AICPA Ethics, Governance & Business Law 3

Question 1

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

Accepted Answer

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

Answer

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.

Question 2

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

Accepted Answer

Identify threats, evaluate significance, and apply safeguards

Answer

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.

Question 3

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

Accepted Answer

Facilitating payments to expedite routine non-discretionary government actions

Answer

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.

Question 4

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

Accepted Answer

Valid if partially performed by both parties

Answer

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.

Question 5

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

Accepted Answer

Material non-public information obtained through a position of trust

Answer

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.

(AICPA) Association of International Certified Professional Accountants Practice Test

(AICPA) Association of International Certified Professional Accountants Practice Test

AICPA Ethics, Governance & Business Law 3