(FORTUNE Magazine) – Dear Annie: For the past few months the regional securities firm where I'm a branch manager has been tussling with the question of how to make sure our people commit no breaches of ethics. The debate centers on whether to tighten up our hiring policies to screen out potentially unscrupulous employees or to build extra safeguards into the organization or both. On the hiring end, how effective are personality tests designed to gauge honesty and integrity? Don't candidates just give the answers they think are the right ones, regardless of what their actual behavior on the job would be? --Diogenes

Dear Diogenes: Probably. Two standardized tests that aim to measure honesty are the Reid Report (www.reidlondonhouse.com/index.html) and the newer CareerEthic Inventory (www.careerethic.com). But, says Daniel Fisher (no relation to yours truly), "there's a lot of research that shows that the smarter you are, the better you are at faking your way through these kinds of tests"--a sticky wicket for those who want to hire the smartest people they can get. Fisher is an organizational psychologist and head of assessment at Worklab Consulting (www.worklab-consulting.com) in New York City, and he advises clients attempting to screen out unethical managers to be rigorous about interviewing and checking references. "We know that people lie in job interviews fairly often," he says. "And if a candidate is willing to lie to you in a job interview, there is good reason to expect that he or she will engage in unethical behavior later on." So, the thinking goes, sniff out the untruthful before you hire them, and half of your potential problem is already solved.

How much fabulating do job applicants do? One study, by a background-checking company called Avert, took a microscope to 2.6 million resumes and discovered that 44% contained exaggerations or outright fabrications about work experience, 23% listed bogus credentials, and 41% boasted fictional degrees. "Fake diplomas are a growth industry on the Internet," Fisher notes. But if someone says he graduated from Harvard, it's easy enough to check whether Harvard has ever heard of him.

As for the even more common fibs about work experience, well, that's where a diligent interviewer can often smell a rat: "Ask the candidate to describe an accomplishment that is related to a specific skill or qualification you're looking for. Drill down and probe for details. Take copious notes and question any contradictions or inconsistencies." Then say that you'll need to verify the information, ask for a relevant contact, and watch how the person reacts: "Note any expressions of fear or increased anxiety, or attempts to retell the experience differently." By the way, Fisher says, most people aren't as adept at spotting liars as they think they are: "The conventional wisdom is that when people are lying, they will fidget, stammer, and avoid eye contact. But in fact really good liars often behave in the opposite way and seem unnaturally calm." Fisher has noticed that lately executive recruiters seem to check facts more carefully because they can be held legally liable for bad hires--"and with senior-level executives, it's especially important to do rigorous due diligence around character references, because many of these people are so intelligent and have such keen interpersonal skills that they can fool you pretty easily."

Even mastering the art of hiring honest people won't get you where you want to go unless your company establishes a culture of zero tolerance for ethical lapses, and that won't work unless it comes from the top. As Peter Drucker once observed, "You'll never get an organization different from those leading it."

Dear Annie: When I took my current job at a small construction company four years ago, I was shocked at its outdated IT systems and lack of efficient project-management tools. So in my spare time I took the initiative to develop a project-management software application, and my team has been using it successfully for two years. Now I'm planning to go back to school full-time to get an MBA, and I don't want to leave my application behind for use by the company. Do I need to hire a lawyer to protect my intellectual property? --Sam I Am

Dear Sam: Oh, dear. You seem to be assuming that your application is your intellectual property, and I'm afraid it's probably not. Before you rush out and hire a lawyer, take a look at a book called Protecting Your Number One Asset: Creating Fortunes From Your Ideas (Warner Books, $19.95), which covers all the legal permutations of your situation in admirably plain English. It was written by an intellectual-property attorney, Michael Lechter, of counsel to Squire Sanders & Dempsey (www.ssd.com), who told me that he thinks you're on pretty shaky ground: "As a rule, anything you invent or create while you're a full-time employee belongs to the company, especially if it was arguably within the scope of what they hired you to do. If you want to hold the copyright on it, you may have to recreate it from scratch after you leave your job."

Of course, if you're feeling brave, you could try copyrighting it now and see how big a fight the company puts up. With any luck, it will decide it's not worth a David-and-Goliath court battle, as, for instance, NBC did when David Letterman took his "Top Ten List" and "Stupid Pet Tricks" to CBS. After much harrumphing about its intellectual-property rights, the peacock network backed down, perhaps because Letterman was having too much fun. "If they sue me, that's okay," he said. "And if this goes to trial, get a seat down front."

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