Asset Management Asset Compliance and Regulatory Standards 2 — Questions and Answers
Question 1: What is the purpose of the Uniform Prudent Investor Act (UPIA) in US trust asset management?
- Regulate stock exchange trading
- Set standards for how trustees must invest and manage trust assets (Correct answer)
- Govern municipal bond issuance
- Define depreciation methods for private trusts
Correct answer: Set standards for how trustees must invest and manage trust assets
UPIA requires trustees to invest trust assets using modern portfolio theory principles, diversifying to minimize risk relative to return objectives.
Question 2: Which US accounting standard requires companies to recognize operating lease assets (right-of-use assets) on the balance sheet?
- ASC 606
- ASC 842 (Correct answer)
- ASC 350
- ASC 985
Correct answer: ASC 842
ASC 842 (effective for public companies from 2019) requires lessees to recognize a right-of-use asset and lease liability for most leases on the balance sheet.
Question 3: The Foreign Corrupt Practices Act (FCPA) impacts international asset management by prohibiting:
- Foreign investment in US assets
- Bribing foreign government officials to obtain or retain business (Correct answer)
- Repatriating overseas asset profits
- Holding foreign currency assets
Correct answer: Bribing foreign government officials to obtain or retain business
The FCPA prohibits US companies and individuals from bribing foreign officials and requires accurate books and records for all assets and transactions.
Question 4: In US healthcare, which regulation requires covered entities to implement safeguards for electronically stored patient data assets?
- ERISA
- HIPAA Security Rule (Correct answer)
- Gramm-Leach-Bliley Act
- COPPA
Correct answer: HIPAA Security Rule
The HIPAA Security Rule mandates administrative, physical, and technical safeguards to protect electronic protected health information (ePHI) assets.
Question 5: Which concept in US public company reporting requires that material information about asset values and risks be disclosed to investors?
- Materiality Principle (Correct answer)
- Consistency Principle
- Going Concern Assumption
- Monetary Unit Assumption
Correct answer: Materiality Principle
The materiality principle requires disclosure of any information that could influence an investor's decision, including significant asset impairments or risks.
Question 6: What is the primary purpose of an asset compliance audit?
- Verify marketing claims
- Assess whether assets are managed in accordance with applicable laws, standards, and internal policies (Correct answer)
- Calculate employee bonuses
- Design new product lines
Correct answer: Assess whether assets are managed in accordance with applicable laws, standards, and internal policies
A compliance audit examines asset records, controls, and processes to verify conformance with regulatory requirements and internal governance standards.
Asset Management Asset Compliance and Regulatory Standards 2
What is the purpose of the Uniform Prudent Investor Act (UPIA) in US trust asset management?