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Self-Study Quiz: Multiple choice questionsTry the following multiple choice questions to test your knowledge of this chapter. Once you have answered the questions, click on 'Submit Answers for Grading' to get your results. If your lecturer has requested that you send your results, please complete the routing information found at the bottom of your graded page and then click on the 'E-Mail Results' button. Please do not forward your results unless your lecturer has specifically requested that you do so. To receive instant feedback for this self-study quiz, click the Check Answers button. Self-study quizzes are not recorded in your course gradebook, and you may take them as many times as you like. These questions are specific to your textbook and have been provided to reinforce chapter materials. This activity contains 20 questions.Answer choices in this exercise appear in a different order each time the page is loaded. 9. The articles of incorporation and bylaws of a corporation serve as a basis for the governance structure of a corporation. Which of the following items are normally included in the bylaws of the corporation as opposed to the articles of incorporation? a. Purpose of the corporation. Correct Answer: C) Procedure for electing directors. (c) Answer (c) is correct because the procedure for electing directors is normally included in the bylaws. Answers (a), (b), and (d) are incorrect because they are normally included in the articles of incorporation. 1. Which of the following is not generally a power of the board of directors of a corporation? a. Selecting officers. Correct Answer: D) Amending the Articles of Incorporation. (d) The requirement is to identify the item that is not generally a power of the board of directors of a corporation. Answer (d) is correct because generally only the shareholders have the power to amend the Articles of Incorporation. Answers (a), (b), and (c) are all incorrect because they are normally powers of the board of directors. 4. Which of the following actions normally requires shareholder approval? a. Appointing the chief executive officer. Correct Answer: D) Changing the nature of the corporation. (d) The requirement is to identify the action that normally requires shareholder approval. Answer (d) is correct because changing the nature of the corporation requires approval by the shareholders. Answers (a), (b), and (c) are incorrect because they are all actions that can be taken by the board of directors without shareholder approval. 5. To which of the following rights is a stockholder of a public corporation entitled? a. The right to have annual dividends declared and paid. Correct Answer: C) The right to a reasonable inspection of corporate records. (c) The requirement is to identify the right of the shareholder. Shareholders have the right to inspect the corporate records if done in good faith for a proper purpose. Answer (a) is incorrect because shareholders do not have a right to dividends. It is the decision of the board of directors whether or not to declare dividends. Answer (b) is incorrect because although at least one class of stock must have voting rights to elect the board of directors, the officers may be selected by the board of directors. Answer (d) is incorrect because a shareholder cannot force an issuance of a new class of stock. 6. Which of the following is correct with respect to the rights of stockholders in a corporation? a. Stockholders have no
right to manage their corporation unless they are also directors or officers. Correct Answer: A) Stockholders have no right to manage their corporation unless they are also directors or officers. (a) The requirement is to identify the correct statement regarding the rights of stockholders. Stockholders do not have the right to manage their corporation. However, stockholders who are also directors or officers do have the right to manage as part of their rights as directors and officers. Answer (b) is incorrect because stockholders generally have no right to receive dividends unless the board of directors declares such dividends. Answer (c) is incorrect because stockholders are given the right to inspect the books and records of their corporation under certain circumstances. Answer (d) is incorrect because the stockholders may demand a list of shareholders for a proper purpose such as to help wage a proxy fight; however, they may not require the corporation to give them a list of its customers to use for a mailing list. 13. Which of the following is a legal rule that prevents directors from being held liable for making bad decisions if they act with good faith, loyalty, and due care? a. The good faith rule. Correct Answer: B) The business judgment rule. (b) The requirement is to identify the legal rule that prevents directors from being held liable for making bad decisions if they act with good faith, loyalty, and due care. Answer (b) is correct because this is referred to as the business judgment rule. Answers (a), (c), and (d) are incorrect because they are not terms used to describe this legal rule. 18. Which of the following is necessary to be an audit committee financial expert according to the criteria specified in the Sarbanes-Oxley Act of 2002? a. An understanding of income tax law. Correct Answer: B) An understanding of generally accepted accounting principles and financial statements. 28. According to the Sarbanes-Oxley Act of 2002, which of the following statements is correct regarding an issuer's audit committee financial expert? a. The issuer's current outside CPA firm's audit partner must be the audit
committee financial expert. Correct Answer: B) If an issuer does not have an audit committee financial expert, the issuer must disclose the reason why the role is not filled. (b) Answer (b) is correct because an issuer is required to disclose the names of the financial experts, or the reason that the issuer does not have a financial expert on the audit committee. 14. Which of the following is not a requirement of the New York Stock Exchange regarding corporate governance of companies listed on the exchange? a. Have a majority of independent
directors of the corporate board. Correct Answer: C) Prohibit the chief financial officer from serving on the board of directors. (c) The requirement is to identify the item that is not a requirement of the NYSE regarding corporate governance of listed companies. Answer (c) is correct because the rules do not prohibit the CFO from serving on the board of directors. Answers (a), (b) and (d) are all requirements of the NYSE. 22. In setting priorities for internal audit activities, the chief audit executive should a. Use a risk-based approach. Correct Answer: A) Use a risk-based approach. Answer (a) is correct because a risk-based approach is required. Answers (b), (c), and (d) are incorrect because they do not describe appropriate overall approaches to setting priorities. 24. According to the International Standards for the Professional Practice of Internal Auditing a. All internal audit seniors must be Certified Internal Auditors. Correct Answer: B) The internal auditors must establish and maintain a system to monitor the disposition of audit results. 43. Which of the following would generally be entitled to a reward for whistle-blowing under the Dodd-Frank Act? a. An external auditor who discovers a violation while performing an audit of a company's financial statement and internal control under SEC requirements. Correct Answer: B) A customer of a company who discovers a violation in the course of doing business with the company. Answer (b) is correct because a customer would be entitled to receive a reward. Answer (a) is incorrect because an external auditor performing an audit would generally not be eligible for a reward. Answer (c) is incorrect because a director who discovers a violation in the course of performing her duties would generally not be eligible for a reward. Answer (d) is incorrect because an internal auditor who discovers a violation while performing an audit would generally not be eligible for a reward. 3. Which of the following is not a right of the shareholder of a corporation? a. Right to inspect the books and records. Correct Answer: C) Right to determine the mission of the corporation. Answer (c) is correct because the board of directors determines the mission of the corporation. Answers (a), (b), and (d) are incorrect because they are all rights of the shareholder. 7. A corporate stockholder is entitled to which of the following rights? a. Elect officers. Correct Answer: C) Approve dissolution. Shareholders have the right to vote on the dissolution of the corporation. Stockholders also have the right to elect the directors of the corporation, who in turn elect the officers. Answer (b) is incorrect, as shareholders do not have the right to receive dividends unless they are declared by the board of directors. Answer (d) is incorrect, as shareholders are not necessarily involved in the management of the corporation and cannot prevent corporate borrowing. 8. Which of the following best identifies the reason that effective corporate governance is important? a. The separation of ownership from management. Correct Answer: A) The separation of ownership from management. Answer (a) is correct because the separation of ownership and management creates an agency problem in that management may not act in the best interest of the shareholders. Answer (b) is incorrect because profit maximization is an appropriate goal of management. Answer (c) is incorrect because while corporate governance is designed to prevent excess management compensation, that is not the only reason it is important. Answer (d) is incorrect because oversight by boards of directors is a part of corporate governance. 11. Which of the following forms of compensation would encourage management to take on excessive risk? a. A fixed salary. Correct Answer: B) A salary and bonuses based on current period net income. Answer (b) is correct because with a bonus based on current period net income, management has an incentive to take on excessive risk to maximize its bonuses. Answer (a) is incorrect because a fixed salary encourages management to take on little risk. Answers (c) and (d) are incorrect because stock options that cannot be exercised for 10 years and restricted stock encourage management to be concerned about the long-term viability of the firm. 12. Which of the following is not a duty that is typically reserved for the board of directors of a corporation? a. Selection and removal of the chief executive officer. Correct Answer: C) Amending the articles of incorporation. Answer (c) is correct because this duty is typically reserved for the shareholders. Answers (a), (b), and (d) are incorrect because these are all typically duties of the board of directors. 16. The Sarbanes-Oxley Act provides that at least one member of the audit committee should be a. Independent. Correct Answer: C) A financial expert. Answer (c) is correct because Sarbanes-Oxley requires that at least one member of the audit committee be a financial expert. Answer (a) is incorrect because all audit committee members should be independent. Answer (b) is incorrect because the chief financial officer is not independent and should not be on the audit committee. Answer (d) is incorrect because while a CPA would generally qualify as a financial expert, it is not required that the financial expert be a CPA. 17. Which of the following is not a statutory requirement regarding the committees of the board of directors of publicly held corporations registered with the SEC? a. All members of the compensation committee must be independent. Correct Answer: B) At least one member of the compensation committee must be a "compensation expert." Answer (b) is correct because there is no requirement to have a compensation expert on the compensation committee. Answers (c) and (d) are incorrect because they are requirements of the Sarbanes-Oxley Act. Answer (a) is incorrect because it is a requirement of the Dodd-Frank Act. 20. Which of the following is most effective as an external monitoring device for a publicly held corporation than the others? a. Internal auditors. Correct Answer: B) External auditors. Answer (b) is correct because external auditors audit the financial statements and internal controls of a publicly held corporation. Answer (a) is incorrect because internal auditors are an internal monitoring device. Answer (c) is incorrect because the SEC relies upon external auditors to audit the corporation's financial statements and internal controls. Answer (d) is incorrect because attorneys only advise management on legal issues. They cannot take action if management does not take their advice. 32. Which of the following is not true regarding the information and communication component of internal control? a. The information system captures
both internal and external sources of data. Correct Answer: D) An important aspect of the information and communication component is assessment of information about fraud. Answer (d) is correct because it is related to the risk assessment component. 34. Which of the following is not a transaction control activity? a. Technology development policies and procedures. Correct Answer: A) Technology development policies and procedures. Answer (a) is correct because technology development policies and procedures are part of the general controls. Answers (b), (c), and (d) are incorrect because they are all transaction control activities. 35. According to COSO, the use of ongoing and separate evaluations to establish a new baseline after changes have been made can best be accomplished in which of the following stages of the monitoring-for-change continuum? a. Control baseline. Correct Answer: C) Change management. (c) The requirement is to identify the stage in which monitoring is used to establish a new baseline after changes have been made. Answer (c) is correct because the change management stage involves evaluating the design and implementation of changes and establishing a new baseline. Answer (a) is incorrect because control baseline involves developing the initial understanding of the control system. Answer (b) is incorrect because change identification involves identifying necessary changes. Answer (d) is incorrect because control revalidation/update involves revalidating the understanding periodically. 40. Management of Johnson Company is considering implementing technology to improve the monitoring component of internal control. Which of the following best describes how technology may be effective at improving monitoring? a. Technology can identify conditions and circumstances that indicate that controls have failed or risks are present. Correct Answer: A) Technology can identify conditions and circumstances that indicate that controls have failed or risks are present. Answer (a) is correct because monitoring involves collecting information to determine that controls are working. Answers (b), (c), and (d) are incorrect because while they represent control advantages to the use of technology, they do not relate as directly to the monitoring component. 41. Which of the following is not a limitation of internal control? a. Human judgment in
decision-making may be faulty. Correct Answer: B) External auditors. Answer (b) is correct because external auditors audit the financial statements and internal controls of a publicly held corporation. Answer (a) is incorrect because internal auditors are an internal monitoring device. Answer (c) is incorrect because the SEC relies upon external auditors to audit the corporation's financial statements and internal controls. Answer (d) is incorrect because attorneys only advise management on legal issues. They cannot take action if management does not take their advice. 42. Which of the following is not required to be included in management's report on internal control required under Section 404 of the Sarbanes-Oxley Act? a. A statement of
management's responsibility for establishing and maintaining adequate internal control over financial reporting. Correct Answer: B) A statement indicating that the board of directors has approved the system of internal control over financial reporting. 46. In the COSO enterprise risk management framework, the term risk tolerance refers to a. The level of risk an organization is willing to accept. Correct Answer: B) The acceptable variation with respect to a particular objective. Answer (b) is correct because the COSO ERM framework defines risk tolerance as the acceptable variation with respect to a particular organizational objective. Answer (a) is incorrect because it defines risk appetite. Answer (c) is incorrect because it defines residual risk. Answer (d) is incorrect because it defines risks that are accepted. 48. Which of the following is not a technique for identifying events in an enterprise risk management program? a. Process flow analysis. Correct Answer: C) Probabilistic models. Answer (c) is correct because probabilistic models are used for risk assessment. Answers (a), (b) and (d) are incorrect because they are all methods used for event identification. 47. Management of Warren Company has decided to respond to a particular risk by hedging the risk with futures contracts. This is an example of risk a. Avoidance. Correct Answer: D) Sharing. Answer (d) is correct because hedging involves sharing the risk with another party. Answer (a) is incorrect because avoidance involves exiting the activity that gives rise to the risk. Answer (b) is incorrect because acceptance involves no response to the risk. Answer (c) is incorrect because reduction involves managing the risk to reduce its likelihood or impact. 45. Jarrett Corporation is considering establishing an enterprise risk management system. Which of the following is not a benefit of enterprise risk management? a. Helps the organization seize
opportunities. Correct Answer: D) Insures that the organization shares all major risks. Answer (d) is correct because sharing risk is only one way of responding, and this technique cannot be used for all risks, nor should it be. Answer (a) is incorrect because ERM involves identifying events with positive effects (i.e., opportunities). Answer (b) is incorrect because ERM involves designing appropriate responses to risks. Answer (c) is incorrect because with ERM capital is deployed to opportunities that are consistent with the organization's risk appetite. 25. Which of the following is NOT a section of the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing? a. Performance Standards B. Independence Standards 27. Which of the following divisions of the SEC reviews corporate filings? a. The Office of the Chief Accountant D. The Division of Corporate Finance A - Incorrect because the Office of the Chief Accountant advises the SEC on accounting & auditing matters and approves the rules of the PCAOB. 33. According to the COSO framework, evaluators that monitor controls within an organization should have which of the following sets of characteristics? a. Competence & objectivity A. Competence & objectivity What is the main purpose of corporate governance Mcq?In the case of modern corporations, the main aim of corporate governance is to assure and fulfill the interests of top-level managers who are being associated with the interests of the shareholders.
Which of the following justifies the importance of corporate governance in a stock corporation?Corporate governance is important because it creates a system of rules and practices that determines how a company operates and how it aligns the interest of all its stakeholders. Good corporate governance leads to ethical business practices, which leads to financial viability. In turn, that can attract investors.
What is meant by the term corporate governance '? Mcq?“Corporate governance means that company manages its business in manner that is. accountable and responsible to the shareholders.
What is the most important element of good corporate governance?Director independence and performance
The most effective boards have a majority of independent directors who are able to supervise company management and independent committees for the benefit of shareholders. These directors should attend the meetings and be prepared to discuss key issues.
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