Corporate Governance and Ethics Flashcards
7 cards from real ACFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Corporate Governance and Ethics flashcards as text
A compliance officer discovers that the CFO is circumventing internal controls. What is the MOST appropriate initial action?
Answer: Escalate to the audit committee or board, bypassing the CFO
When suspected misconduct involves a senior executive, proper escalation goes around that executive to the board or audit committee, which has oversight authority.
The duty of loyalty requires corporate directors to:
Answer: Act in the best interests of the corporation rather than personal interests
The duty of loyalty requires directors to prioritize the corporation's best interests over their own personal financial interests or those of other parties.
Which type of audit committee independence concern arises when a committee member receives consulting fees from the company?
Answer: Material relationship that compromises independence
Receiving consulting fees creates a material financial relationship between the director and the company, which compromises audit committee independence.
Under the Business Judgment Rule, courts will generally NOT second-guess a board decision if directors:
Answer: Made the decision in good faith, on an informed basis, and without conflicts of interest
The Business Judgment Rule protects directors who acted in good faith, were adequately informed, and had no personal interest in the outcome.
Which statement BEST describes the role of internal audit in corporate governance?
Answer: Internal audit provides independent assurance on risk management and controls
Internal audit provides independent, objective assurance to the board and management on the effectiveness of governance, risk management, and internal controls.
An organization's anti-bribery policy should MOST importantly include which of the following?
Answer: Absolute prohibition on facilitation payments and clear due diligence requirements for third parties
Effective anti-bribery policies require comprehensive third-party due diligence and clear prohibitions, as bribes are often paid through agents and intermediaries.
Which of the following governance failures was MOST prominently associated with the Enron scandal?
Answer: Board waiving its own code of ethics to allow off-balance-sheet transactions
Enron's board voted to waive its own code of ethics to allow CFO Andrew Fastow to manage the SPEs that concealed liabilities off the balance sheet.