IFA IFA Corporate Governance & Risk Management 2

Question 1

What does the Sarbanes-Oxley Act (SOX) primarily require of US public companies?

Accepted Answer

Enhanced financial disclosure requirements and CEO/CFO personal certification of financial statements

Answer

SOX requires US public companies to strengthen internal controls, certify the accuracy of financial statements, and establish audit committees, with severe penalties for non-compliance.

Question 2

What is a whistleblower policy in a governance context?

Accepted Answer

A formal mechanism allowing employees to report suspected wrongdoing without fear of retaliation

Answer

A whistleblower policy provides protected channels for employees to report unethical, illegal, or fraudulent activities without facing retaliation, supporting governance integrity.

Question 3

What is a 'conflict of interest' in corporate governance?

Accepted Answer

A situation where a director's personal interests may compromise their duty to act in the company's best interests

Answer

A conflict of interest arises when a director or officer has personal financial or other interests that could improperly influence their decisions made on behalf of the company.

Question 4

What is 'tone at the top' in corporate governance?

Accepted Answer

The ethical culture, values, and behaviors modeled and communicated by senior leadership

Answer

'Tone at the top' refers to the ethical climate established by senior leadership, whose behavior and communication set the standard for integrity and compliance throughout the organization.

Question 5

What purpose does an internal audit function serve in risk management?

Accepted Answer

It provides independent assurance that risks are being managed and internal controls are effective

Answer

Internal audit provides independent, objective assurance and consulting to management and the board that risk management, control, and governance processes are operating effectively.

(IFA) Institute of Financial Accountants Certification Practice Test

(IFA) Institute of Financial Accountants Certification Practice Test

IFA IFA Corporate Governance & Risk Management 2