Attempts: Keep the Highest: / 3 7. Ethical corporate behavior and the Sarbanes-Oxley Act Most executives believe that they and their firms behave in an ethical manner and that it is in their best interests to do so. How can a firm's ethical conduct increase its long-term profitability? A Aa Ethical corporate behavior builds public trust and encourages the use of good corporate governance. Both increase the likelihood that creditors and investors will want to invest in the firm, which in turn increases the availability of financial capital. Ethical corporate behavior attracts managers who believe that greed is good and that to succeed they should be prepared to do absolutely anything necessary for the firm to make a profit. O Ethics deals with questions of right or wrong behavior. Which of the following behaviors involves ethical-as opposed to unethical decision making? O While considering the purchase of an expensive piece of equipment, afirm's purchasing manager recommends that the purchase be made from his cousin's firm rather than from one of two other vendors offering the identical equipment at lower prices. While interviewing prospective applicants for a manager-trainee position, the company's recruiter makes sexually suggestive remarks t he applicants and recommends hiring only the good looking candidates O While riding in a taxi, a loan officer with the Fifth County Bank finds a briefcase containing the confidential and proprietary lending policies of a competing bank. Instead of returning the briefcase, she keeps the competing bank's information and distributes it at the next loan application review meeting. While planning for an upcoming company audit, a manager insists on hiring an external auditing firm to audit the company's financial statements. GAGE UNLIMITED Do's and In 2002, in response to an outbreak of corporate scandals and unethical financial and accounting behavior. Congress passed the Sarbanes-Oxley Act. Which of the following is a major provision of this legislation? O A publicly traded corporation must have a board of directors composed solely of inside directors to oversee the firm's annual audit, because insiders know best about how the company does its business O A publicly traded corporation must hire an external auditing firm to render an unbiased and independent opinion regarding the firm's financial statements