CED Regulatory Compliance & Legal Framework 2 — Questions and Answers
Question 1: Under the Sarbanes-Oxley Act, which section requires CEOs and CFOs to personally certify the accuracy of financial reports?
- Section 302 (Correct answer)
- Section 404
- Section 201
- Section 501
Correct answer: Section 302
Section 302 of SOX requires the principal executive and financial officers to personally certify financial reports filed with the SEC.
Question 2: A nonprofit executive director discovers a board member has a financial interest in a vendor seeking a contract. The FIRST required action is to:
- Remove the board member from the organization
- Disclose the conflict and recuse the member from the vote (Correct answer)
- Cancel the vendor contract negotiation
- Report the conflict to the IRS immediately
Correct answer: Disclose the conflict and recuse the member from the vote
Proper conflict-of-interest management requires disclosure and recusal from decision-making, not automatic removal.
Question 3: Which federal law prohibits discrimination in employment based on disability and requires reasonable accommodations?
- Title VII of the Civil Rights Act
- The Americans with Disabilities Act (ADA) (Correct answer)
- The Family and Medical Leave Act (FMLA)
- The Rehabilitation Act of 1973
Correct answer: The Americans with Disabilities Act (ADA)
The ADA of 1990 prohibits disability-based employment discrimination and mandates reasonable accommodations for qualified individuals.
Question 4: An organization's whistleblower policy is MOST directly intended to:
- Protect the organization from liability for employee actions
- Encourage reporting of legal violations without fear of retaliation (Correct answer)
- Establish grounds for terminating disloyal employees
- Comply with trade secret protection requirements
Correct answer: Encourage reporting of legal violations without fear of retaliation
Whistleblower policies protect employees who report suspected illegal activity or misconduct from retaliation by their employer.
Question 5: Under HIPAA, a covered entity must provide breach notification to affected individuals within how many days of discovering a breach?
- 30 days
- 45 days
- 60 days (Correct answer)
- 90 days
Correct answer: 60 days
HIPAA requires covered entities to notify affected individuals within 60 days of discovering a breach of unsecured protected health information.
Question 6: The 'business judgment rule' in corporate law protects directors who:
- Guarantee profitable outcomes for shareholders
- Make informed decisions in good faith without personal interest (Correct answer)
- Follow all decisions recommended by legal counsel
- Obtain shareholder approval before major decisions
Correct answer: Make informed decisions in good faith without personal interest
The business judgment rule protects directors from liability when they act in good faith, on an informed basis, and without personal financial interest in the outcome.
Question 7: Which of the following is the BEST description of 'respondeat superior' as it applies to executive liability?
- Executives are personally liable for all corporate debts
- An employer can be held liable for wrongful acts of employees acting within the scope of employment (Correct answer)
- Directors must respond to all regulatory inquiries personally
- Organizations must have superior response protocols for legal matters
Correct answer: An employer can be held liable for wrongful acts of employees acting within the scope of employment
Respondeat superior is a legal doctrine holding employers vicariously liable for employees' negligent acts committed within the scope of their employment.
CED Regulatory Compliance & Legal Framework 2
Under the Sarbanes-Oxley Act, which section requires CEOs and CFOs to personally certify the accuracy of financial reports?