CCA CCA Ethics & Corporate Governance 2

Question 1

Under IMA (Institute of Management Accountants) standards, which standard requires management accountants to disclose all relevant information that could influence users' understanding of reports?

Accepted Answer

Credibility

Answer

Integrity

Answer

Objectivity

Answer

Confidentiality

Question 2

What is 'whistleblowing,' and what protection does the Dodd-Frank Act provide for whistleblowers?

Accepted Answer

Reporting suspected securities law violations to the SEC; Dodd-Frank provides anti-retaliation protections and financial awards for qualifying tips

Answer

Reporting securities violations internally; Dodd-Frank requires internal reporting before external

Answer

Disclosing trade secrets to competitors; Dodd-Frank imposes penalties for this

Answer

Reporting tax evasion to the IRS; Dodd-Frank mandates anonymous reporting

Question 3

What is the 'independence in appearance' requirement for external auditors?

Accepted Answer

Reasonable, informed observers must conclude that the auditor's objectivity is not impaired

Answer

Auditors must physically locate their offices away from client premises

Answer

Auditors must rotate every three years to maintain fresh perspectives

Answer

Auditors must decline all non-audit services to any client

Question 4

Under SOX Section 404, management of a public company must:

Accepted Answer

Assess and report on the effectiveness of internal control over financial reporting (ICFR)

Answer

Submit to annual SEC inspections of internal records

Answer

Certify that no material weaknesses existed in any prior period

Answer

Provide quarterly updates on litigation risk to shareholders

Question 5

Which corporate governance mechanism aligns the interests of executives with those of shareholders?

Accepted Answer

Performance-based equity compensation tied to long-term shareholder value metrics

Answer

Mandatory quarterly earnings guidance

Answer

Fixed annual salary increases based on tenure

Answer

Debt covenants requiring minimum current ratios

Question 6

What is a 'related-party transaction,' and why does it require disclosure in financial statements?

Accepted Answer

A transaction between a company and an entity with which it has a special relationship (e.g., a subsidiary or executive's family member); disclosed because it may not be arm's length

Answer

A transaction between a company and a competitor; disclosed to prevent antitrust violations

Answer

A foreign currency transaction; disclosed due to exchange rate risk

Answer

A transaction exceeding $1 million; disclosed for materiality purposes