for free in impoverished regions. What broader business concept does this represent?
- A) Hostile takeover strategy
- B) Corporate Social Responsibility (CSR)
- C) Tax evasion
- D) Monopoly pricing
Show answer & explanation
Answer: B) Corporate Social Responsibility (CSR)
CSR is a management concept whereby companies voluntarily integrate social and environmental concerns in their business operations and interactions with their stakeholders.
Question 9
Why is 'Tone at the Top' considered the most critical factor in establishing an ethical corporate culture?
- A) Because lower-level employees cannot read the Code of Ethics
- B) Because senior management does not have to follow the rules
- C) Because if senior leaders visibly demonstrate and prioritize ethical behavior, it sets the standard that all employees will follow
- D) Because only top executives are allowed to whistleblow
Show answer & explanation
Answer: C) Because if senior leaders visibly demonstrate and prioritize ethical behavior, it sets the standard that all employees will follow
The 'Tone at the Top' refers to the ethical atmosphere created in the workplace by the organization's leadership. If leaders are visibly ethical, employees are far more likely to behave ethically.
Question 10
Which of the following is a direct potential consequence for a business that operates unethically and is subsequently exposed in the media?
- A) Guaranteed increase in market share
- B) Automatic tax exemptions from the government
- C) Severe reputational damage, leading to loss of consumer trust and potential boycotts
- D) An immediate influx of highly skilled ethical job applicants
Show answer & explanation
Answer: C) Severe reputational damage, leading to loss of consumer trust and potential boycotts
Unethical behavior, once exposed, severely damages a firm's reputation, destroys public trust, and can lead to a loss of sales, legal fines, and falling share prices.
Question 11
A purchasing manager chooses a supplier whose prices are 10% higher than competitors because the supplier is owned by the manager's cousin. Which ethical issue does this represent?
- A) Insider trading
- B) Conflict of interest
- C) Whistleblowing
- D) Corporate social responsibility
Show answer & explanation
Answer: B) Conflict of interest
A conflict of interest occurs when an employee's personal or family interests interfere with their duty to make objective decisions for the employer.
Question 12
An accountant discovers a major fraud committed by the CEO but decides not to report it to the auditors to protect their own job. Which ethical principle is primarily being compromised?
- A) Integrity
- B) Professional competence
- C) Marketing fairness
- D) Environmental responsibility
Show answer & explanation
Answer: A) Integrity
Integrity requires professionals to be straightforward, honest, and courageous enough to stand up against fraud or misrepresentation.
Question 13
During a dinner party, an auditor mentions to friends that a specific client is secretly planning to declare bankruptcy next week. Which ethical rule did the auditor violate?
- A) Professional competence
- B) Conflict of interest
- C) Confidentiality
- D) Objectivity
Show answer & explanation
Answer: C) Confidentiality
Confidentiality mandates that professionals must not disclose sensitive client or employer information to outside parties without proper authorization.
Question 14
The concept of 'Tone at the top' in business ethics implies that:
- A) The highest paid employees should be exempt from ethical rules
- B) Ethical culture must be driven and demonstrated by senior management
- C) Ethics only apply to boardroom meetings
- D) Junior staff are responsible for enforcing rules on senior staff
Show answer & explanation
Answer: B) Ethical culture must be driven and demonstrated by senior management
For an ethical code to be effective, top management must lead by example and demonstrate strong ethical behavior, known as 'tone at the top'.
Question 15
An employee overhears confidential board discussions about an unannounced merger and quickly buys shares in the target company to make a profit. What is this illegal practice called?
- A) Whistleblowing
- B) Strategic investing
- C) Insider trading
- D) Corporate Social Responsibility
Show answer & explanation
Answer: C) Insider trading
Insider trading is the illegal practice of trading on the stock exchange to one's own advantage through having access to confidential, non-public information.
Question 16
A manufacturing firm decides to invest 5% of its profits into building a local community school and planting trees in deforested areas. This initiative falls under the umbrella of:
- A) Corporate Social Responsibility (CSR)
- B) Tax evasion strategies
- C) Mandatory government lobbying
- D) Conflict of interest
Show answer & explanation
Answer: A) Corporate Social Responsibility (CSR)
CSR involves businesses self-regulating and taking initiatives to contribute positively to societal goals, philanthropy, and the environment.
Question 17
An employee notices that the factory is secretly dumping toxic waste into a local river and decides to report this to an environmental agency after management ignores his warnings. This action is known as:
- A) Insider trading
- B) Whistleblowing
- C) Corporate espionage
- D) Breach of contract
Show answer & explanation
Answer: B) Whistleblowing
Whistleblowing occurs when an employee exposes secretive, unethical, or illegal activities occurring within an organization to authorities or the public.
Question 18
To ensure employees understand what behaviors are expected and unacceptable, a company should formally distribute a document known as a:
- A) Sales ledger
- B) Code of Ethics/Conduct
- C) Financial audit report
- D) Marketing mix strategy
Show answer & explanation
Answer: B) Code of Ethics/Conduct
A written Code of Ethics provides clear guidelines to employees regarding the ethical standards and behaviors expected by the organization.
Question 19
A financial analyst is evaluating a company but owns a significant amount of stock in its direct competitor. According to ethical standards, the analyst's judgment might lack:
- A) Confidentiality
- B) Objectivity
- C) Professional competence
- D) Mathematical accuracy
Show answer & explanation
Answer: B) Objectivity
Objectivity means not allowing bias, conflict of interest, or undue influence of others to override professional or business judgments.
Question 20
Which of the following is a potential consequence for a business that is exposed in the media for highly unethical practices?
- A) Guaranteed increase in stock price
- B) Severe reputational damage and loss of consumer trust
- C) Exemption from future tax liabilities
- D) Automatic promotion of its executives
Show answer & explanation
Answer: B) Severe reputational damage and loss of consumer trust
Unethical behavior destroys public trust, damaging the firm's reputation, leading to lost sales, potential fines, and decreased shareholder value.
Question 21
ICAP’s code of ethics mandates that members maintain professional knowledge to ensure clients receive competent service. This principle is called:
- A) Professional competence and due care
- B) Objectivity
- C) Confidentiality
- D) Corporate social responsibility
Show answer & explanation
Answer: A) Professional competence and due care
Professional competence and due care require professionals to maintain their skills and knowledge at the level required to provide capable service.
Question 22
Which of the following practices generally undermines fair competition and is considered unethical?
- A) Creating innovative new products
- B) Secretly colluding with competitors to keep market prices artificially high
- C) Offering seasonal discounts to customers
- D) Advertising product features honestly
Show answer & explanation
Answer: B) Secretly colluding with competitors to keep market prices artificially high
Price-fixing and collusion with rivals harm consumers and undermine the principles of a fair, competitive free market.
Question 23
A hiring manager interviews five candidates for a job. He ultimately hires his nephew, even though his nephew scored the lowest on the competency test. What specific ethical issue does this demonstrate?
- A) Insider trading
- B) Whistleblowing
- C) Conflict of interest
- D) Corporate social responsibility
Show answer & explanation
Answer: C) Conflict of interest
A conflict of interest occurs when an individual's personal or family interests compromise their ability to make objective, fair decisions for their employer.
Question 24
An IT administrator secretly reads an email from the CEO discussing a highly profitable acquisition that will be announced next week. The IT administrator immediately buys company shares to profit. What is this called?
- A) Whistleblowing
- B) Corporate espionage
- C) Insider trading
- D) Strategic investment
Show answer & explanation
Answer: C) Insider trading
Insider trading is the illegal and unethical practice of trading on the stock exchange based on access to confidential, non-public information.
Question 25
An accountant discovers that the CFO is embezzling funds. After internal reports are ignored, the accountant reports the crime to the national financial regulator. This action is known as:
- A) Breaching a contract
- B) Whistleblowing
- C) Insider trading
- D) Conflict of interest
Show answer & explanation
Answer: B) Whistleblowing
Whistleblowing is the act of exposing secretive, illegal, or unethical behavior within an organization to a higher authority or the public.
Question 26
While having lunch at a public restaurant, an auditor loudly discusses a client's severe financial difficulties with a friend. Which fundamental principle of professional ethics has the auditor violated?
- A) Objectivity
- B) Professional competence
- C) Confidentiality
- D) Integrity
Show answer & explanation
Answer: C) Confidentiality
Confidentiality requires professionals to respect the secrecy of information acquired during their work and not disclose it without proper authorization.
Question 27
A financial analyst is preparing an investment report on Company X. However, the analyst owns a significant amount of stock in Company X. According to the ICAP code of ethics, what principle is most directly threatened here?
- A) Objectivity
- B) Confidentiality
- C) Professional competence
- D) Public relations
Show answer & explanation
Answer: A) Objectivity
Objectivity dictates that professionals should not allow bias, conflict of interest, or the undue influence of others to override their business judgment.
Question 28
The fundamental ethical principle that requires an accountant to be straightforward, honest, and truthful in all professional and business relationships is known as:
- A) Objectivity
- B) Integrity
- C) Confidentiality
- D) Due care
Show answer & explanation
Answer: B) Integrity
Integrity implies fair dealing and truthfulness. It means the professional will not be associated with reports containing materially false or misleading statements.
Question 29
A company drafts a brilliant 50-page Code of Ethics, but the CEO routinely ignores it and treats staff poorly. As a result, the employees also ignore the code. This highlights the failure of which concept?
- A) Corporate social responsibility
- B) Insider trading
- C) Tone at the top
- D) Span of control
Show answer & explanation
Answer: C) Tone at the top
For ethical codes to be effective, they must be strongly endorsed and actively modeled by senior management, a concept known as the 'tone at the top'.
Question 30
To ensure all employees clearly understand the firm's values, expected behaviors, and rules against bribery, an organization should formally issue a:
- A) Mission statement
- B) Marketing plan
- C) Code of Conduct / Ethics
- D) Shareholder dividend report
Show answer & explanation
Answer: C) Code of Conduct / Ethics
A Code of Conduct is a formal, written document distributed to all employees detailing the ethical guidelines and behavioral rules of the organization.
Question 31
A heavy machinery manufacturer decides to switch to renewable energy sources and pledges to plant a tree for every machine sold. What broad business concept does this environmental commitment fall under?
- A) Corporate Social Responsibility (CSR)
- B) Tax evasion
- C) Supply chain logistics
- D) Whistleblowing
Show answer & explanation
Answer: A) Corporate Social Responsibility (CSR)
CSR encompasses an organization's self-regulated efforts to act responsibly towards the environment, community, and society beyond simply making a profit.
Question 32
An auditor realizes they do not understand the complex new tax laws affecting their client, but they complete the audit anyway without seeking training. Which ethical principle is violated?
- A) Confidentiality
- B) Professional competence and due care
- C) Objectivity
- D) Integrity
Show answer & explanation
Answer: B) Professional competence and due care
Professionals must maintain their knowledge and skills at an appropriate level. Attempting work without the necessary competence violates this principle.
Question 33
If a major food company is exposed by the media for knowingly selling contaminated products, what is the most severe and immediate non-legal risk it faces?
- A) Loss of reputation and severe credibility damage among consumers
- B) Automatic increase in corporate taxes
- C) Exemption from future labor laws
- D) Immediate promotion of the Board of Directors
Show answer & explanation
Answer: A) Loss of reputation and severe credibility damage among consumers
Unethical behavior causes massive reputational risk. Loss of consumer trust can permanently damage the brand and destroy sales revenue.
Question 34
A manager is faced with a difficult ethical dilemma regarding a new supplier contract and decides to use the 'mirror test' for ethical decision-making. According to this framework, what is the very first question the manager should ask?
- A) Will this action maximize our public relations?
- B) Is it legal?
- C) What will other people think?
- D) Is it according to our business standards?
Show answer & explanation
Answer: B) Is it legal?
In the mirror testing technique for ethical decision-making, the sequential questions start with asking: 'Is it legal?' before moving to policy and public perception.
Question 35
A procurement manager must award a lucrative contract for office supplies. He secretly directs the contract to a firm owned by his brother, ignoring cheaper bids. This is a classic example of:
- A) Corporate Social Responsibility
- B) Conflict of interest
- C) Whistleblowing
- D) Insider trading
Show answer & explanation
Answer: B) Conflict of interest
A conflict of interest occurs when a person's personal or family interests inappropriately influence their professional duty to their employer.
Question 36
A chef working at a famous restaurant writes down the restaurant's secret, highly profitable sauce recipe and sells it to a rival restaurant. Which ethical principle did the chef violate?
- A) Professional competence
- B) Objectivity
- C) Confidentiality
- D) Transparency
Show answer & explanation
Answer: C) Confidentiality
Confidentiality demands that employees do not disclose sensitive, proprietary, or secret information belonging to their employer without authorization.
Question 37
After working for 15 years as a bank manager, Mehnaz is severely pressured by her uncle to approve a highly risky loan for his failing business. If she approves it due to this pressure, she violates the principle of:
- A) Confidentiality
- B) Objectivity
- C) Corporate Governance
- D) Due care
Show answer & explanation
Answer: B) Objectivity
Objectivity requires a professional to not allow bias, family pressure, or the undue influence of others to override their fair business judgment.
Question 38
The professional code of ethics dictates that an accountant must be straightforward and completely honest in all professional relationships. This principle is explicitly known as:
- A) Integrity
- B) Technical competence
- C) Environmental responsibility
- D) Confidentiality
Show answer & explanation
Answer: A) Integrity
Integrity means being honest, fair, and truthful, ensuring that the professional is not associated with false or misleading information.
Question 39
A multinational corporation's branch in a developing country hires underage children to work in the factory because it is cheaper, ignoring international laws. Which ethical issue head does this represent?
- A) Hiding information
- B) Permitting organizational abuse
- C) Conflict of interest
- D) Insider trading
Show answer & explanation
Answer: B) Permitting organizational abuse
Hiring children against policy and international labor standards is a severe form of permitting organizational and human rights abuse.
Question 40
A professional regulatory body shifts entirely to a paper-free e-filing system to reduce deforestation and waste. This initiative directly demonstrates the body's:
- A) Conflict of interest
- B) Environmental responsibility
- C) Financial inefficiency
- D) Marketing mix
Show answer & explanation
Answer: B) Environmental responsibility
Adopting green practices like paper-free systems to protect nature is a core aspect of an organization's environmental responsibility (CSR).
Question 41
Employees at a corporate office spend several hours every day playing computer games and watching movies instead of completing their assigned tasks. What ethical issue is this?
- A) Misuse of organization time
- B) Divulging information
- C) Insider trading
- D) Professional competence
Show answer & explanation
Answer: A) Misuse of organization time
Engaging in unnecessary, personal activities during paid office hours is an ethical violation categorized as the misuse of organizational time.
Question 42
To guide managers facing difficult decisions, an ethicist suggests asking three sequential questions: 'Is it legal? Is it according to policy? What will others think?'. This decision-making technique is known as the:
- A) Glass test
- B) Mirror test
- C) Balance test
- D) Stress test
Show answer & explanation
Answer: B) Mirror test
The 'Mirror test' is a self-reflection technique used in ethical decision-making, involving questions about legality, policy, and public perception.
Question 43
An auditor realizes she lacks the complex technical knowledge required to audit a new cryptocurrency client, but she proceeds anyway without seeking help. Which principle did she violate?
- A) Confidentiality
- B) Professional competence and due care
- C) Tone at the top
- D) Objectivity
Show answer & explanation
Answer: B) Professional competence and due care
Professional competence and due care require professionals to only take on tasks for which they have the necessary up-to-date skills and knowledge.
Question 44
A senior manager overhears confidential board discussions regarding an upcoming lucrative merger. He immediately calls his broker to buy thousands of shares in the company before the news becomes public. What is this crime?
- A) Whistleblowing
- B) Insider trading
- C) Strategic sourcing
- D) Conflict of resolution
Show answer & explanation
Answer: B) Insider trading
Insider trading is the illegal practice of using confidential, non-public corporate information to execute trades on the stock market for personal gain.
Question 45
A factory worker discovers that management is secretly dumping toxic chemicals into the local water supply. After internal complaints are ignored, he alerts the national media. This act is called:
- A) Corporate espionage
- B) Whistleblowing
- C) Breach of trust
- D) Embezzlement
Show answer & explanation
Answer: B) Whistleblowing
Whistleblowing involves an employee exposing secretive, illegal, or unethical actions occurring within their organization to external authorities or the public.
Question 46
An employee uses a specific ethical decision-making framework that requires asking three sequential questions: 'Is it ethical?', 'Is it legal?', and 'What will other people think?'. What is this framework called?
- A) The transparency test
- B) The mirror test
- C) The objectivity test
- D) The compliance test
Show answer & explanation
Answer: B) The mirror test
The mirror test is an ethical evaluation tool comprising three main questions: Is it ethical? Is it legal? What will other people think?
Question 47
The fundamental ethical principle that explicitly requires a professional chartered accountant to be straightforward, fair, and totally honest in all professional relationships is known as:
- A) Objectivity
- B) Integrity
- C) Confidentiality
- D) Due care
Show answer & explanation
Answer: B) Integrity
Integrity implies fair dealing and truthfulness. It strictly forbids a professional from associating with false or misleading reports.
Question 48
A senior auditor is tasked with evaluating a company, but his wife is the Chief Financial Officer (CFO) of that exact company. He proceeds to give the company a perfect audit report. Which ethical principle is severely compromised here?
- A) Confidentiality
- B) Professional competence
- C) Objectivity
- D) Environmental responsibility
Show answer & explanation
Answer: C) Objectivity
Objectivity demands that a professional must not allow bias, conflict of interest, or undue family influence to override their professional business judgment.
Question 49
During a casual dinner with friends, an accountant reveals that her client, a famous local restaurant, is secretly going bankrupt. Which fundamental ethical rule has the accountant violated?
- A) Objectivity
- B) Integrity
- C) Professional competence
- D) Confidentiality
Show answer & explanation
Answer: D) Confidentiality
Confidentiality requires professionals to respect the secrecy of client information and not disclose it to outside parties without proper authorization.
Question 50
An IT consultant accepts a highly lucrative contract to implement an advanced cybersecurity system, fully knowing he has no training or experience in cybersecurity. Which ethical principle is he violating?
- A) Professional Competence and Due Care
- B) Confidentiality
- C) Whistleblowing
- D) Conflict of interest
Show answer & explanation
Answer: A) Professional Competence and Due Care
Professionals must maintain their knowledge and only accept tasks they have the competence to complete. Accepting work without the required skills violates this principle.
Question 51
An employee at a chemical plant discovers that management is falsifying safety reports to hide dangerous leaks. After internal warnings fail, she anonymously sends the real reports to a national newspaper. This action is known as:
- A) Insider trading
- B) Whistleblowing
- C) Corporate espionage
- D) Strategic marketing
Show answer & explanation
Answer: B) Whistleblowing
Whistleblowing is the act of exposing secretive, illegal, or unethical actions occurring within an organization to a higher authority or the public.
Question 52
An executive secretary reads an unreleased memo detailing an upcoming massive tech patent. He immediately calls his broker and buys 10,000 shares of the company before the public finds out. What is this illegal practice?
- A) Whistleblowing
- B) Conflict of interest
- C) Insider trading
- D) Corporate social responsibility
Show answer & explanation
Answer: C) Insider trading
Insider trading occurs when an individual buys or sells stock in a publicly traded company based on material, non-public information.
Question 53
To evaluate a difficult ethical dilemma, a manager uses the 'Mirror Test'. According to this framework, what is the sequence of the three questions he must ask himself?
- A) Will it make money? Is it fast? Is it legal?
- B) Is it legal? Is it according to policy? What will other people think?
- C) What will the CEO think? Is it cheap? Is it fast?
- D) Does it protect the environment? Does it pay taxes? Does it avoid unions?
Show answer & explanation
Answer: B) Is it legal? Is it according to policy? What will other people think?
The 'mirror test' for ethical decision making involves asking three specific questions: Is it legal? Is it according to company policy? What will the public think?
Question 54
A fast-food company decides to eliminate all single-use plastics from its packaging and pledges to donate 2% of profits to local homeless shelters. These actions are prime examples of:
- A) Mandatory tax compliance
- B) Corporate Social Responsibility (CSR)
- C) The marketing mix
- D) Whistleblowing
Show answer & explanation
Answer: B) Corporate Social Responsibility (CSR)
CSR is the concept where businesses integrate social and environmental concerns into their operations and interactions with stakeholders on a voluntary basis.
Question 55
A company issues a strict Code of Ethics, but the CEO openly ignores it by verbally abusing staff and demanding they falsify sales data. Consequently, the staff act unethically too. This scenario highlights the crucial importance of:
- A) Supply chain logistics
- B) Tone at the top
- C) Insider trading laws
- D) Product life cycles
Show answer & explanation
Answer: B) Tone at the top
For an ethical code to work, senior management must actively demonstrate and enforce ethical behavior, a concept known as the 'tone at the top'.
Question 56
During paid office hours, an employee spends four hours every day watching movies and browsing social media instead of working on assigned projects. What specific ethical issue does this represent?
- A) Misuse of organization time
- B) Divulging confidential information
- C) Abusive behavior
- D) Conflict of interest
Show answer & explanation
Answer: A) Misuse of organization time
Using paid company time for personal, non-work-related activities like watching movies is an ethical violation categorized as misuse of organizational time.
Question 57
A purchasing manager chooses a supplier whose prices are 20% higher than the market average solely because the supplier is owned by the manager's brother. What is this unethical situation called?
- A) Whistleblowing
- B) Corporate social responsibility
- C) Conflict of interest
- D) Professional competence
Show answer & explanation
Answer: C) Conflict of interest
A conflict of interest occurs when a person's personal or family interests interfere with their objective professional duty to their employer.
Question 58
A chartered accountant appears on live television and starts aggressively insulting and making baseless accusations against rival accounting firms. According to ICAP's Code of Ethics, which principle is explicitly violated?
- A) Confidentiality
- B) Objectivity
- C) Professional behavior
- D) Technical competence
Show answer & explanation
Answer: C) Professional behavior
Professional behavior requires accountants to comply with laws and avoid any action (like public insults) that brings discredit to the profession.
Question 59
Which term is defined as the “discipline dealing with what is good and bad and with moral duty and obligation”?
- A) Ethics
- B) Business Law
- C) Corporate Governance
- D) Corporate Social Responsibility
Show answer & explanation
Answer: A) Ethics
Ethics represents the fundamental philosophical discipline focusing on moral duties, evaluating right versus wrong, and defining moral obligations.
Question 60
A second-hand car dealer sold a car to a customer assuring him that it is in good condition because a reputed mechanic tested it, despite knowing he never hired a mechanic. Is this an ethical dealing?
- A) True
- B) False
Show answer & explanation
Answer: B) False
Lying or misrepresenting facts to gain an unfair advantage or close a sale violates the ethical principle of honesty and integrity.
Question 61
Ethically speaking, a builder can bribe the Building Control Authority to build a few extra unauthorized floors, as long as there is a genuine commitment to buy 100 ambulances for a welfare trust.
- A) True
- B) False
Show answer & explanation
Answer: B) False
Bribery and illegal activities are intrinsically unethical and cannot be justified or offset by subsequent charitable donations.
Question 62
XYZ Organization installs a factory in an underdeveloped locality, hiring underage students below minimum wage, believing they are helping poor families. Is this ethically acceptable corporate social responsibility?
- A) True
- B) False
Show answer & explanation
Answer: B) False
Exploiting child labor and violating minimum wage laws is highly unethical and illegal; it does not constitute legitimate corporate social responsibility.
Question 63
An employee sees an HR vacancy that their cousin is highly qualified for. What is the most ethical course of action to avoid a conflict of interest?
- A) Demand HR give priority to the cousin
- B) Secretly ensure the cousin gets the job through internal pressure
- C) Ask the cousin to apply through standard channels and officially disclose the relationship as a referral
- D) Guarantee the cousin that the position is theirs
Show answer & explanation
Answer: C) Ask the cousin to apply through standard channels and officially disclose the relationship as a referral
Transparency is key in managing conflicts of interest. The candidate should go through normal competitive channels while the existing employee explicitly discloses the familial relationship.
Question 64
Being completely honest with a customer regarding the quality and limitations of a product is an example of:
- A) Marketing strategy
- B) Business ethics
- C) Effective leadership
- D) Confidentiality
Show answer & explanation
Answer: B) Business ethics
Honesty in commercial dealings, avoiding deception, and ensuring the customer is well-informed falls squarely under the domain of business ethics.
Question 65
Ethical issues may arise in all of the following corporate situations, EXCEPT:
- A) Fair and honest dealing with customers and suppliers
- B) Developing the routine mathematical production schedule for next week
- C) Showing respect to communities and public
- D) Disposing of chemical waste near a river
Show answer & explanation
Answer: B) Developing the routine mathematical production schedule for next week
Creating a standard production schedule is an operational and mathematical task, inherently lacking the moral dimension that triggers ethical dilemmas.
Question 66
An organization is in the process of awarding a contract. The son of the CEO of the same organization is also bidding for the contract. This represents a potential conflict of interest situation.
- A) True
- B) False
Show answer & explanation
Answer: A) True
A conflict of interest occurs when a decision-maker's personal or familial interests could inappropriately influence their professional obligations to the company.
Question 67
A food manufacturer strictly labels its products as 'Halal' only after passing rigorous and legitimate certification. This specific practice depicts:
- A) Grading
- B) Professional behaviour
- C) Honesty
- D) Branding
Show answer & explanation
Answer: C) Honesty
Labeling products truthfully and not deceiving consumers regarding religious or dietary compliance is a demonstration of corporate honesty.
Question 68
A professional cricket league ensures that all garbage collected from the stadiums is properly recycled rather than dumped in landfills. This shows:
- A) Social responsibility
- B) Environmental responsibility
- C) Economic responsibility
- D) Labour responsibility
Show answer & explanation
Answer: B) Environmental responsibility
Taking active measures to recycle waste and reduce an organization's carbon footprint specifically addresses environmental responsibility within the broader CSR framework.