ACC 112 Corporate Governance, Business Ethics, Risk Management, and Internal Control Practice Set PDF

Name: ___________________________________ Class number: _______ Section: ____________ Schedule: _____________ Date: _______________ LEARNING OBJECTIVE: This assessment measures the competence of the student in terms of his/her application of knowledge and skills in the fo...

Name: ___________________________________ Class number: _______ Section: ____________ Schedule: _____________ Date: _______________ LEARNING OBJECTIVE: This assessment measures the competence of the student in terms of his/her application of knowledge and skills in the following topics: 1. Corporate Governance 2. Business Ethics 3. Risk management 4. Internal Control ACC 112 - CORPORATE GOVERNANCE, BUSINESS ETHICS, RISK MANAGEMENT AND INTERNAL CONTROL 1. Which of the following is not crucial to the integrity and efficiency of capital markets and economic growth? a. Sustainability and financial health of public companies. b. Public trust. c. High stock prices. d. Investor confidence. 2. Investors should rely on which of the following to make rational, informed investment decisions? a. Accurate financial statements and reports. b. Former employees. c. Internet “blogs” and message boards. d. Insider information. 3. Conflicts of interest among corporate governance participants are referred to as an: a. “Anything you can do, I can do better” problem. b. Alignment problem. c. Agency problem. d. There are no conflicts of interest among corporate governance participants. 4. The primary mission of a public company is to: a. Make money now without planning for the future. b. Keep management happy. c. Create sustainable and enduring corporate value. d. Remain idle and complacent with current performance. 5. Congress passed the Sarbanes-Oxley Act of 2002 to: a. Enhance the burden of financial reporting. b. Establish a new regime of investor protection. c. Increase the workload of auditors of public companies. d. Provide more protection to the managers of public companies. 6. Suppliers and customers reward good corporate performance by: a. Actively and favorably doing business with the company. b. Investing in the company at the lower desired rate of return of investment. c. Disinvesting or demanding a higher rate of return on their investment. d. Giving extra benefits to the management of the company. 7. The primary stakeholders are: a. Customers. b. Suppliers. c. Shareholders. d. Creditors. 8. Research suggests that firms with ____ perform better, especially when collaboration among top management team members is important.. greater emphasis on stock options. a. larger proportion of insiders on the board of directors. b. smaller pay gap between the CEO and other top executives. c. benchmarking used for top executive pay. 9. The separation between firm ownership and management creates a(n) ____ relationship.. agency a. governance b. control c. dependent. 10. Monitoring by shareholders is usually accomplished through:. management consultants. a. government auditors b. the firm’s top managers c. the board of directors. 11. Executive compensation is a governance mechanism that seeks to align managers’ and owners’ interests through all of the following EXCEPT:. bonuses. a. long-term incentives such as stock options. b. Salary. c. penalties for inadequate firm performance. 12. Which of the following is not responsibility of audit committee? a. Management compensation. b. Relations with independent auditor. c. Monitoring management. d. Reviewing corporate reporting process. 13. An independent director is expected to except: a. Apply expertise and skills in the corporation’s best interest. b. Assist management to keep performance objectives at the top of its agenda. c. Respect the collective cabinet nature of the board’s decision. d. Act as conduit between board and organization. 14. __________ can be considered to be a high-level statements of corporate governance good practices and are applicable to all companies. a. principle. b. recommendations c. integrity d. honesty 15. All of the following are Principles of Good Corporate Governance except a. Establishing a competent board. b. Forming Complex Roles and Responsibilities of the Board. c.Launching Board Committees d.Promotion Commitment 16. Which of the following statements is true about ethical decision making in business? a. Ethical decision making is not limited to the type of major corporate decisions with dramatic social consequences. b. Every employee does not face an issue that requires ethical decision making. c. All ethical decisions can be covered by economic, legal, or company rules and regulations. d. Ethical decision making should not rely on the personal values and principles of the individuals involved. 17. Which of the following statements is true about ethical decision making in business? a. Ethical decision making is limited to the type of major corporate decisions with social consequences. b. At some point, every worker will be faced with an issue that will require ethical decision making. c. All ethical decisions can be covered by economic, legal, or company rules and regulations. d. Ethical decision making should not rely on the personal values and principles of the individuals involved. 18. Which of the following statements is true about ethical decision making in business? a. Ethical decision making is limited to the type of major corporate decisions with social consequences. b. Every employee does not face an issue that requires ethical decision making. c. All ethical decisions can be covered by economic, legal, or company rules and regulations. d. Ethical decision making should rely on the personal values and principles of the individuals involved. 19. In a general sense, a business _____ is anyone who affects or is affected by decisions made within the firm, for better or worse. a. nominee b. stakeholder c. stockholder d. watchdog 20. Which of the following best describes a business stakeholder? a. Only the minority shareholders in a business entity b. Only those who have acquired significant shares in a firm c. Anyone who audits a firm d. Anyone who affects or is affected by decisions made within a firm 21. When the politicians and public officials are ask to be bribe. The allegation is, “There’s no escaping from it, for if you don’t pay, you are bound to fall behind” a. extortion. b. intimidation c. threat d. corruption 22. When unethical acts are discovered in a firm, in most instances:. they are caused by unwilling participants. a. the cause is due to external stakeholders. b. the perpetrators are caught and prosecuted d. there was knowing cooperation or complicity from within the company. 23. is the act of an employee exposing an employer's wrongdoing to outsiders.. Fraud. a. Whistleblowing. b. Ethical misconduct. c. Corruption. 24. Among the commitments of the Finance and Accounting Section of an organization is:. To pay taxes in compliance with all laws. a. To have appropriate tools to receive, monitor and act on internal and external complaints of employees. b. To communicate rules and guidelines on giving gifts, entertainment tokens of hospitality and contributes to/from public or private organization. c. To prohibit contracting a third party to be bribe or commit corrupt practices in behalf of the company. 25 A Corruption may take place in any of the following except: a. A company paying bribe to win a public contract to build the local highway. b. A politician redirecting investment to his hometown rather than to the most in need region. c. Public official embezzling fund for school renovation to build his private villa. d. A salesman discussing to the purchasing manager of the company to give chance to his product. 26 all of the following are Effects of Corruption except a. It leads to inefficient use of public resources. b. It corrodes public trust, undermines the rule of law, and ultimately delegitimizes the state. c. It could lead others to join religious group d. Could lead to breakdown in social lives and other ordinary people are affected as they are prevented in receiving all the essential services they are entitled to. 27. A situation a person faces in which a decision must be made about the appropriate behaviour. a. Ethical Dilemma b. misrepresentation c. anxiety d. confused 28. ______________ offering a product that does not meet the required standards. a. False Advertising b. misrepresentation c. Adulteration d. Mislabeling 29. The product label contains false statement or container is similar to a well-known product. a. False Advertising b. misrepresentation c. Adulteration d. Mislabeling 30._______________ failure to attend regularly in board meeting could result to betrayal of trust of the parties who elected them to their position. a. Negligence of duty b. Insider Trading c. Plain Graft d. Interlocking Directorship 31. ____________ observe fairness and due process- employees have the right to file and respond to complaints against suspected illegal or unethical practices. a. Human resources b. Top Management c. Sales and Marketing d. Implementation and Monitoring 32. ____________________ strongly supports integrity practices and allocates sufficient resources for their implementation. a. Human resources b. Top Management c. Sales and Marketing d. Implementation and Monitoring 33. ____________________clearly communicates rules and guidelines on giving gifts, entertainment, tokens of hospitality, and contributions to/from public and private organizations and their representatives. a. Human resources b. Top Management c. Sales and Marketing d. Implementation and Monitoring 34.________________ is a formal expression of organization’s values and ethics a. False Advertising b. misrepresentation c. Adulteration d. none of the choices 35. Who issued the Code Ethics for Philippine Business? a. Bikehops Businessmen’s Conference (BBC) b. Securities on exchange commission c. Board of Business Committee (BBC) d. none of the choices. 36.___________ use to manage the results of past decisions, assess the current situation and highlight solutions. a. Break-even Point Analysis b. Variance analysis c. Profit analysis d. none of the above 37. Risk management is concerned with A. the identification and treatment of loss exposures. B. the management of speculative risks only. C. the management of pure risks that are uninsurable. D. the purchase of insurance only. 38. A situation or circumstance in which a loss is possible, regardless or whether a loss occurs, is called a A. deductible. B. loss exposure. C. loss avoidance. D. peril. 39. All of the following are risk management objectives prior to the occurrence of loss EXCEPT A) analysis of the cost of different techniques for handling losses. B) continuing operations after a loss. C) reduction of anxiety. D) meeting externally imposed obligations. 40. Preloss objectives of risk management include which of the following? I. Preparing for potential losses in the most economical way. II. Reduction of anxiety. A) I only B) II only C) both I and II D) neither I nor II 41. A risk manager is concerned with I. Identifying potential losses. II. Selecting the appropriate techniques for treating losses. A) I only B) II only C) both I and II D) neither I nor II 42. Sources of information that can be used by a risk manager to identify pure loss exposures include all of the following EXCEPT A) risk analysis questionnaires. B) currency exchange rates. C) physical inspections. D) past losses. 43. All of the following are indicator of financial risk except: a.Fraud b.Robustness of information management systems c. Inefficient cash management d. Adequate insurance 44 Which of the following is indicator of operational risk. a. Breakdown on labour relations b. Resource-building and resource allocation decisions c. Poor brand management or handling of a crisis d. Political or regulatory development 45. Which of the following can be done to mitigate or reduce risk? a. set quality assurance programs b. environmental and control processes c. enforcing health and safety regulations d. All of the above 46._____________ used to decide whether to continue developing a product, alter the price, provide discounts or change suppliers to reduce cost. a. Break-even Point Analysis b. Variance analysis c. Profit analysis d. none of the above 47______________ helps in managing the sales mix, cost structure and production capacity, forecasting and budgeting. a. Break-even Point Analysis b. Variance analysis c. Profit analysis d. none of the above 48. which of the is practical techniques to improve profitability? a. Focus on decision making on most profitable areas b. Decide how to treat the least profitable products. c. Make sure new products enhance overall profitability. d. all of the above 49. Which of the following principle can be considered to avoid flawed decision? a. Understand the impact of Cash flow b. Decide how to treat the least profitable products. c. Set the buying policy d. none of the above 50. All of the following principle can be considered to avoid flawed decision except? a. Avoid Weak Budgetary Control b. Consider the impact of financial decisions c. Know where the risk lies d. None of the above 51. A risk response which involves eliminating a threat is called:. Mitigation a. Avoidance b. Avoidance c. Transfer. 52. Risk mitigation involves all but which of the following:. Developing system standards (policies, procedures, responsibility standards). a. Obtaining insurance against loss. b. Identification of project risks. c. Performing contingent planning. 53. When should a risk be avoided?. When the risk event has a low probability of occurrence and low impact. a. When the risk event is unacceptable -- generally one with a very high probability of occurrence and high impact. b. When it can be transferred by purchasing insurance. c. A risk event can never be avoided. 54. The ISO 31000 standard separates risk management areas into:. frameworks, processes and audit. a. principles, frameworks and compliance. b. principles, frameworks and processes c. principles, processes and compliance 55. Of the following control environment characteristics, identify the one that contributes most to effective internal control a. The audit committee consists of the president, two vice- presidents, and the corporate controller. b. The company does not have a centralized human resources function. c. The company has an effective internal audit staff that monitors controls on a continuous basis. d. The company routinely transacts business with related parties. 56.The most effective control to prevent unbilled and unrecorded shipments of finished goods is to a. Require all outgoing shipments to be accompanied by a prenumbered shipping order and bill of lading (signed by the carrier). Forward a copy of these documents to accounting, to be placed in an open file awaiting receipt of the customer invoice copy. b. Forward a copy of the shipping order and bill of lading to billing. c. Implement a policy that prevents sales invoices from being mailed to customers in the absence of a properly approved shipping order and bill of lading signed by the carrier. d. Forward a copy a the signed bill of lading to the stores manager. 57.Apex Manufacturing Corporation mass produces eight different products. The controller, who is interested in strengthening internal controls over the accounting for materials used in production, would be most likely to implement a. An economic order quantity (EOQ) system. b. A job order cost accounting system. c. A perpetual inventory system. d. A separation of duties among production personnel. 58.The human resources department receives an edit listing of payroll changes processed at every payroll cycle. If they do not verify the changes processed, this could result in: a. Undetected errors in payroll rates for new employees. b. Inaccurate social security deductions. c. Labor hours charged to the wrong account in the cost reporting system. d. Employees not being asked if they want to contribute to the company pension plan. 60.Which of the following, if material, would be considered fraud? a. Mistakes in the application of accounting principles. b. Clerical mistakes in the accounting data underlying the financial statements. c. Misappropriation of an asset or groups of assets. d. Misinterpretations of facts that existed when the financial statements were prepared. 61. In general, material irregularities perpetrated by which of the following are most difficult to detect? a. Internal auditor. b. Keypunch operator. c. Cashier. d. Controller. 62. Which of the following is not an element of an entity's internal control? a. Control risk. b. Control activities. c. The information system d. The control environment. 63.Which of the following would not be considered an internal control feature? a. Prenumbered documents. b. Limited access to documents. c. Competent personnel. d. A comparison-shopping staff. 64.In a properly designed set of internal control procedures, the same employee should not be permitted to a. Sign checks and cancel supporting documents. b. Receive merchandise and prepare a receiving report. c. Prepare disbursement vouchers and sign checks. d. Initiate a request to order merchandise and approve merchandise received. 65.Proper segregation of functional responsibilities calls for the separation of the a. Authorization, recording, and custodial functions. b. Authorization, execution, and payment functions. c. Receiving, shipping, and custodial functions. d. Authorization, approval, and execution functions. 66.In a properly designed accounts payable system, a voucher is prepared after the invoice, purchase order, requisition, and receiving report are verified. The next step in the system is to a. Cancel the supporting documents. b. Enter the check amount in the check register. c. Approve the voucher for payment. d. Post the voucher amount to the expense ledger. 67.Proper segregation of functional responsibilities in an effective system of internal control calls for separation of the functions of a. Authorization, execution, and payment. b. Authorization, recording, and custody. c. Custody, execution, and reporting. d. Authorization, payment, and recording. 68.Which of the following groups establishes and maintains the company's internal controls?. Internal control. a. Board of Directors. b. Management. c. Audit Committee. 69.For effective internal control, the accounts payable department should compare the information on each vendor's invoice with the a. Receiving report and the purchase order. b. Receiving report and the voucher. c. Vendor's packing slip and the purchase order. d. Vendor's packing slip and the voucher. 70. Which of the following is not considered one of the five major components of internal control? A. Risk assessment. B. Segregation of duties. C. Control activities. D. Monitoring. 71. The effectiveness of controls is not generally tested by: A. Inspection of documents and reports. B. Performance of analytical procedures. C. Observation of the application of accounting policies and procedures. D. Inquiries of appropriate client personnel. 72. The Sarbanes-Oxley Act of 2002 requires that the audit committee: A. Annually reassess control risk using information from the CPA firm. B. Be directly responsible for the appointment, compensation and oversight of the work of the CPA firm. C. Require that the company's CPA firm rotate the partner in charge of the audit. D. Review the level of management compensation. 73. Which of the following is not a responsibility that should be assigned to a company's internal audit department? A. Evaluating internal control. B. Approving disbursements. C. Reporting on the effectiveness of operating segments. D. Investigating potential merger candidates. 74. Which of the following would be least likely to be considered a benefit of effective internal control? A. Eliminating all employee fraud. B. Restricting access to assets. C. Detecting ineffectiveness. D. Ensuring authorization of transactions. 75. The major components of internal control include all of the following, except: A. Risk assessment. B. The control environment. C. Internal auditing. D. Control activities. 76. In the consideration of internal control, the operating effectiveness of controls is tested by: A. Flowcharts verification. B. Tests of controls. C. Substantive procedures. D. Decision tables. 77. A material weakness involves an amount that could result in a misstatement that is A. Smaller than inconsequential. B. Larger than inconsequential. C. Tolerable. D. Material. 78. Effective internal control a. Eliminates risk and potential loss to the organization. b. Cannot be circumvented by management. c. Is unaffected by changing circumstances and conditions encountered by the organization. d. Reduces the need for management to review exception reports on a day-to-day basis. 79. Which of the following statements about internal control is correct? a. Properly maintained internal controls reasonably assure that collusion among employees cannot occur. b. Establishing and maintaining internal control is the internal auditor’s responsibility. c. Exceptionally strong control allows the auditor to eliminate substantive tests. d. The cost-benefit relationship should be considered in designing internal control. 80. A necessary element of internal control is:. database a. systems design b. information and communication c. system analysis END OF EXAMINATION