CEA Corporate Governance & Compliance 3

Question 1

What is the primary purpose of a whistleblower protection policy within a corporate compliance program?

Accepted Answer

To encourage reporting of internal wrongdoing without fear of retaliation

Answer

Whistleblower protection policies create safe channels for employees to report misconduct, protecting them from retaliation and encouraging a culture of transparency.

Question 2

Under Sarbanes-Oxley (SOX) Section 404, what are management and external auditors required to assess?

Accepted Answer

The effectiveness of internal controls over financial reporting

Answer

SOX Section 404 requires management to assess and external auditors to attest to the effectiveness of internal controls over financial reporting.

Question 3

A 'clawback' provision in executive compensation allows a company to:

Accepted Answer

Recover previously paid compensation if misconduct or restatements occur

Answer

Clawback provisions enable companies to recoup compensation paid to executives when it was based on inaccurate financial results or when misconduct is discovered.

Question 4

Which body primarily sets accounting standards used in financial reporting for U.S. public companies?

Accepted Answer

Financial Accounting Standards Board (FASB)

Answer

FASB sets Generally Accepted Accounting Principles (GAAP), which govern financial reporting for U.S. public and private companies.

Question 5

What does 'board independence' primarily mean in corporate governance?

Accepted Answer

A majority of directors have no material relationship with the company

Answer

Board independence means that a majority of directors have no material financial, personal, or professional relationship with the company that could compromise their objective judgment.

(CEA) Certified Ethics Associate Practice Test

(CEA) Certified Ethics Associate Practice Test

CEA Corporate Governance & Compliance 3