• Home
  • Textbooks
  • McGraw-Hill Education 2,000 Review Questions for the CPA Exam
  • Corporate Governance

McGraw-Hill Education 2,000 Review Questions for the CPA Exam

Denise M Stefano; Darrel Surett

Chapter 22

Corporate Governance - all with Video Answers

Educators

Chapter Questions

Problem 472

The Sarbanes-Oxley Act of 2002 addresses the problems related to inadequate board oversight by requiring public companies to have an:
I. audit committee
II. annual audit for all issuers
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Check back soon!
01:48

Problem 473

The board of directors of a corporation generally does NOT have the authority to do which of the following?
A. Declare dividends
B. Add or repeal bylaws
C. Determine executive compensation
D. Manage daily operations

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator

Problem 474

According to the Sarbanes-Oxley Act of 2002 , corporate responsibility for financial reports includes the chief executive officer (CEO) and chief financial officer (CFO) certifying that they have reviewed the report and that the report does NOT:
I. contain untrue statements
II. omit material information
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Check back soon!

Problem 475

Under the Sarbanes-Oxley Act of 2002, which of the following services would an auditor be permitted to perform for its public client?
I. Tax compliance services
II. Bookkeeping services
III. Legal services
A. II and III only
B. II only
C. I and III only
D. I only

Check back soon!

Problem 476

Under the Sarbanes-Oxley Act of 2002, which of the following are enhanced disclosures required in periodic reports?
I. All correcting adjustments identified by the independent auditor
II. Relationships with unconsolidated subsidiaries
III. Material off-balance sheet transactions
A. I and II
B. I and III
C. II and III
D. I, II, and III

Check back soon!

Problem 477

The Sarbanes-Oxley Act of 2002 requires that the management report on internal control include:
I. a statement of management's responsibilities for establishing and maintaining adequate internal controls
II. a conclusion about the effectiveness of the company's internal controls
III. a statement that there are no disagreements between management and the auditor as to the effectiveness of internal controls
A. I, II, and III
B. III only
C. I and II only
D. II and III only

Check back soon!

Problem 478

Under the Sarbanes-Oxley Act of 2002, an audit committee expert must have an understanding of which of the following?
A. Federal tax law
B. Corporate governance rules and procedures
C. Generally accepted auditing standards
D. Generally accepted accounting principles

Check back soon!

Problem 479

The Sarbanes-Oxley Act of 2002 requires that the officers of a corporation be held accountable to a code of ethics. According to the act, codifications of ethical standards should include provisions for:
I. full, fair, accurate, and timely disclosure in periodic financial statements
II. honest and ethical conduct
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Check back soon!

Problem 480

According to the Sarbanes-Oxley Act of 2002, which of the following statements would be correct regarding an issuer's audit committee financial expert?
I. The issuer's current outside CPA firm's audit partner would be a good choice to be the audit committee financial expert.
II. The audit committee financial expert should be the issuer's audit committee chairperson to enhance internal control.
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Check back soon!

Problem 481

Benefits to establishing an enterprise risk management (ERM) system within an organization include all of the following EXCEPT:
A. more effective capital allocation
B. the ability to respond to opportunities expediently
C. the ability to avoid all risks posed to the organization
D. the ability to anticipate potential events

Check back soon!

Problem 482

Which of the following is best suited to establish and execute risk procedures for a particular department in accordance with the Committee of Sponsoring Organizations (COSO) and as part of the ERM process?
A. Internal audit department personnel
B. The chief executive officer
C. The audit committee
D. A manager within that department

Check back soon!

Problem 483

According to the COSO, principles relating to the control environment include:
I. board of directors oversight of internal control
II. commitment to attracting and retaining competent individuals III. evaluating and communicating internal control deficiencies
A. I and II only
B. II and III only
C. I and III only
D. I, II, and III

Check back soon!

Problem 484

According to the Sarbanes-Oxley Act, which of the following individuals would be considered automatically qualified for the position of audit committee financial expert?
I. Anyone with a CPA certificate
II. A full-time tenured professor of accounting at a well-known university who has already earned a $\mathrm{PhD}$
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Check back soon!

Problem 485

In accordance with its ERM process, Catalina Corp. identifies events and analyzes risks. The company wants to assess its risk after management's response to the risk. This type of risk is indicative of which of the following?
A. Residual risk
B. Detection risk
C. Inherent risk
D. Control risk

Check back soon!

Problem 486

For compensation and promotion purposes, Fessler Corp. evaluates employees who are responsible for financial reporting on how well they fulfill those responsibilities. The company's policies support the idea that:
I. human resources practices should be designed to facilitate effective internal control over financial reporting
II. management's philosophy and operating style support achieving effective internal control over financial reporting
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Check back soon!

Problem 487

The existence of a published code of ethics and a periodic acknowledgment that ethical values are understood is evidence of:
I. the development of ethical values and ensuring that those values are understood and taken seriously
II. the board of directors understanding and exercising oversight responsibility related to financial reporting and related internal control
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Check back soon!

Problem 488

Broad Corp. has a corporate compliance program that allows cmployecs the option of anonymously reporting violations of laws, rules, regulations, or policies or other issues of abuse through a hotline. Reported issues are reviewed by the internal auditor and either immediately forwarded to the CEO or summarized and reported to the CEO each month. The program also provides opportunities to report through supervisory channels and includes a biannual training class that all employees must complete. The corporate compliance program demonstrates which of the following?
I. Sound integrity and ethical values are developed and understood and set the standard of conduct for financial reporting.
II. Management and employees are assigned appropriate levels of authority and responsibility to facilitate effective internal control over financial reporting.
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Check back soon!

Problem 489

Active engagement by an audit committee in representing the board of directors relative to all matters of internal and external audits is evidence of:
I. the board's understanding of its oversight responsibility over financial reporting
II. the need for an organizational structure to support effective internal control over financial reporting
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Check back soon!

Problem 490

All of the following are techniques for identifying events in an ERM program EXCEPT for:
A. internal analysis
B. leading event indicators
C. probability and expected value analysis
D. process flow analysis

Check back soon!
00:57

Problem 491

According to the COSO framework, variance analysis primarily supports:
A. internal control information
B. external control communication
C. internal control communication
D. effective financial reporting

Muhammad Ahsan
Muhammad Ahsan
Numerade Educator

Problem 492

Cohen Corp. recently relocated its manufacturing plan to a region that will allow the company to reduce its tax liability. However, this new region is also prone to tornadoes. In order to insure the plant from tornado losses, Cohen purchased a property and casualty insurance policy. Cohen employed what type of risk response when purchasing this insurance policy?
A. acceptance
B. avoidance
C. reduction
D. sharing

Check back soon!

Problem 493

Which component of the COSO ERM framework addresses a corporation's risk management philosophy and risk appetite?
A. Risk assessment
B. Control (internal) environment
C. Information and communication
D. Control activities

Check back soon!

Problem 494

According to the COSO ERM framework, which of the following would involve the determination of the likelihood and impact of events on the achievement of objectives?
A. Control activities
B. Risk assessment
C. Inherent risk
D. Residual risk

Check back soon!

Problem 495

A response to risk that involves the diversification of product offerings rather than the elimination of product offerings is called risk:
A. acceptance
B. avoidance
C. reduction
D. sharing

Check back soon!

Problem 496

According to the COSO, reporting that triggers prompt exception resolution, root cause analysis, and control updates illustrates the principle of:
A. internal control information
B. financial reporting information
C. internal communications
D. external communications

Check back soon!

Problem 497

According to the COSO, which of the following would be an operations objective?
I. Maintaining adequate staffing to keep overtime and benefit costs within budget
II. Maintaining direct labor cost variances within published guidelines
III. Maintaining accounting principles that conform to US GAAP
A. I and III
B. I, II, and III
C. II and III
D. I and II

Check back soon!

Problem 498

The control activities component of the ERM framework includes key elements that relate to:
I. the policies and procedures that ensure appropriate responses to identified risks
II. integrity and ethical values
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Check back soon!

Problem 499

Which of the following is NOT typically included in a corporation's articles of incorporation?
I. Number of authorized shares of a company's stock
II. Procedure for electing the board of directors
III. The corporation's purpose
A. I and III only
B. II only
C. I, II, and III
D. II and III only

Check back soon!

Problem 500

The Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing do NOT include which of the following sections of standards?
A. Attribute Standards
B. Independence Standards
C. Performance Standards
D. Implementation Standards

Check back soon!