Dear Selena,
The process that you describe is well known; you are right that the questionnaire filled in the manner you described need not represent the true picture of the unit. Organizations do have other means to reveal the issues glossed over in the questionnaire through different functional audits and assessments, like for example, internal audit, risk audit, management audit, etc. If a unit has the habit of glossing over its shortcomings, and other audits and reviews point to these shortcomings, the unit faces the prospect of being marked for further HQ reviews...which is not desirable.
With kind regards,
Ramakrishnan