BUE Chapter 10

Which of the following is true of gatekeepers? a. They are not bound to ethical duties. b. Investors and boards are examples of gatekeepers. c. They serve as intermediaries between market participants. d. They are not responsible for ensuring conformance to fairness in the marketplace.

Which of the following rely on gatekeepers for fair and effective functioning of economic markets? a. Bankers b. Auditors c. Accountants d. Financial analysts

The function of auditors as gatekeepers is to: a. verify a company's financialstatements so that investors' decisions are free from fraud and deception. b. evaluate a company's financial prospects or creditworthiness, so thatbanks and investors can make informed decisions. c. ensure that decisions and transactions conform to the law. d. function as intermediaries between a company'sstockholders and its executives.

. Identify the gatekeepers who evaluate a company's financial prospects or creditworthiness, so that banks and investors can make informed decisions. a. Investors b. Attorneys c. Auditors d. Analysts

Identify the gatekeepers who ensure that decisions and transactions conform to the law. a.Accountants b. Attorneys c. Auditors d. Analysts

Identify the gatekeepers whofunction as intermediaries between a company'sstockholders and its executives. a. Accountants b. Auditors c. Board of directors d. Financial analysts

Which of the following gatekeepers guarantee that executives act onbehalf of the stockholders' interests? a. Accountants b. Board of directors c. Auditors d. Analysts

. A _____exists where a person holds a position of trust that requires that he exercise judgment on behalf of others, but where his personal interests conflict with those of others. a. duty of care b. community of interest c. conflict of interest d. duty of loyalty

A professional is said to have _____ if he has a professional and ethical obligation to clients rooted in trust that overrides his personal interests. a. statutory duties b. executive rights c. creditor claims d. fiduciary duties

Which of the following statements is true of conflicts of interests? a. Self-interest makes it easy for individuals to fulfill their gatekeeper duties. b. Legal protection cannot shield professionals from conflicts of interests. c. Cross-selling of consulting services reduces conflicts of interests. d. Excessive executive compensation involves conflicts of interests.

Which of the following statements is true of the Sarbanes-Oxley Act? a. It is also known as the Financial Services Modernization Act of 2002. b. It is enforced by the Financial Accounting Standards Board. c. It was passed by Congress because corporate boards failed to police themselves. d. It fails to provide oversight in terms of direct lines ofaccountability and responsibility.

Which provision of the Sarbanes-Oxley Act prohibits various forms ofprofessional services that are determined to be consulting rather than auditing? a. Section 201 b. Section 301 c. Section 307 d. Section 404

Section 201 of the Sarbanes-Oxley Act addresses the: a. rules of professional responsibility for attorneys. b. codes of ethics for senior financial officers. c. management assessment of internal controls. d. services outside the scope of auditors.

Which of the following provisions of the Sarbanes-Oxley Actmandates majority of independents on any board andtotal absence of current or prior business relationships? a. Section 407 b. Section 301 c. Section 406 d. Section 307

. Section 307of the Sarbanes-Oxley Act addresses the: a. rules of professional responsibility for attorneys. b. codes of ethics for senior financial officers. c. management assessment of internal controls. d. services outside the scope of auditors.

Which of the following provisions of the Sarbanes-Oxley Actrequires lawyers to report concerns of wrongdoing if not addressed? a. Section 407 b. Section 301 c. Section 406 d. Section 307

Section 404of the Sarbanes-Oxley Act addresses the: a. rules of professional responsibility for attorneys. b. codes of ethics for senior financial officers. c. management assessment of internal controls. d. services outside the scope of auditors

Section 406of the Sarbanes-Oxley Act addresses the: a.rules of professional responsibility for attorneys. b. codes of ethics for senior financial officers. c. management assessment of internal controls. d. services outside the scope of auditors.

. _____ of the Sarbanes-Oxley Act addresses the disclosure of audit committee financial expert. a. Section 404 b. Section 301 c. Section 407 d. Section 307

Which of the following is a criticism of the Sarbanes-Oxley Act? a. It excludes requirements for certification of documents by officers. b. It imposes extraordinary financial costs on the firms. c. It does not requirelawyersto report concerns of wrongdoing if not addressed. d. It does not require codes of ethics for senior financial officers.

Identify the external mechanism that seeks to ensure ethical corporate governance. a. The Sarbanes-Oxley Act b. The COSO framework c. The European Union 7th Directive d. The European Union 4th Directive

Which of the following is an internal mechanism that seeks to ensure ethical corporate governance? a.European Union 8th Directive b. The Sarbanes-Oxley Act c. The COSO framework d. European Union 7th directive

Which of the following statements is true of the Committee of SponsoringOrganizations? a. It improves financial reporting through a combination of controls and governancestandards called the External Control—Integrated Framework. b. It is an external mechanism that seeks to ensure ethical corporate governance. c. It describes control as encompassing thoseelements of an organization that, taken together, support people in the achievementof the organization's objectives. d. It replaced the Sarbanes-Oxley Act to ensure ethical corporate governance.

Which of the following elements of COSO sets the tone or culture of a firm? a. Ongoing monitoring b. Information and communications c. Risk assessment d. Control environment

Which of the following elements of COSO refers to policies and procedures that support the cultural issues such as integrity, ethical values, competence, philosophy, and operating style? a. Ongoing monitoring b. Information and communications c. Control activities d. Risk assessment

Identify the COSO element that is directed at supporting the control environmentthrough fair and truthful transmission of facts. a. Risk assessment b. Information and communications c. Control activities d. Ongoing monitoring

Which of the following COSO elements provides assessment capabilities and uncovers vulnerabilities? a. Risk assessment b. Information and communications c. Control activities d. Ongoing monitoring

According to the COSO framework, which of the following is true of internal control? a. It is not geared to the achievement of objectives in overlapping categories. b. It can provide absolute assurance to an entity's board. c. It is an end in itself, not a means to an end. d. It is affected by people at every level of an organization.

Which of the following is true of the COSO controls and the Sarbanes-Oxley requirements? a. They result in less transparency in ensuring ethical corporate governance. b. They encourage greater accountability for financial stewardship. c. They result in a lesser emphasis to prevent any financial misconduct. d. They do not impact executives, boards, and internal audits.

Which of the following legal duties of board members suggests that a director does not need to be an expert or actually run the company? a. Duty of care b. Duty of good faith c. Duty of candor d. Duty of loyalty

Identify the duty of obedience according to which board members should strive toward corporate objectives, and are not permitted toact in a way that is inconsistent with the central goals of the organization? a. Duty of care b. Duty of good faith c. Duty of candor d. Duty of loyalty

Which of the following duties of board members suggests that conflicts of interest are always to be resolved in favor of the corporation? a. Duty of care b. Duty of good faith c. Duty of candor d. Duty of loyalty

Whichof the following is true of Federal Sentencing Guidelines for boards? a. The board must be knowledgeable about the objectives and process of the ethics program rather than simply the mere contents of a training session. b. The board should avoid exercising reasonable oversight with respect to the effectiveness and implementation of the ethics program. c. The board should leave the evaluation of all board policies, procedures, governance structure, and position descriptions to the executives. d. The board need not work with executives to analyze the incentives for ethical behavior.

Which of the following are additional ethical responsibilities board members should have beyond legal obligations? a. They should maintain closed conversations within the firm. b. They should refrain from providing oversight. c. They should be critical in their inquiries about corporate vulnerabilities. d. They should pay out a significant amount of the company's sustainable growth dollars to its chief executives in compensation.

Tom, an employee of Electronixx, adjusted credits and debits of the company's ledger to show high profits. He also created false documents, underreported his income, and evaded paying taxes for a year. Tom can be convicted for _____. a. unethical insider trading b. conflicts of interest in corporate governance c. conflicts of interest in accounting d. unfair executive excessive compensation

According to Kevin Bahr, which of the following is a cause for conflicts in the financial markets? a. The independence and lack of expertise of audit committees b. The presence of shareholder activism c. Long-term executive greed versus short-term shareholder wealth d. Self-regulation of the accounting profession

Which of the following is true of excessive compensation packages? a. When executivecompensation is tied to stock price, executives have a strong incentive to focus onlong-term corporate interests rather than short-term stock value. b. When hugeamounts of compensation depend on quarterly earnings reports, there is a strongincentive to manipulate those reports in order to achieve the money. c. Economic fairness and personal morality always exists in executives receiving lofty compensation packages. d. Excessive compensation packages serve corporate interests when they provide an incentive that is not based on executive performance or accomplishments.

Which of the following scenarios gives rise to conflicts of interests in corporate governance? a. Senior executives determining the compensation received by board members b. Board members hand-selecting employees in their company c. A CEO not chairing the board of directors d. The absence of cross-fertilization of boards

Which of the following exemplifies insider trading? a. Underreporting income b. Falsifying account documents c. Misappropriation of proprietary knowledge d. Illegally evading income taxes

Sara, an employee of PentaComp Inc., passed on confidential information of her company to her friend. Her friend benefitted from selling PentaComp's stock based on the information shared by Sara. In this scenario, Sara can be convicted of _____. a. insider trading b. falsifying documents c. underreporting income d. evading taxes