ACFE Corporate Governance and Ethics 2 — Questions and Answers
Question 1: Under the Sarbanes-Oxley Act, which officer must personally certify the accuracy of financial statements filed with the SEC?
- Chief Compliance Officer
- Chief Financial Officer only
- Both CEO and CFO (Correct answer)
- External auditor
Correct answer: Both CEO and CFO
SOX Section 302 requires both the CEO and CFO to personally certify the accuracy of financial reports filed with the SEC.
Question 2: What is the primary purpose of a board audit committee in the context of fraud prevention?
- Approving executive compensation packages
- Overseeing financial reporting and internal controls (Correct answer)
- Managing day-to-day accounting operations
- Selecting the company's external legal counsel
Correct answer: Overseeing financial reporting and internal controls
The audit committee oversees financial reporting integrity, internal controls, and the external audit process to detect and prevent fraud.
Question 3: Which governance concept refers to the separation of the roles of board chairman and chief executive officer?
- Dual mandate principle
- Role bifurcation
- Board duality (Correct answer)
- Leadership separation doctrine
Correct answer: Board duality
Board duality refers to having separate individuals serve as board chairman and CEO, which is considered a governance best practice to prevent power concentration.
Question 4: A company's code of ethics is MOST effective when it:
- Is distributed only to senior management
- Is posted on the company website without formal training
- Is supported by tone at the top and enforced consistently (Correct answer)
- Focuses exclusively on financial reporting obligations
Correct answer: Is supported by tone at the top and enforced consistently
A code of ethics is most effective when leadership demonstrates commitment to it and violations are consistently addressed regardless of the offender's position.
Question 5: Which of the following best describes the concept of 'tone at the top' in corporate governance?
- The volume of ethics training sessions conducted annually
- The ethical environment established by senior leadership through their actions (Correct answer)
- The strictness of disciplinary policies for lower-level employees
- The number of policies included in the employee handbook
Correct answer: The ethical environment established by senior leadership through their actions
Tone at the top refers to the ethical culture and values that senior leadership models through their own conduct and decisions.
Question 6: An independent director on a corporate board is BEST defined as one who:
- Holds a significant ownership stake in the company
- Has no material relationship with the company beyond their directorship (Correct answer)
- Was previously an executive at the company more than five years ago
- Represents institutional shareholders on the board
Correct answer: Has no material relationship with the company beyond their directorship
Independence requires that a director have no material financial or personal relationships with the company that could compromise their objectivity.
Question 7: Which ethical framework holds that the morality of an action is determined solely by its consequences?
- Deontological ethics
- Virtue ethics
- Consequentialism (Correct answer)
- Rights-based theory
Correct answer: Consequentialism
Consequentialism judges the rightness of actions based on their outcomes and effects, not on the nature of the actions themselves.
ACFE Corporate Governance and Ethics 2
Under the Sarbanes-Oxley Act, which officer must personally certify the accuracy of financial statements filed with the SEC?