Q&A Hero

Q: Sebastian and Amy are arguing over secondary legislations that were in place prior to the passing of the Foreign Corrupt Practices Act (FCPA). Amy is of the opinion that the FCPA encompasses all secondary measures that were in use to prohibit corrupt practices. Sebastian disagrees with Amy on this point. Which of the following, if true, would strengthen Amy's argument? A. The FCPA requires only partial disclosure of funds that were taken out of or brought into the United States. B. The FCPA does not specify that using wire communications to transact fraudulent schemes is illegal. C. The FCPA requires corporations to fully disclose all transactions conducted with foreign officials in line with the SEC provisions. D. The FCPA does not fine companies for failing to disclose payments made to foreign officials under its securities rules.

Q: Which of the following statements is true of the Foreign Corrupt Practices Act? A. It is jointly enforced by the Federal Bureau of Investigation and the Ministry of Internal Affairs. B. It encompasses all the measures that were previously used to control unethical overseas transactions by U.S. corporations. C. It replaced the Dodd-Frank Wall Street Reform and Consumer Protection Act. D. It ignores stipulations laid down by the Bank Secrecy Act and the Mail Fraud Act.

Q: Which of the following legislations required full disclosure of funds that were taken out of or brought into the United States before the Foreign Corrupt Practices Act was introduced? A. The Trade Commission Act B. The Consumer Protection Act C. The Bank Secrecy Act D. The Government Corporate Control Act

Q: Which of the following legislations could fine companies for failing to disclose bribes and other forms of payments to foreign officials before the Foreign Corrupt Practices Act was introduced? A. The Securities and Exchange Commission B. The Dodd-Frank Wall Street Reform and Consumer Protection Act C. The U.S. Federal Sentencing Guidelines for Organizations D. The Ethics Resource Center

Q: Which of the following is a legislation that was introduced to control bribery and other less obvious forms of payment to overseas officials and politicians by American publicly traded companies? A. The Foreign Assistance Act B. The Fair Credit Reporting Act C. The Fair Business Standards Act D. The Foreign Corrupt Practices Act

Q: Which of the following did the government formulate to penalize corporate wrongdoing? A. The Glass-Steagall Act B. The Sarbanes-Oxley Act C. The Gramm-Leach-Bliley Act D. The Taft-Harley Act

Q: Which of the following key U.S. legislations is an attempt to discourage, if not prevent, illegal conduct within organizations? A. The U.S. Federal Sentencing Guidelines for Organizations B. The U.S. Federal International Customary Law C. The U.S. Federal Procurement Regulations System D. The U.S. Federal Standards for Commercial Services

Q: The original Volcker rule sought to allow trading of all derivatives without discrimination.

Q: The Volcker rule proposed that there should be a key restriction in the legislation to limit the ability of banks to trade on their own accounts.

Q: The Financial Stability Oversight Council is led by the Treasury secretary and is made up of top financial regulators.

Q: The Financial Stability Oversight Council is not authorized to act against a bank that poses a threat to the financial stability of the United States if its assets exceed $50 billion.

Q: The authority of the Consumer Financial Protection Bureau does not extend to examining and enforcing regulations for banks and credit unions if their assets exceed $10 billion.

Q: The Consumer Financial Protection Bureau is a government agency within the Federal Reserve that oversees financial products and services.

Q: The Dodd-Frank Wall Street Reform and Consumer Protection Act Legislation was established to expand the foreign trade sector.

Q: In September and October 2008, financial markets around the world suffered a severe crash as a consequence of aggressive lending to subprime borrowers in a deregulated environment.

Q: Title IX of the Sarbanes-Oxley Act requires CEOs and CFOs to certify their periodic reports and imposes penalties for certifying a misleading or fraudulent report.

Q: Title VIII of the Sarbanes-Oxley Act imposes fines on employees for lying to other employees regarding company benefits and pay.

Q: Title VI of the Sarbanes-Oxley Act provides additional funding and authority to the Securities and Exchange Commission to follow through on all the new responsibilities outlined in the act.

Q: Title III of the Sarbanes-Oxley Act requires senior auditors to rotate off an account every five years and junior auditors every seven years.

Q: As an oversight board, the Public Company Accounting Oversight Board (PCAOB) was charged with maintaining compliance with established standards and enforcing rules and disciplinary procedures for those organizations that found themselves out of compliance.

Q: The creation of the Public Company Accounting Oversight Board (PCAOB) as an independent oversight body was an attempt to reestablish the perceived independence of auditing companies that faced serious questioning after several corporate scandals.

Q: The Sarbanes-Oxley Act is a legislative response to the corporate accounting scandals of the early 2000s that covers the financial management of businesses.

Q: The Revised Federal Sentencing Guidelines for Organizations required evidence of actively promoting ethical conduct rather than just complying with legal obligations.

Q: The concept of an ethical culture was recognized, for the first time, as a foundational component of an effective compliance program under the Revised Federal Sentencing Guidelines for Organizations.

Q: According to the Federal Sentencing Guidelines for Organizations, criminal offenses, whether actual or suspected, must generate an appropriate response, analysis, and corrective action in order to establish an effective compliance program.

Q: In order to minimize an organization's culpability score, the Federal Sentencing Guidelines for Organizations prescribes that its employees be granted absolute discretionary authority.

Q: Under the Federal Sentencing Guidelines for Organizations, a judge has the discretion to impose a so-called death penalty upon an organization, where the fine matches all the organization's assets.

Q: Under no circumstances can the culpability score be increased or decreased.

Q: The culpability score, according to the Federal Sentencing Guidelines for Organizations, is the calculation of an organization's degree of blame or guilt, and it is a multiplier of the base fine up to 40 times.

Q: The base fine of an organization sentenced under the Federal Sentencing Guidelines for Organizations is always calculated after its culpability score.

Q: The Federal Sentencing Guidelines for Organizations table factors in both the nature of the crime and the amount of the loss suffered by the victim.

Q: The sentence of an organization punished under the Federal Sentencing Guidelines for Organizations is calculated through a three-step process: determination of mitigating factors, evaluating the credit rating, and the determination of base fine.

Q: In its mission to promote ethical organizational behavior and increase the costs of unethical behavior, the Federal Sentencing Guidelines for Organizations establishes a definition of an organization that is so broad as to prompt the assessment that "no business enterprise is exempt."

Q: According to the Federal Sentencing Guidelines for Organizations, businesses cannot be held liable for the criminal acts of their employees and agents.

Q: Under the Foreign Corrupt Practices Act, payments to foreign officials made in connection with the promotion or demonstration of company products or services are legal.

Q: Payments to foreign officials made in connection with expediting lawful customs clearances and obtaining the issuance of entry or exit visas are considered bribes under the Foreign Corrupt Practices Act.

Q: Grease payments are illegal under the Foreign Corrupt Practices Act.

Q: The Securities and Exchange Commission can enforce criminal penalties of up to $2 million per violation of the Foreign Corrupt Practices Act for corporations and other business entities.

Q: A company can be found in violation of the Foreign Corrupt Practices Act even if its bribe is unsuccessful.

Q: The processing of governmental papers, such as visas, is an example of a routine governmental action.

Q: Under the Foreign Corrupt Practices Act, facilitation payments are payments that are acceptable (legal), provided they expedite or secure the performance of a routine governmental action.

Q: The Foreign Corrupt Practices Act focuses on disclosure, which requires corporations to fully reveal any and all transactions conducted with foreign officials and politicians, in line with the Securities and Exchange Commission provisions.

Q: The Foreign Corrupt Practices Act encompasses all the secondary measures that were in use to prohibit bribery and other illegal forms of payment to foreign officials by focusing on two distinct areasdisclosure and prohibition.

Q: The Credit Rating Agency and the New York Stock Exchange are the only bodies authorized to enforce the Foreign Corrupt Practices Act.

Q: Prior to the passing of the Foreign Corrupt Practices Act, the Securities and Exchange Commission was not authorized to penalize company executives for failing to disclose payments under its securities rules.

Q: Prior to the passing of the Foreign Corrupt Practices Act, making illegal payments to foreign officials was not punishable through any type of legislation.

Q: The Foreign Corrupt Practices Act was introduced to more effectively control bribery and other less obvious forms of payment to foreign officials and politicians by American publicly traded companies as they pursued international growth.

Q: _____ is about the way in which boards oversee the running of a company by its managers and how board members are, in turn, accountable to shareholders and the company. A. Management consulting B. Corporate governance C. Corporate transparency D. Management education

Q: Which of the following checks, when in place, reduces the risk of fraud or unethical behavior in a corporation? A. The participants of the governance process must be made accountable effectively. B. The roles of the chief executive officer and the chairperson of the board must be merged. C. The authority of the chief executive officer should be absolute and unchallenged. D. The company should follow the "comply or explain" approach to governance.

Q: A commitment to good corporate governance: A. necessitates decreasing the independence of a board. B. often affects a company's public image adversely. C. means adopting the "comply or explain" approach. D. makes a company more attractive to investors.

Q: Which of the following is true of managers in an organization with good corporate governance? A. They must be nominated by the compensation committee. B. They should fulfill a fiduciary responsibility to the owners. C. They must consider only the single bottom line of profitability. D. They should follow an exclusive, rather than an internal, approach.

Q: The fiduciary responsibility of a manager is ultimately based on his or her _____. A. educational background B. work experience C. charisma D. trust

Q: Which of the following is true of ethical misconduct? A. It can occur even if all the checks governing a board of directors is in place. B. It cannot be influenced by the personalities of individual board members. C. It is least likely to occur when a CEO has more authority than board members. D. It is barred effectively by the "comply or explain" approach to corporate governance.

Q: Walter Salmon's checklist to assess the quality of the board recommends: A. following an exclusive rather than an inclusive approach. B. the consideration of a single bottom line of profitability. C. that the roles of employees in senior positions must be increased. D. that there be three or more outside directors for every insider.

Q: Which of the following principles should a company follow for effective corporate governance? A. The appointments to the board of directors should always be done on the basis of quid pro quo agreements. B. The board of directors and the CEO should work together when evaluating risk-versus-reward scenarios. C. The board of directors should consist solely of members who have direct connections to the company. D. The roles of the chairperson of the board and that of the chief executive officer should be merged.

Q: Which of the following actions is a step toward running a company successfully? A. Merging the roles of the chief executive officer and the chairperson of the board B. Liberating the chief executive officer from constraints laid by the board members C. Evaluating risk-versus-reward scenarios frequently, regardless of the company's size D. Reducing the board's independence and decreasing the power of stockholders

Q: Which of the following is true of the CRAFTED principles of governance? A. It recommends creating a culture of consistency, accountability, and responsibility. B. It considers only the financial profitability of all operational actions. C. It favors a tight information flow managed by a company's senior executive leaders. D. It approves of selecting members of a board by trading professional favors.

Q: The merging of the roles of the chief executive officer and the chairperson of a board is inadvisable because _____. A. the independence of the board is maximized B. the financial goals of a company takes utmost importance C. the power of the chief executive officer decreases D. the power of the stockholders is minimized

Q: Which of the following is an effect of merging the roles of the chief executive officer and the chairperson of the board? A. The power of the stockholders is maximized. B. The oversight provided by the board is increased. C. The independence of the board is compromised. D. The influence of the CEO is minimized.

Q: Merging the roles of the chief executive officer and the chairperson of the board of an organization is advantageous because _____. A. the power of the stockholders and the independence of the board are increased B. the power vested in external public shareholders is decreased C. the checks that the board set in place against unethical behavior become more effective D. the board is led by someone familiar with the inner workings of the organization

Q: In what way did the "comply or else" approach differ from the "comply or explain" approach to corporate governance? A. Unlike "comply or else," the "comply or explain" approach penalized companies that don't conform to regulations heavily. B. Unlike "comply or explain," the "comply or else" approach did not offer corporations an easy way to avoid conforming to the operating standards. C. Unlike "comply or explain," the "comply or else" approach had a vague definition for what constitutes an acceptable explanation for noncompliance. D. Unlike "comply or else," the "comply or explain" approach was successful in discouraging unethical behavior in corporations.

Q: Which of the following is true of the "comply or else" approach to corporate governance? A. It set stiff financial penalties for companies that refused to abide by the operational standards. B. It gave companies the flexibility to comply with the standards or explain why they didn't in their corporate documents. C. Its definition of what would be an acceptable explanation for not complying was not clear. D. It was not incorporated into the Sarbanes-Oxley Act of 2002which governs ethical behavior in corporations.

Q: The _____ of 2002 incorporates the "comply or else" approach to corporate governance. A. Sarbanes-Oxley Act B. Comstock Act C. Multi-divisional Form Act D. Trade Act

Q: The "comply or explain" approach to corporate governance was problematic because _____. A. it did not take into consideration the remuneration packages provided to the employees of a company B. its stringent measures to deny flexibility to comply with governance standards caused organization-wide friction C. its definition of what constitutes an acceptable explanation for not complying was vague D. it expected corporations to abide by an extremely rigid set of operating standards

Q: Which of the following is true of the "comply or explain" approach to corporate governance? A. It set stiff financial penalties for companies that refused to abide by the operational standards. B. It gave companies the flexibility to comply with the governance standards or justify why they didn't in their corporate documents. C. It was extremely explicit when it came to defining what would be acceptable explanations for noncompliance. D. It proved to be an effective deterrent to financial scandals and reduced the incidence of unethical behavior in corporations.

Q: One of the common characteristics of the King I and King II reports on corporate governance was that _____. A. they both limited their scope to the financial and regulatory accountability of corporations B. they both advocated following the traditional, single bottom line of profitability C. they both rejected the triple bottom line suggested by the Cadbury approach D. they both incorporated a code of corporate practices that looked beyond corporations

Q: The King II report, released by the committee formed by Mervyn King, on corporate governance: A. strongly advocated that companies follow the traditional, single bottom line of profitability. B. did not look beyond companies or take their impact upon the larger community into account. C. formally recognized the economic, environmental, and social aspects of a company's activities. D. did not recognize the involvement of a corporation's stakeholders in the efficient operation of an organization.

Q: A feature of the King I report on corporate governance, established by Mervyn King in 1994, is that _____. A. it was inclusive of the recruiting policies of an organization B. it limited its scope to internal corporate governance C. it limited its scope to financial and regulatory accountability D. it considered the impact of corporations' on the larger community

Q: The Cadbury report, established by Sir Adrian Cadbury in 1992 to address financial aspects of corporate governance, recommended: A. adopting a Code of Best Practice to achieve high standards of corporate behavior. B. considering the environmental and social aspects of an organization's activities. C. formally recognizing all the stakeholders of an organization. D. considering a company's impact on the larger community.

Q: The main focus of the Cadbury report, established by Sir Adrian Cadbury in 1992 to address financial aspects of corporate governance, was on _____. A. external governance B. corporate social responsibility C. internal governance D. recruiting policy

Q: The Cadbury report, established by Sir Adrian Cadbury in 1992 to address financial aspects of corporate governance, addressed: A. the cultural aspects of a company's activities. B. the financial aspects of corporate governance. C. the need to consider the triple bottom line. D. the failings of the "comply or explain" policy.

Q: One of the primary responsibilities of an organization's _____ is to ensure compliance with the company's internal code of ethics. A. business sales unit B. quality assurance unit C. corporate governance committee D. proposal committee

Q: Identify a true statement about the corporate governance committee of a company. A. It monitors the ethical performance of the corporation. B. It does not oversee compliance with the company's internal code of ethics. C. It is in charge of setting the compensation packages of all the senior executives. D. It does not include the employees of the company.

Q: Which of the following is true of the compensation committee of a company? A. It sets the compensation for all the employees of the company. B. It cannot be staffed by individuals on the company's board of directors. C. It cannot be staffed by independent or outside directors of the company. D. It oversees the salaries and bonuses of the senior executives only.

Q: The _____ of a company is an operating committee responsible for determining the salaries, bonuses, and perks for the CEO and other senior executives. A. credit committee B. business sales unit C. compensation committee D. quality assurance unit

Q: Catherine, a board member of Clayton Inc., is also part of an operating committee that is responsible for overseeing the accounting policies of the company. This committee is known as the _____. A. business sales unit B. audit committee C. human resourcing unit D. marketing committee

Q: One of the responsibilities of the audit committee of a company is to: A. elect members of the company's board of directors. B. manage the company's leadership pipeline. C. monitor the company's accounting policies and procedures. D. elect members of the corporate governance committee.

Q: Identify a feature of the outside members of an organization's board of directors. A. They are not permitted to have financial connections to the organization. B. They have less importance than the inside members in the decision-making process. C. They are the ones who make all the major organizational decisions without consulting the inside members. D. They may comprise the company's creditors, suppliers, or consultants.

Q: The inside members of a company's board of directors: A. typically have no direct connection with the company. B. hold managerial positions within the company. C. comprise the company's creditors and suppliers. D. include the external consultants used by the company.

Q: The board of directors of a company: A. is not accountable to the company's stakeholders. B. should ideally be elected by the CEO. C. oversees the governance of the organization. D. should ideally have less power than the CEO.