governance

Investors should rely on which of the following to make rational, informed investment? a. Accurate financial statements and reports. b. Former employees. c. Internet "blogs" and message boards. d. Insider information

a

Suppliers and customers reward good corporate performance by: a. Actively and favorably doing business with the company. b. Investing in the company at the lower desired rate of return of investment. c. Disinvesting or demanding a higher rate of return on their investment. d. Giving extra benefits to the management of the company.

a

The Web site disclosure required for amendments and waivers to the code of ethics must be maintained online for which of the following: a. 12 months or otherwise be retained for at least five years. b. 24 months or otherwise be retained for at least five years. c. 5 months or otherwise be retained for at least five years. d. 12 months or otherwise be retained for at least two years

a

The director position that is utilized in CEO duality situations to keep the board objective and independent of management is the: a. Lead director. b. Covering director. c. Prime director. d. None of the above

a

The goal of corporate governance and business ethics education is to: a. Teach students their professional accountability and to uphold their personal integrity to society. b. Change the way in which ethics is taught to students. c. Create more ethics standards by which corporate professionals must operate. d. Increase the workload for accounting students.

a

The internal audit function is least effective when the department: a. Is nonindependent. b. Is competent. c. Is objective. d. Exhibits integrity

a

The two broadly defined and commonly accepted ethical theories are: a. Consequentialism and nonconsequentialism. b. Egoism and utilitarianism. c. Consequentialism and egoism. d. Consequentialism and utilitarianism.

a

The ultimate responsibility for maintaining an appropriate balance between management and the owners rests with: a. Board of directors. b. Managers. c. Shareholders. d. Regulating entities

a

Which of the following are considered to be the second-tier stakeholders in the company? a. Lenders and creditors. b. Customers and suppliers. c. Shareholders. d. Governmental oversight bodies (e.g., PCAOB, SEC).

a

Which of the following is not an aspect of corporate governance reporting/disclosures? a. Financial position and earnings analysis. b. Compensation policy for directors and officers. c. Material information on multiple bottom lines sustainability performance. d. Major share ownership and voting rights.

a

With the ___________ the primary goal is to achieve economic performance, while proper consideration is given to other measures including social, ethical, and environmental (SEE) issues. a. Multiple bottom lines (MBL) objectives. b. PCAOB Auditing Standards. c. SEC Final Statements. d. Generally Accepted Accounting Principles (GAAP)

a

. Under the _____________, both internal and external corporate governance mechanisms are intended to induce managerial actions that maximize profit and shareholder value. a. Shareholder theory. b. Agency theory. c. Stakeholder theory. d. Corporate governance theory.

b

. Which of the following would be considered principles-based? a. Step-by-step directions for a temp worker. b. Best practices. c. U.S. GAAP. d. Shareholder voting procedures

b

A consequence of reducing costs by lowering the quality of products and services is an example of: a. Regulatory-based incentives. b. Market-based incentives. c. Organization-based incentives. d. Individual-based incentives.

b

A director who notifies the company of a possible investment opportunity instead of acting upon it himself is demonstrating the: a. Duty of obedience. b. Duty of loyalty. c. Duty of care. d. Duty of fair disclosure.

b

An organization's appropriate tone at the top promoting ethical conduct is an example of: a. Ethics sensitivity. b. Ethics incentives. c. Ethical behavior. d. Consequentialist

b

Congress passed the Sarbanes-Oxley Act of 2002 to: a. Enhance the burden of financial reporting. b. Establish a new regime of investor protection. c. Increase the workload of auditors of public companies. d. Provide more protection to the managers of public companies

b

External governance mechanisms such as the capital market and state and federal regulations are designed to: a. Keep companies from providing a large earnings-per-share. b. Align the interests of insiders with the interests of outsiders. c. Prohibit corporate takeover efforts. d. Ensure management makes budget.

b

Financial resources are made available to the board for all of the following except: a. Compensating directors. b. Reimbursing personal expenses. c. Hiring external auditors. d. Obtaining legal council.

b

Management's implementation of board strategies and the board serving as the key decision maker are best associated with: a. Certifying board. b. Operating board. c. Passive board. d. Intervening board

b

Multiple-bottom-lines focus on: a. Improving internal control over financial reporting. b. Enhancing organizational disclosures concerned with social, environmental, and ethical issues. c. Creating and sustaining effective corporate structure. d. Reporting on the many ventures in which the organization is involved.

b

Shareholders own corporations and the ______________ is elected to make business decisions on behalf of shareholders. a. Chief executive officer. b. Board of directors. c. Chief compliance officer. d. Legal counsel.

b

The Federal Sentencing Guidelines require: a. Swift and harsh penalties. b. Compliance and ethics training. c. Companies to eliminate incentives for ethical performance. d. Martha Stewart treatment for all financial statement frauds

b

The Sarbanes-Oxley Act of 2002 provided guidance for all of the following except: a. Executive certifications of internal controls and financial statements. b. Limits on executive and director pay. c. Audit committee oversight of financial reporting and audit activities. d. Director independence.

b

The elements of a multiple bottom line (MBL) approach are economic, social, ethical, and: a. Equity. b. Environmental. c. Eccentricity. d. None of the above.

b

The ownership structure that may best characterize a situation in which a typical shareholder may have little power to control the company's affairs beyond voting power to elect members of the board of directors is: a. Centralized ownership structure. b. Dispersed ownership structure. c. Two-tier ownership structure. d. None of the above.

b

The relationship between public companies and shareholders, creditors, auditors, etc. is: a. Marital. b. Contractual. c. Legally nonbinding. d. There is no relationship

b

Which of the following is false concerning market mechanisms? a. Market mechanisms are used to monitor, control, and discipline business affairs. b. Market mechanisms are effective as the only control structure. c. Market mechanisms require additional corporate governance reforms to provide adequate controls. d. Market mechanisms were discussed as early as 1776.

b

Which of the following would be considered the least effective and appropriate best practice of a public company? a. Executive compensation programs should be designed and implemented to ensure alignment of interest with the long-term interests of shareowners. b. The CEO and chairperson of the board should be the same individual to allow for the congruence of management and director interests. c. The board of a publicly owned corporation should have a substantial degree of independence from management. d. The board does not impose term limits, as this could unnecessarily interfere with the continuity, diversity, developed experience and knowledge, and long-term outlook the board must have.

b

. Corporate governance reports are recommended to include all of the following disclosures except: a. The company's vision, strategies, and missions in creating stakeholder value. b. The board of director's composition, independence, involvements, functions, and evaluation. c. Competitive trade secrets and research reports. d. The company's financial, economic, social, and environmental indicators.

c

. The Combined Code is the leading corporate governance directive for: a. The United States. b. Germany. c. The United Kingdom. d. Japan.

c

A compliance culture can be promoted through the establishment of a centralized: a. Chief executive officer. b. Chief governance officer. c. Chief compliance officer. d. Board of directors.

c

A well-balanced implementation of the seven corporate governance functions should not result in: a. Responsible corporate governance. b. Reliable financial reports. c. Harm to the company. d. Credible audit services.

c

All of the following describe agency problems and costs except: a. The agency problem exists when the desires of management and shareholders are not in accord. b. Agency costs arise where there is "information asymmetry" between management and shareholders. c. Agency problems can be perfectly solved and agency costs can be totally eliminated. d. The agency problem exists when the company's board of directors fails to fulfill their assigned oversight role.

c

An example of an internal governance mechanism is a(n): a. Shareholder activist. b. Shareholder proposal. c. Audit committee. d. Federal statute.

c

An independent director is one who: a. Did not attend a school supported by the company. b. Does not have outside relationships with other directors. c. Does not have any other relationships with the company other than his or her directorship. d. All of the above

c

Conflicts of interest among corporate governance participants are referred to as an: a. "Anything you can do, I can do better" problem. b. Alignment problem. c. Agency problem. d. There are no conflicts of interest among corporate governance participants.

c

Effective corporate governance does all of the following except: a. Ensure corporate accountability. b. Enhance the integrity and efficiency of the capital market. c. Eliminate the prospect of fraud within an organization. d. Enhance the reliability and quality of public financial information.

c

GAAP stands for: a. Generally Accepted Accounting Procedures. b. Generally Abnormal Accounting Procedures. c. Generally Accepted Accounting Principles. d. Generally Abnormal Accounting Principles

c

Gatekeepers should: a. Be employees of the company and use their internal insight to effectively monitor corporate governance practices. b. Accept the representations of management on full faith. c. Be fully independent from the company. d. Fulfill their professional responsibility to the management of the company

c

One of the objectives of the Sarbanes-Oxley Act was to: a. Increase the cost of compliance with federal regulations. b. Force foreign companies to delist from U.S. capital market exchanges. c. Improve the quality and transparency of financial reporting. d. Increase the compliance burden for small companies.

c

Public companies are required to comply with all of the following except: a. Federal and state laws and regulations. b. Listing standards of their respective exchange. c. Best practices of leading competitors. d. All of the above require compliance.

c

Ratification of management decisions and minimal liability defines which best practices board structure? a. Certifying board. b. Operating board. c. Passive board. d. Intervening board

c

The primary mission of a public company is to: a. Make money now without planning for the future. b. Keep management happy. c. Create sustainable and enduring corporate value. d. Remain idle and complacent with current performance

c

The primary mission of public companies is regarded as: a. Reporting increasing revenues. b. Decreasing unemployment rates. c. Creating sustainable and enduring value. d. Decreasing costs

c

The primary stakeholders are: a. Customers. b. Suppliers. c. Shareholders. d. Creditors.

c

The second tier of the stakeholder hierarchy consists of all of the following except: a. Creditors. b. Employees. c. Shareholders. d. Suppliers.

c

Which of the following is false? a. Public companies do not usually report their corporate governance activities. b. Corporate governance reporting reports the effectiveness, responsiveness, and credibility of an organization's corporate governance measures. c. Corporate governance reports are required to be prepared in conjunction with the annual 10-k filed with the SEC. d. Corporate governance standards should be developed to assess, attest to, and report on the quality and effectiveness of corporate governance.

c

Which of the following is not a factor that can lead to companies misrepresenting their financial position? a. Performance is below their industry's average performance. b. Performance is significantly above their own past performance. c. The company has an established and well-defined code of corporate ethics. d. Their CEO receives a high proportion of total compensation as stock options.

c

Which of the following is not a key corporate gatekeeper? a. Board of directors. b. External auditor. c. Governmental oversight bodies (e.g., PCAOB, SEC). d. Legal counsel.

c

Which of the following is not crucial to the integrity and efficiency of capital markets and economic growth? a. Sustainability and financial health of public companies. b. Public trust. c. High stock prices. d. Investor confidence.

c

Which of the following is/are the key component(s) of an organization's control environment as set forth in both reports of the Committee of Sponsoring Organizations of the Treadway Commission (COSO)? a. Integrity. b. Ethical conduct. c. Both (a) and (b). d. Neither (a) nor (b)

c

Which of the following statements best describes the compliance function? a. The compliance function is composed of a set of laws, regulations, rules, and standards established by state and federal legislators which are followed only when beneficial. b. Compliance is following your internal bylaws and regulations. c. The compliance function is composed of a set of laws, regulations, rules, and standards established by state and federal legislators which must be followed regardless of the cost. d. Compliance is a nuisance that deters from the company's main goal of making money.

c

Which of the following statements is not true concerning corporate governance mechanisms? a. The effectiveness of corporate governance mechanisms also depends on the costbenefit trade-offs among these mechanisms. b. Corporate governance mechanisms create effective systems of checks and balances. c. Internal and external mechanisms work best when used independently of the other. d. None of the above are true statements.

c

An advantage of a corporation is: a. Limited liability for the owners. b. Unlimited life of the corporation. c. Ease of transferability of ownership interests. d. All are advantages of a corporation.

d

Companies need ethics and business programs in order to effectively and efficiently perform which of the following functions? a. Diversify personnel services. b. Satisfy the expectations of the public and their stakeholders. c. Comply with applicable laws, regulations, rules, standards, and guidelines. d. All of the above.

d

Corporate governance in the United States is influenced by: a. State and federal statutes. b. Court decisions. c. Listing standards and best practices. d. All of the above.

d

Public companies must make their code of ethics publicly available through: a. SEC annual reports. b. Corporate Web sites (if available). c. Hard copies (upon request). d. All of the above.

d

Signatory companies, as part of their public accountability process, are required to: a. Conduct internal audits. b. Assess compliance of internal audits. c. Provide officer certifications. d. All of the above.

d

The chairperson of the board of directors and CEO should be leaders with: a. Vision and problem solving skills. b. The ability to motivate. c. Business acumen. d. All of the above.

d

The corporate governance structure is shaped by: a. Internal governance mechanisms. b. External governance mechanisms. c. Policy interventions through regulations. d. All of the above.

d

The corporate governance structure of a company reflects the individual companies': a. Cultural and economic system. b. Legal and business system. c. Social and regulatory system. d. All of the above.

d

The improvement of corporate governance and financial reporting by SOX should add the following benefits except: a. Improved investor confidence. b. Increased firm value. c. Decreased cost of capital. d. Increased audit fees.

d

The increasing trend toward more involvement of the board of directors in the company's ethics program is influenced by: a. Consequences of reported financial scandals. b. Auditors of low-profile companies. c. Development of corporate governance reforms in promoting ethical conduct. d. Both (a) and (c).

d

The oversight function of the board of directors consists of: a. Representing shareholders and protecting their interests. b. Approving the company's major operating, investing, and financial activities. c. Holding the board, its committees, and its directors accountable for the fulfillment of the assigned fiduciary duties and oversight functions. d. All of the above.

d

The primary responsibilities of the board of directors include all but which of the following: a. Define the company's mission and goals. b. Establish or approve strategic plans and decisions to achieve these goals. c. Appoint senior executives to manage the company in accordance with the established strategies, plans, policies, and procedures. d. Make managerial decisions that will increase the company's stock price.

d

The structure of a public company's board of directors is established by its: a. Articles of incorporation. b. Bylaws. c. Corporate governance policies. d. All of the above.

d

Value protection is intended to protect the interests of all stakeholders. Such interests include: a. Government—tax revenue. b. Employee—job security. c. Shareholder—wealth (stock appreciation and dividends). d. All of the above

d

Which of the following are not considered third-tier stakeholders? a. Employees. b. Customers. c. Suppliers. d. Creditors.

d

Which of the following can be diversification classifications? a. Age. b. Gender. c. Ethnicity. d. All of the above

d

Which of the following does not effectively characterize the post-SOX era: a. A change in the regulatory framework for the auditing profession through the establishment of the PCAOB. b. The move toward more transparent and timely financial reports. c. A redefining of roles and responsibilities of those who are directly or indirectly involved in the financial reporting process. d. The reduction of the importance and role of ethics within publicly traded companies.

d

Which of the following is not a primary source of corporate governance in the U.S.? a. Federal securities laws. b. Best practices. c. Listing standards. d. All of the above are primary sources of corporate governance in the U.S

d

Which of the following statements is true? a. An external audit can be performed by anyone with an accounting degree. b. An external audit is required for any company with annual revenues greater than $5 million. c. An external audit is designed to prove that the financial statements are wrong. d. An external audit must be performed by an independent, public accounting firm

d

Which of the following would be an example of a corporate gatekeeper? a. Independent and competent board of directors. b. Independent and competent external auditor. c. Objective and competent legal counsel or financial advisor. d. All of the above would be an example of a corporate gatekeeper

d