RCMS Ethics & Corporate Governance 2 — Questions and Answers
Question 1: A compliance officer discovers that a senior executive is steering contracts to a vendor owned by a family member without disclosure. Which governance principle is most directly violated?
- Transparency
- Conflict of interest policy (Correct answer)
- Anti-bribery statute
- Fiduciary duty to creditors
Correct answer: Conflict of interest policy
Undisclosed related-party transactions violate conflict of interest policies, which require disclosure and recusal.
Question 2: Under the Sarbanes-Oxley Act, which officer must personally certify the accuracy of financial statements filed with the SEC?
- Chief Compliance Officer and Chief Legal Officer
- Chief Executive Officer and Chief Financial Officer (Correct answer)
- Chief Audit Executive and Chief Risk Officer
- Board Audit Committee Chair only
Correct answer: Chief Executive Officer and Chief Financial Officer
SOX Section 302 requires the CEO and CFO to personally certify the accuracy and completeness of periodic financial reports.
Question 3: What is the primary purpose of a board-level audit committee in a publicly traded US company?
- Setting executive compensation benchmarks
- Overseeing financial reporting and internal controls (Correct answer)
- Approving major capital expenditure projects
- Managing day-to-day compliance operations
Correct answer: Overseeing financial reporting and internal controls
The audit committee oversees the integrity of financial reporting, internal audit function, and relationship with external auditors.
Question 4: An employee reports suspected fraud through a hotline. Under the Dodd-Frank Act, which federal agency can the employee also report to for potential whistleblower protections and awards?
- Department of Justice
- Securities and Exchange Commission (Correct answer)
- Office of Inspector General
- Federal Trade Commission
Correct answer: Securities and Exchange Commission
Dodd-Frank established the SEC Whistleblower Program, which offers financial awards and anti-retaliation protections for qualifying tips.
Question 5: Which of the following best describes 'tone at the top' in a corporate ethics context?
- The written code of conduct distributed to all employees
- Leadership's visible commitment to ethical behavior that sets organizational culture (Correct answer)
- The compliance department's enforcement of disciplinary actions
- Annual ethics training completion rates across the organization
Correct answer: Leadership's visible commitment to ethical behavior that sets organizational culture
Tone at the top refers to the ethical climate and culture modeled by senior leadership through their actions and stated values.
Question 6: A company's code of ethics prohibits gifts over $50 from vendors. A salesperson accepts a $200 gift certificate and does not report it. What type of control failure does this represent?
- Preventive control failure
- Detective control failure (Correct answer)
- Corrective control failure
- Directive control failure
Correct answer: Detective control failure
A detective control failure occurs when a monitoring or detection mechanism fails to identify a policy violation that has already occurred.
Question 7: The Foreign Corrupt Practices Act (FCPA) prohibits US companies from paying bribes to which category of recipients?
- Private sector competitors
- Foreign government officials (Correct answer)
- Domestic labor union leaders
- International non-governmental organizations
Correct answer: Foreign government officials
The FCPA specifically prohibits corrupt payments to foreign government officials to obtain or retain business.
RCMS Ethics & Corporate Governance 2
A compliance officer discovers that a senior executive is steering contracts to a vendor owned by a family member without disclosure.
Which governance principle is most directly violated?