CCA Ethics & Corporate Governance Flashcards

Under the AICPA Code of Professional Conduct, which fundamental principle requires a CPA to be straightforward and honest in professional and business relationships?

Answer: Integrity

The integrity principle requires CPAs to be straightforward and honest, avoiding subordination of professional judgment to client or employer pressure.

What is the primary role of a board of directors' audit committee?

Answer: To oversee the financial reporting process, internal controls, and the external auditor relationship

The audit committee oversees financial reporting integrity, monitors internal control systems, and serves as the direct link between the board and the external auditors.

Which of the following best describes a conflict of interest for a corporate accountant?

Answer: Having a personal financial stake in decisions that should be made objectively for the employer

A conflict of interest arises when a professional has personal interests that could impair their objective judgment in performing duties for an employer or client.

The Sarbanes-Oxley Act (SOX) Section 302 requires corporate officers to:

Answer: Certify the accuracy of financial statements and effectiveness of disclosure controls

SOX Section 302 requires the CEO and CFO to personally certify the accuracy of financial statements and assess the effectiveness of disclosure controls and procedures.

What does the concept of 'fiduciary duty' mean for a corporate officer?

Answer: The legal and ethical obligation to act in the best interests of the company and its shareholders

Fiduciary duty requires corporate officers to act with loyalty and care in the best interests of the company and its shareholders, not their own personal interests.

Which of the following is an example of earnings management crossing into financial statement fraud?

Answer: Recording fictitious revenues to meet analyst earnings expectations

Recording fictitious (non-existent) revenues is financial statement fraud — it involves intentional misrepresentation rather than aggressive but permissible accounting choices.