Ethics and Corporate Governance in Finance Flashcards
7 cards from real CPFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Ethics and Corporate Governance in Finance flashcards as text
Which of the following best describes insider trading?
Answer: Buying or selling securities based on material non-public information
Insider trading involves buying or selling a security using material information that is not yet available to the general public, which is illegal under securities law.
A company's whistleblower policy is designed primarily to:
Answer: Allow employees to report misconduct without fear of retaliation
A whistleblower policy creates a safe, confidential channel for employees to report suspected fraud or misconduct without risking job loss or retaliation.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted primarily in response to:
Answer: The 2008 global financial crisis and systemic risk failures
Dodd-Frank was enacted in 2010 in response to the 2008 financial crisis to increase oversight of financial institutions and reduce systemic risk in the financial system.
Under corporate governance best practices, a 'say-on-pay' vote gives shareholders the right to:
Answer: Approve or reject the executive compensation packages through a non-binding vote
Say-on-pay votes give shareholders an advisory (non-binding) vote on executive compensation, allowing them to express approval or disapproval of pay practices.
Which of the following best describes the role of an external auditor in corporate governance?
Answer: Providing an independent opinion on whether financial statements are fairly presented
External auditors independently examine a company's financial statements and internal controls to provide an objective opinion on whether they fairly represent the company's financial position.
What is 'earnings management,' and why is it considered an ethical concern?
Answer: Manipulating accounting estimates or timing to achieve desired reported earnings, distorting true performance
Earnings management involves using accounting flexibility to manipulate reported results, which misleads investors and violates the principle of fair presentation of financial information.
Which of the following governance structures is most effective at reducing the risk of financial fraud at a publicly traded company?
Answer: A majority of independent directors with a separate audit committee
Having a majority of independent directors and a separate audit committee creates effective checks and balances that reduce the risk of financial fraud and misreporting.