CEA Conflict of Interest Management 5

Question 1

A private equity firm's auditor also provides consulting services to the same firm. This arrangement PRIMARILY raises concerns about:

Accepted Answer

Auditor independence being compromised by financial ties to the client

Answer

Providing both audit and consulting services to the same client creates financial incentives that can undermine the auditor's independence and objectivity.

Question 2

Which of the following BEST describes the difference between 'recusal' and 'waiver' in conflict of interest management?

Accepted Answer

Recusal removes the conflicted party from a decision; waiver allows participation after disclosure and approval

Answer

Recusal means stepping away entirely, while a waiver is a formal grant of permission to participate despite the disclosed conflict.

Question 3

A board of directors reviews a related-party transaction involving the CEO. Best governance practice requires:

Accepted Answer

The CEO to be excluded from the vote and preferably the deliberation

Answer

Related-party transactions require the interested party to be excluded from deliberation and voting to ensure an independent review.

Question 4

An employee reports a conflict of interest in good faith and is subsequently passed over for a promotion. Under ethical and legal standards, this MOST likely constitutes:

Accepted Answer

Retaliation against a whistleblower, which is prohibited

Answer

Adverse employment action taken in response to a good-faith ethics disclosure constitutes prohibited retaliation.

Question 5

Which standard is MOST commonly used to determine whether a conflict of interest should be disclosed?

Accepted Answer

Whether a reasonable person would consider the interest likely to influence the individual's judgment

Answer

The 'reasonable person' standard is the widely applied test — if an objective observer would see a potential influence, disclosure is warranted.

(CEA) Certified Ethics Associate Practice Test

(CEA) Certified Ethics Associate Practice Test

CEA Conflict of Interest Management 5