Chapter 6 Quiz

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True / False Questions 1. Since the 1970s, there has been 45 key attempts at behavior modification to discourage, if not prevent, illegal conduct within organizations. True False 2. The Defense Industry Initiatives (1986) were a key attempt at behavior modification to discourage and/or prevent illegal conduct within organizations. True False 3. The Foreign Corrupt Practices Act (FCPA) placed more effective controls over the practice of bribing foreign officials and politicians by American publicly traded companies pursuing international growth. True False 4. By passing the FCPA, Congress sent a message that the competitiveness of US corporations in overseas markets should be based on price and product quality. True False 5. The SBDC strictly enforces the FCPA. True False 6. The FCPA encompassed all the secondary measures that were currently in use to prohibit such behavior by focusing on one distinct area: disclosure. True False 7. Under the FCPA, facilitation payments would be acceptable, provided they expedited or secured the performance of a routine government action. True False 8. Processing government papers such as visas is a routine government action. True False 9. The SEC can enforce criminal penalties of up to $2 million per violation of the FCPA against corporate and business entities. True False 10. Fortunately, if a bribe is unsuccessful, the company cannot be found in violation of the FCPA. True False 11. The Defense Industry Initiatives (DII) addressed growing public concern over procurement irregularities in business contract performances of major defense contractors. True False 12. Grease payments are illegal under the FCPA. True False

Chapter 6 Quiz

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13. Under the FCPA, payments lawful under foreign laws are legal. True False 14. Payments to foreign officials made in connection with the promotion or demonstration of company products or services is a type of bribe. True False 15. The DII consists of six principles intended to promote sound management practices, to ensure that companies are in compliance with complex regulations, and to restore public confidence in the defense industry. True False 16. The Federal Sentencing Guidelines for Organizations (FSGO) took a different approach from the DII by requiring organizations to police themselves in order to prevent and detect criminal activity among their employees and agents. True False 17. The Comprehensive Crime Control Act established the U.S. Federal Sentencing Commission in 1984 by and charged it with developing uniform sentencing guidelines for offenders convicted of federal crimes. True False 18. The Federal Sentencing Guidelines for Organizations (FSGO) establishes a definition of an organization that is so narrow as to prompt the assessment that "many business enterprises are exempt." True False 19. The sentence of an organization punished under the FSGO is determined through a three step process: determination of base fine, culpability score, and determination of the total fine amount. True False 20. The second step of calculating a sentence under the FSGO is the determination of the base fine. True False 21. The culpability score of the FSGO is the calculation of the degree of blame or guilt used as a multiplier of up to four times the base fine. True False 22. One of the factors that can increase a culpability score is an organization's effective program to prevent and detect violations of law. True False 23. In certain cases, a judge has the discretion to impose a "death penalty," where the fine is set high enough to match all the organization's assets. True False

Chapter 6 Quiz

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24. Delegation of substantial discretionary authority is one step the FSGO prescribes to organizations in order to create an effective compliance program that minimizes its culpability score. True False 25. The FSGO has prescribed ten steps for an effective compliance program. True False 26. The first step of an effective compliance program, as prescribed by the FSGO, is management oversight. True False 27. The Sarbanes-Oxley Act contains four sections, or title, and almost 30 subsections covering every aspect of the financial management of businesses. True False 28. The creation of the PCAOB as an independent oversight body was an attempt to reestablish the perceived independence of auditing companies that faced serious questioning after several corporate scandals. True False 29. The Sarbanes-Oxley Act helps an organization create an ethical corporate culture. True False 30. Title III of the Sarbanes-Oxley Act (SOX) requires senior auditors to rotate off an account every five years. True False 31. Title II of SOX prohibits specific "nonaudit" services by public accounting firms that violate auditor independence. True False 32. Title IX of SOX requires CEOs and CFOs to certify their periodic reports and imposes penalties for certifying a misleading or fraudulent report. True False 33. It is estimated that Section 404 of SOX has generated auditing fees in the hundreds of millions of dollars. True False 34. The Sarbanes-Oxley Act helps organizations create an ethical corporate culture and hire an effective and ethical board of directors. True False

Chapter 6 Quiz

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Multiple Choice Questions 35. Which of the following is NOT a key attempt at behavior modification to discourage illegal conduct with organizations since the 1970s? A. The U.S. Federal Sentencing Guidelines for Organizations B. The Ethics Resource Center C. The Sarbanes-Oxley Act D. The Foreign Corrupt Practices Act 36. The introduction of the______ placed more effective controls over bribing practices and less obvious forms of payment to foreign officials and politicians by American publicly traded companies pursuing international growth. A. U.S. Federal Sentencing Guidelines for Organizations B. Ethics Resource Center C. Sarbanes-Oxley Act D. Foreign Corrupt Practices Act 37. Prior to the passing of the Foreign Corrupt Practices Act (FCPA), illegal behavior was punishable only through the ______ sources of legislation. A. primary B. international C. secondary D. domestic 38. By passing the FCPA, Congress sent a message that U.S. companies should compete solely on the basis on ______ and ______ in overseas markets. A. price; product quality B. personnel; bribery C. payments; uniqueness D. uniqueness; government support 39. Under which area does the FCPA require corporations to fully disclose any and all transactions conducted with foreign officials and politicians, in line with the SEC provisions? A. Prohibition B. Disclosure C. Exclusion D. Prevention 40. Under which area does the FCPA incorporate the wording of the Bank Secrecy Act and the Mail Fraud Act to prohibit the movement of funds overseas for the express purpose of conducting a fraudulent scheme? A. Disclosure B. Exclusion C. Facilitation D. Prohibition

Chapter 6 Quiz

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41. Payments that are acceptable (legal) provided they expedite or secure the performance of a routine governmental action refers to _______. A. facilitation payments B. prohibition payments C. disclosure payments D. governmental payments 42. Any regular administrative process or procedure, excluding any action taken by a foreign official in the decision to award new or continuing business, refers to _______. A. routine executive procedures B. routine administrative action C. routine governmental action D. practical managerial procedures 43. Which of the following is NOT a routine government action? A. Providing permits qualifying a person to do business in a foreign country B. Processing governmental papers C. Providing police protection relate to the transit of goods across a country D. Influencing a government official to obtain a government or business contract 44. Penalties under the books and record-keeping provisions of the FCPA can reach up to _______ for an individual and up to _______ for organizations. A. $25 million; $75 million B. $5 million and 20 years imprisonment; $25 million C. $5 million and 10 years imprisonment; $50 million D. $10 million and 10 years imprisonment; $50 million 45. The SEC may bring civil fines of up to ______ per violation under the FCPA. A. $100,000 B. $50,000 C. $25,000 D. $10,000 46. The DII stands for the ______. A. Declining Industry Initiatives B. Defense Industry Initiatives on Business Ethics and Conduct C. Domestic Industry Initiatives on Business Regulations D. Defending International Initiatives on Procurement Irregularities 47. Facilitating payments to foreign officials in order to expedite or secure the performance of a routine governmental action is known as a ____________. A. grease payment B. lawful payment under foreign laws C. bribe D. recordkeeping provision

Chapter 6 Quiz

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48. The _______ contains six principles that "were intended to promote sound management practices, to ensure that companies were in compliance with complex regulations, and to restore public confidence in the defense industry." A. Compliance Proposals B. Routine Governmental Initiatives C. Department of Justice Proposals D. Defense Industry Initiatives 49. All of the following are principles included in the DII, except: A. Each company will have and adhere to a written code of business ethics and conduct B. Each company will create a free and open atmosphere that allows and encourages employees to report violations of its code to the company without fear of retribution for such reporting C. Each company has the responsibility to live by the standards to increase investors' confidence in the defense industry D. Each company must have public accountability for its commitment to these principles 50. The _______ holds businesses liable for the criminal acts of their employees and agents. A. Federal Sentencing Guidelines for Organizations (FSGO) B. Department of Justice C. Defense Industry Initiatives D. Sarbanes-Oxley Act 51. The FSGO established a definition of an organization that was so ______ as to prompt the assessment that "no enterprise is exempt." A. narrow B. broad C. well-defined D. contracted 52. Which of the following is NOT a step in calculating a fine sentenced by the FSGO? A. The culpability score B. The total fine amount C. The determination of the base fine D. The determination of the mitigating factors 53. All of the following are aggravating factors of the culpability score, except: A. the organization willfully obstructed justice B. the organization had an effective program to prevent and detect violations of law C. the current offense violated a judicial order, injunction, or condition of probation D. high-level personnel were involved in or tolerated the criminal activity 54. The culpability score of an organization can be increased for all of the following Reasons, except: A. the organization had a prior history of similar misconduct B. the organization willfully obstructed justice C. the organization self-reported the offense to appropriate governmental authorities D. high-level personnel were involved in or tolerated the criminal activity

Chapter 6 Quiz

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55. The formula used to calculate the total fine sentenced by the FSGO is ______. A. the base fine multiplied by the culpability score B. the base fine plus the culpability score C. the base fine minus the culpability score D. the base fine divided by the culpability score 56. The maximum penalty that a judge can administer for FSGO violations is ______. A. a $2 million penalty B. a penalty that is worth a quarter of the organization's assets C. a penalty that is worth half of the organization's assets D. a penalty that is worth the full amount of the organization's assets 57. An effective compliance program includes all of the following, except: A. Management oversight B. Consistent discipline C. Coercive action D. Compliance with standards and procedures 58. ______ was hailed as one of the most important pieces of legislation governing the behavior of accounting firms and financial markets since the SEC legislation of the 1930s. A. The U.S. Federal Sentencing Guidelines for Organizations B. The Ethics Resource Center C. The Sarbanes-Oxley Act D. The Foreign Corrupt Act 59. The creation of the ______ as independent oversight body attempted to re-establish the perceived independence of auditing companies. A. PCAOB B. AOB C. CPAOB D. PCAB 60. All of the following are covered under Title II: Auditor Independence, except: A. prohibits specific "nonaudit" services of public accounting firms as violations of auditor independence B. requires the external auditor to report to the client's audit committee on specific topics C. requires auditors to disclose all other written communications between management and themselves D. requires audit committees to be independent and undertake specified oversight responsibilities 61. Title ______ of the Sarbanes-Oxley Act addresses issues related to corporate responsibility. A. III B. V C. VI D. VII

Chapter 6 Quiz

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62. Title ______ of the Sarbanes-Oxley Act addresses issues related to commission resources and authority. A. III B. V C. VI D. VII 63. Title ______ of the Sarbanes-Oxley Act addresses issues related to corporate fraud and accountability. A. VIII B. IX C. X D. XI 64. Section 404 of the Sarbanes-Oxley Act has generated auditing fees estimated to be in the ______. A. hundreds of millions of dollars B. hundreds of billions of dollars C. few million dollar range D. thousands of dollars