1. A company discovers a flaw in its accounting software that has been overestimating profits for the past quarter. What should the company do? A) Ignore the issue to maintain stock prices. B) Correct the error and inform stakeholders immediately. C) Correct the error but only inform the internal audit committee. D) Assess the impact and decide whether to inform stakeholders based on potential reactions. Answer: B) Correct the error and inform stakeholders immediately. Rationale: Ethical business practices require transparency and honesty. Correcting the error and informing stakeholders upholds the company's integrity and complies with accounting standards. 2. An accountant finds evidence of small, consistent discrepancies in the company's financial reports. What is the most ethical first step? A) Report the findings to the manager. B) Ignore the discrepancies as they are not material. C) Adjust the reports without informing anyone to correct the totals. D) Investigate further to understand the discrepancies. Answer: D) Investigate further to understand the discrepancies. Rationale: An ethical approach involves thorough investigation to ensure accuracy and integrity in financial reporting. Premature reporting or adjustments could lead to incorrect conclusions or actions. 3. During an audit, it is discovered that a company has been engaging in tax evasion. What is the ethical responsibility of the auditor? A) Report the findings to the authorities immediately. B) Confront the company and suggest ways to legally reduce tax liabilities. C) Keep the information confidential as part of client-auditor privilege. D) Advise the company to self-report to the authorities to potentially reduce penalties. Answer: A) Report the findings to the authorities immediately. Rationale: Auditors have a duty to uphold the law and report illegal activities. Tax evasion is a serious offense, and reporting it aligns with legal and ethical standards. 4. A CFO is offered a bribe to manipulate