CCS Legal & Ethical Compliance Standards 2 — Questions and Answers
Question 1: Under the Foreign Corrupt Practices Act (FCPA), which of the following payments to a foreign official is explicitly permitted?
- Payments to secure a government contract
- Facilitating payments to expedite routine governmental actions (Correct answer)
- Payments to influence legislation in a foreign country
- Payments to obtain a business license that would otherwise be denied
Correct answer: Facilitating payments to expedite routine governmental actions
The FCPA contains a narrow exception for 'facilitating payments' made to expedite or secure the performance of routine, non-discretionary governmental actions.
Question 2: A compliance officer discovers that a senior executive is falsifying expense reports for personal gain. The most appropriate initial action is to:
- Immediately terminate the executive
- Report directly to the board's audit committee or independent directors (Correct answer)
- Confront the executive privately and request repayment
- Report the matter to local law enforcement
Correct answer: Report directly to the board's audit committee or independent directors
When misconduct involves senior management, the compliance officer should escalate to the board's audit committee or independent directors to ensure an independent investigation.
Question 3: Which legal doctrine holds that a corporation can be held criminally liable for the acts of its employees committed within the scope of employment to benefit the company?
- Respondeat superior (Correct answer)
- Piercing the corporate veil
- Vicarious liability waiver
- Alter ego doctrine
Correct answer: Respondeat superior
Respondeat superior ('let the master answer') is the doctrine under which an employer is liable for criminal acts of employees acting within the scope of their employment.
Question 4: The Dodd-Frank Act's whistleblower program administered by the SEC awards whistleblowers who provide original information leading to enforcement actions resulting in sanctions exceeding:
- $500,000
- $1 million (Correct answer)
- $750,000
- $2 million
Correct answer: $1 million
SEC whistleblowers are eligible for awards when their information leads to enforcement actions with sanctions exceeding $1 million.
Question 5: Which of the following best describes the 'business judgment rule' in the context of corporate compliance?
- Directors are liable for all business decisions that result in financial loss
- Courts will defer to directors' decisions made in good faith and with due care (Correct answer)
- Officers must seek shareholder approval for all major compliance expenditures
- Regulators may override corporate decisions they disagree with
Correct answer: Courts will defer to directors' decisions made in good faith and with due care
The business judgment rule protects directors from liability for decisions made in good faith, with due care, and in the honest belief they are acting in the company's best interest.
Question 6: Under the Sarbanes-Oxley Act (SOX) Section 404, management must assess and report on the effectiveness of:
- Anti-bribery controls in international operations
- Internal control over financial reporting (ICFR) (Correct answer)
- Data privacy and cybersecurity frameworks
- Environmental compliance programs
Correct answer: Internal control over financial reporting (ICFR)
SOX Section 404 requires management to assess and report on the effectiveness of internal controls over financial reporting, with external auditor attestation for large accelerated filers.
Question 7: An employee reports a compliance concern through an anonymous hotline. Under best practice and applicable law, the organization should:
- Disregard reports that cannot be verified due to anonymity
- Investigate all credible anonymous reports and protect reporter identity (Correct answer)
- Require the reporter to identify themselves before investigation begins
- Only investigate if the report involves financial fraud over a set threshold
Correct answer: Investigate all credible anonymous reports and protect reporter identity
Best practice and laws like SOX require organizations to investigate all credible reports, including anonymous ones, while protecting the confidentiality of reporters.
CCS Legal & Ethical Compliance Standards 2
Under the Foreign Corrupt Practices Act (FCPA), which of the following payments to a foreign official is explicitly permitted?