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Professional Ethics & Governance Flashcards

7 cards from real CME practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Professional Ethics & Governance flashcards as text

  1. A board director owns stock in a company that is bidding on a contract with the organization. What is the MOST appropriate immediate action?

    Answer: Disclose the conflict and recuse herself from the vote

    Disclosing the conflict and recusing oneself from the decision is the standard governance response to a director conflict of interest.

  2. Which governance principle holds that management is accountable to shareholders and other stakeholders for organizational outcomes?

    Answer: Accountability

    Accountability is the governance principle requiring that those entrusted with authority answer for their decisions and outcomes to principals.

  3. An executive discovers that a prior quarterly report contained a material error that benefited the company's stock price. The BEST ethical course of action is to:

    Answer: Immediately disclose the error to regulators and the board

    Material misstatements in public filings require prompt disclosure to regulators and the board under securities law and ethical obligations.

  4. The 'tone at the top' concept in organizational ethics primarily refers to:

    Answer: Senior leadership's visible behavior setting the cultural standard for integrity

    Tone at the top describes how senior leaders' own conduct and stated values shape the organization's ethical culture more than written policies.

  5. A company's audit committee is BEST described as serving which primary function?

    Answer: Overseeing financial reporting integrity and internal controls

    The audit committee provides board-level oversight of financial reporting, external auditors, and internal control systems.

  6. Under the stakeholder theory of governance, management's primary obligation is to:

    Answer: Balance the interests of shareholders, employees, customers, communities, and other affected parties

    Stakeholder theory holds that corporations owe duties to all parties materially affected by their decisions, not shareholders alone.

  7. Which of the following BEST illustrates a breach of the duty of loyalty for a corporate officer?

    Answer: Steering a contract to a supplier in which the officer has an undisclosed ownership interest

    Directing corporate business to a personally owned supplier without disclosure is a classic self-dealing breach of the duty of loyalty.