Corporate Governance (M40)

Question 1

Who has the power of selecting officers?

Answer 1

The board of directors of a corporation

Question 2

Who has the power to declare dividends?

Answer 2

The board of directors of a corporation

Question 3

Who has the power to determine management compensation?

Answer 3

The board of directors of a corporation

Question 4

Who has the power to amend the Articles of Incorporation?

Answer 4

The shareholders of a corporation

Question 5

T/F

Shareholders have a right to inspect the books and records

Answer 5

TRUE

Question 6

T/F

Shareholders have a right to share in dividends if declared

Answer 6

TRUE

Question 7

T/F

Shareholders have a right to sue on behalf of the corporation if the officers and directors fail to uphold corporate rights

Answer 7

TRUE

Question 8

T/F

Shareholders have a right to determine the mission of the corporation

Answer 8

FALSE

The board of directors determines the mission of the corporation

Question 9

Who determines the mission of the corporation?

Answer 9

The board of directors of a corporation

Question 10

Who must give approval for appointing the CEO?

Answer 10

The board of directors of a corporation

Question 11

Who must give approval for issuing a dividend?

Answer 11

The board of directors of a corporation

Question 12

Who must give approval of the corporation strategic plan?

Answer 12

The board of directors of a corporation

Question 13

Who must give approval to change the nature of the corporation

Answer 13

The stockholders of a corporation

Question 14

T/F

A stockholder has a right to annual dividends declared and paid

Answer 14

FALSE

It is the decision of the board of directors whether or not to declare dividends

Question 15

T/F

A stockholder has a right to vote for the election of officers

Answer 15

FALSE

Stockholders elect Directors (SD)
Directors elect Officers (DO)

Question 16

T/F

Shareholders have a right to a reasonable inspection of corporate records

Answer 16

TRUE

Question 17

T/F

Shareholders have the right to have the corporation issue a new class of stock

Answer 17

FALSE

Question 18

T/F

Stockholders have a right to manage their corporation even if they are not directors or officers

Answer 18

FALSE

Unless Stockholders are also directors or officers they have no right to manage their corporation

Question 19

T/F

Stockholders have a right to receive dividends

Answer 19

FALSE

It is the decision of the board of directors whether or not to declare dividends

Question 20

T/F

Stockholders have a right to inspect the books and records of their corporation

Answer 20

TRUE

Question 21

T/F

Stockholders have a right to get a list of their corporation’s customers to use for a business mailing list

Answer 21

FALSE

Question 22

T/F

Stockholders have a right to demand a list of shareholders for a proper purpose

Answer 22

TRUE

For example, stockholders have a right to demand a list of shareholders to help wage a proxy fight

Question 23

The purpose of the corporation is included in the ______ (bylaws/Articles of Incorporation)

Answer 23

Articles of Incorporation

Question 24

The number of authorized shares of stock is included in the ______ (bylaws/Articles of Incorporation)

Answer 24

Articles of Incorporation

Question 25

The procedure for electing directors is included in the ______ (bylaws/Articles of Incorporation)

Answer 25

Bylaws

Question 26

The powers of the corporation are included in the ______ (bylaws/Articles of Incorporation)

Answer 26

Articles of Incorporation

Question 27

The ________ 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

Answer 27

Business Judgment Rule

Question 28

T/F The NYSE requires that a majority of directors on the corporate board are independent

Answer 28

TRUE

Question 29

T/F The NYSE requires that a corporation adopt and make publicly available a code of conduct

Answer 29

TRUE

Question 30

T/F The NYSE prohibits the CFO from serving on the board of directors

Answer 30

FALSE

Question 31

T/F The NYSE requires that a corporation have an independent audit committee

Answer 31

TRUE

Question 32

T/F SOX requires that at least one member of the audit committee should be independent

Answer 32

FALSE ALL audit committee members should be independent

Question 33

T/F SOX requires that at least one member of the audit committee should be the CFO of the company

Answer 33

FALSE The CFO is not independent and therefore should not be on the audit committee

Question 34

T/F SOX requires that at least one member of the audit committee should be a financial expert

Answer 34

TRUE

Question 35

T/F SOX requires that at least one member of the audit committee should be a CPA

Answer 35

FALSE While a CPA may generally qualify as a financial expert, a financial expert is not required to be a CPA

Question 36

What is the most effective external monitoring device for publicly held corporations?

Answer 36

External auditors

Question 37

In setting priorities for internal audit activities, the chief audit executive should use what approach?

Answer 37

A risk-based approach

Question 38

What are the three sections of the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing?

Answer 38

1) Performance Standards 2) Attribute Standards 3) Implementation Standards

Question 39

Which division of the SEC reviews corporate filings?

Answer 39

The Division of Corporate Finance

Question 40

Which division of the SEC advises the SEC on accounting and auditng matters and approves the rules of the PCAOB?

Answer 40

The Office of the Chief Accountant

Question 41

Which division of the SEC assists the SEC in executing its law enforcement function?

Answer 41

The Division of Enforcement

Question 42

What does the Division of Corporate Disclosure do for the SEC?

Answer 42

TRICK QUESTION There is no Division of Corporate Disclosure for the SEC