CFS CFS Corporate Governance & Whistleblower Programs 2 — Questions and Answers
Question 1: Under the Dodd-Frank Act, the SEC Whistleblower Program awards qualifying whistleblowers what percentage of sanctions collected?
- 1–5%
- 10–30% (Correct answer)
- 31–50%
- 51–75%
Correct answer: 10–30%
The SEC Whistleblower Program awards qualifying individuals between 10% and 30% of monetary sanctions exceeding $1 million collected in enforcement actions.
Question 2: Which SOX section protects employees of publicly traded companies who report fraud from retaliation?
- Section 302
- Section 404
- Section 806 (Correct answer)
- Section 409
Correct answer: Section 806
SOX Section 806 prohibits publicly traded companies from retaliating against employees who provide information about potential securities fraud to regulators or supervisors.
Question 3: An anonymous hotline is most effective as a fraud detection tool because:
- It replaces the need for internal auditors
- Employees are more likely to report suspicions when protected from retaliation (Correct answer)
- It satisfies all SOX compliance requirements on its own
- It eliminates the need for background checks
Correct answer: Employees are more likely to report suspicions when protected from retaliation
Anonymous hotlines reduce the fear of retaliation, making employees significantly more willing to report observed fraud or misconduct, which is the most common fraud detection method.
Question 4: Which element is essential for a whistleblower program to be effective?
- Mandatory reporting quotas for each department
- Guaranteed confidentiality and non-retaliation protections (Correct answer)
- Public disclosure of all reports received
- Financial rewards for every report regardless of merit
Correct answer: Guaranteed confidentiality and non-retaliation protections
Effective whistleblower programs must guarantee confidentiality and clearly communicate non-retaliation policies to encourage good-faith reporting without fear of consequences.
Question 5: Which internal governance body typically has direct oversight of a company's internal audit function?
- The CFO's office
- The audit committee of the board (Correct answer)
- The external auditor
- The legal department
Correct answer: The audit committee of the board
The audit committee of the board oversees the internal audit function to ensure its independence from management and alignment with governance and risk objectives.
Question 6: An organization's ethics hotline received a tip about an executive's expense fraud. Who should typically investigate this allegation?
- The executive's direct supervisor
- Internal audit or a designated fraud investigation team independent of the accused (Correct answer)
- The company's marketing department
- External auditors exclusively
Correct answer: Internal audit or a designated fraud investigation team independent of the accused
Allegations against executives should be investigated by parties independent of the accused, such as internal audit, legal counsel, or external forensic accountants, to avoid conflicts of interest.
CFS CFS Corporate Governance & Whistleblower Programs 2
Under the Dodd-Frank Act, the SEC Whistleblower Program awards qualifying whistleblowers what percentage of sanctions collected?