Ethics, Governance & Business Law Flashcards

Which of the following best describes the 'business judgment rule' as it applies to corporate directors?

Answer: Directors are protected from liability if they acted on an informed basis in good faith

The business judgment rule presumes that directors acted in good faith, on an informed basis, and in the honest belief that the action was in the corporation's best interest.

Under the AICPA Code of Professional Conduct, the 'conceptual framework' approach requires CPAs to do what when facing potential ethical conflicts?

Answer: Identify threats, evaluate significance, and apply safeguards

The conceptual framework requires CPAs to identify threats to compliance, evaluate their significance, and apply appropriate safeguards to eliminate or reduce them to an acceptable level.

Under the Foreign Corrupt Practices Act (FCPA), which of the following payments to a foreign government official is explicitly permitted?

Answer: Facilitating payments to expedite routine non-discretionary government actions

The FCPA contains an exception for 'facilitating payments' (grease payments) made to expedite routine, non-discretionary governmental actions such as mail delivery or utility services.

A written contract that violates the Statute of Frauds requirement is best described as:

Answer: Valid if partially performed by both parties

Under the part performance doctrine, a contract that falls within the Statute of Frauds may be enforced if there has been sufficient partial performance by both parties.

Under the Securities Exchange Act of 1934, insider trading violations most commonly involve trading based on:

Answer: Material non-public information obtained through a position of trust

Insider trading involves buying or selling securities based on material information that is not publicly available, obtained by virtue of a special relationship or position of trust.

Which component of the COSO Internal Control framework addresses the processes used by management to identify and analyze risks to achieving objectives?

Answer: Risk assessment

The risk assessment component involves management's process for identifying, analyzing, and responding to risks relevant to achieving the entity's objectives.

Under contract law, which doctrine allows a court to refuse enforcement of a contract whose terms are oppressively one-sided and were imposed on a party with no meaningful choice?

Answer: Unconscionability

Unconscionability allows courts to refuse enforcement of contracts that are oppressively unfair, typically involving both procedural unfairness (unequal bargaining power) and substantive unfairness (harsh terms).