15.1 Corporate Ethical Legislation Flashcards
(16 cards)
Which of the following corporations are subject to the accounting requirements of the Foreign Corrupt Practices Act (FCPA)?
A. All corporations that have made a public offering under the Securities Act of 1933.
B. All corporations engaged in interstate commerce.
C. All domestic corporations engaged in international trade.
D. All corporations whose securities are registered pursuant to the Securities Exchange Act of 1934.
D. All corporations whose securities are registered pursuant to the Securities Exchange Act of 1934.
The accounting requirements of the FCPA apply to all companies required to register and report under the Securities Exchange Act of 1934. These companies must maintain books, records, and accounts in reasonable detail that accurately and fairly reflect transactions. The FCPA also requires these companies to maintain a system of internal accounting control that provides certain reasonable assurances, including that corporate assets are not used for bribes.
The Foreign Corrupt Practices Act prohibits
A. Bribes to all foreigners.
B. Small bribes to foreign officials that serve as facilitating or grease payments.
C. Bribery only by corporations and their representatives.
D. Bribes to foreign officials to improperly influence official acts.
D. Bribes to foreign officials to improperly influence official acts.
The Foreign Corrupt Practices Act (FCPA) prohibits any U.S. firm from bribing foreign officials to influence official acts improperly. The businesses subject to the FCPA include corporations, partnerships, limited partnerships, business trusts, and unincorporated organizations. Violations of the FCPA are federal felonies. The penalties are up to 5 years in prison or up to a $100,000 fine or both for an officer, director, or shareholder who helps make the bribe.
A major impact of the Foreign Corrupt Practices Act of 1977 is that registrants subject to the Securities Exchange Act of 1934 are now required to
A. Keep records that reflect the transactions and dispositions of assets and to maintain a system of internal accounting controls.
B. Provide access to records by authorized agencies of the federal government.
C. Prepare financial statements in accord with international accounting standards.
D. Produce full, fair, and accurate periodic reports on foreign commerce and/or foreign political party affiliations.
A. Keep records that reflect the transactions and dispositions of assets and to maintain a system of internal accounting controls.
The main purpose of the Foreign Corrupt Practices Act of 1977 is to prevent bribery by firms that do business in foreign countries. A major ramification is that it requires all companies that must register with the SEC under the Securities Exchange Act of 1934 to maintain adequate accounting records and a system of internal accounting control.
The requirement of the Foreign Corrupt Practices Act of 1977 to devise and maintain adequate internal control is assigned in the act to the
A. Chief financial officer.
B. Board of directors.
C. Director of internal auditing.
D. Company as a whole with no designation of specific persons or positions.
D. Company as a whole with no designation of specific persons or positions.
The accounting requirements apply to all public companies that must register under the Securities Exchange Act of 1934. The responsibility is thus placed on companies, not individuals.
Which of the following is not an aspect of the Foreign Corrupt Practices Act of 1977?
A. It subjects management to fines and imprisonment.
B. It prohibits bribes to foreign officials.
C. It requires the establishment of independent audit committees.
D. It requires an internal control system to be developed and maintained.
C. It requires the establishment of independent audit committees.
The Foreign Corrupt Practices Act of 1977 prohibits bribes to foreign officials and requires firms to have adequate systems of internal control. Violation of the act subjects individual managers to fines and/or imprisonment. The act does not specifically require the establishment of audit committees, but many firms have established audit committees as one means of dealing with the internal control provisions of the act.
Firms subject to the reporting requirements of the Securities Exchange Act of 1934 are required by the Foreign Corrupt Practices Act of 1977 to maintain satisfactory internal control. The role of the independent auditor relative to this act is to
A. Report clients with unsatisfactory internal control to the SEC.
B. Provide assurances to users as part of the traditional audit attest function that the client is in compliance with the present legislation.
C. Express an opinion on the sufficiency of the client’s internal control to meet the requirements of the Act.
D. Attest to the financial statements.
D. Attest to the financial statements.
Whether a client is in conformity with the Foreign Corrupt Practices Act is a legal question. Auditors cannot be expected to provide clients or users of the financial statements with legal advice. The role of the auditor is to assess control risk in the course of an engagement to attest to the fair presentation of the financial statements.
The Foreign Corrupt Practices Act of 1977 prohibits bribery of foreign officials. Which of the following statements correctly describes the act’s application to corporations engaging in such practices?
A. It applies only to multinational corporations.
B. It applies to all domestic corporations engaged in interstate commerce.
C. It applies only to corporations whose securities are registered under the Securities Exchange Act of 1934.
D. It applies only to corporations engaged in foreign commerce.
B. It applies to all domestic corporations engaged in interstate commerce.
Although the requirements of the FCPA relating to the maintenance of accounting records and systems of internal accounting control apply only to companies required to register under the Securities Exchange Act of 1934, the antibribery provisions apply to all domestic business concerns engaged in interstate commerce.
Which of the following corporations are subject to the accounting requirements of the Foreign Corrupt Practices Act (FCPA)?
A. All corporations engaged in interstate commerce.
B. All domestic corporations engaged in international trade.
C. All corporations that have made a public offering under the Securities Act of 1933.
D. All corporations whose securities are registered pursuant to the Securities Exchange Act of 1934.
D. All corporations whose securities are registered pursuant to the Securities Exchange Act of 1934.
The accounting requirements of the FCPA apply to all companies required to register and report under the Securities Exchange Act of 1934. These companies must maintain books, records, and accounts in reasonable detail that accurately and fairly reflect transactions. The FCPA also requires these companies to maintain a system of internal accounting control that provides certain reasonable assurances, including that corporate assets are not used for bribes.
Which of the following provisions are covered in the U.S. Foreign Corrupt Practices Act?
I. Illegal payments to foreign officials to assist in obtaining business.
II. Transparency of accounting records reflecting all transactions.
III. Payments to agents for the purpose of influencing foreign officials.
IV. Maintenance of an adequate system of internal controls.
A. I only.
B. I and III only.
C. II, III, and IV only.
D. I, II, III, and IV.
D. I, II, III, and IV.
The U.S. Foreign Corrupt Practices Act covers illegal payments to foreign officials to assist in obtaining business, transparency of accounting records reflecting all transactions, payments to agents for the purpose of influencing foreign officials, and maintenance of an adequate system of internal controls.
According to the United Kingdom Bribery Act of 2010 (UKBA),
A. Individuals and organizations violating the act may be fined, but individuals cannot be imprisoned.
B. A foreign company with only an agent in the U.K. cannot be liable under the act.
C. A commercial organization is liable for failure to prevent a bribe to retain business.
D. Commercial bribery and passive bribery are permitted.
C. A commercial organization is liable for failure to prevent a bribe to retain business.
The UKBA recognizes four offenses: (1) offering, promising, or giving an advantage; (2) requesting, agreeing to receive, or accepting an advantage; (3) bribery of a foreign public official; and (4) failure by a commercial organization to prevent a bribe being paid to gain or retain business or a business advantage.
Which of the following best describes an important provision of the U.S. Foreign Corrupt Practices Act?
A. Auditors cannot provide bookkeeping or other services related to the accounting records or financial statements of the audit client.
B. The CEO and CFO must certify that they have no knowledge of any corrupt practices occurring in any overseas subsidiaries of U.S. companies.
C. Companies must follow the laws of the their home country as well as the laws of the countries where any foreign subsidiaries are located.
D. The internal accounting controls should be examined, and if material weaknesses are found, controls must be strengthened.
D. The internal accounting controls should be examined, and if material weaknesses are found, controls must be strengthened.
The FCPA states that all public companies registered under the 1934 Act must devise and maintain a system of internal accounting control sufficient to provide reasonable assurance against material misstatements.
Under the Foreign Corrupt Practices Act (FCPA), an action may be brought that seeks
A. Treble damages by a private party.
B. Damages and injunctive relief by the Securities and Exchange Commission.
C. Criminal sanctions against both the corporation and its officers by the Department of Justice.
D. Injunctive relief by a private party.
C. Criminal sanctions against both the corporation and its officers by the Department of Justice.
The SEC may investigate violations of the FCPA, bring civil actions for its enforcement, and recommend that the Justice Department prosecute criminal violations.
The U.S. Foreign Corrupt Practices Act is particularly focused on the dealings of financial institutions and the safeguarding of the global financial system. Financial institutions must implement robust controls to ensure knowledge of their customers and the nature of their business transactions and be in a position to prove to regulators a high level of due diligence. These safeguards are required to minimize all of the following except
A. Money laundering.
B. Insider trading.
C. Terrorist financing.
D. Extortion and bribery.
B. Insider trading.
The safeguards of the global financial system relating to the U.S. Foreign Corrupt Practices Act deal with minimizing money laundering, terrorist financing, and extortion and bribery. Insider trading is not a focus of the safeguards.
Which one of the following is a permitted transaction under the U.S. Foreign Corrupt Practices Act?
A. Payments to customs officials to enable the release of an oil drilling rig and other equipment.
B. Payments to government officials to circumvent importation rules in countries where such payments are a customary business practice by multinational competitors.
C. Payments to expedite routine governmental action.
D. Payments to close friends of government officials to obtain an exception to a regulation.
C. Payments to expedite routine governmental action.
The U.S. Foreign Corrupt Practices Act contains an explicit exception to the bribery prohibition for facilitating payments for routine governmental action and provides affirmative defenses, which can be used to defend against alleged violations of the FCPA.
The United Kingdom Bribery Act (UKBA) of 2010 is similar to the Foreign Corrupt Practices Act (FCPA) of 1977 because it prohibits
A. Bribery of a foreign official.
B. Commercial bribery.
C. Passive bribery.
D. Failure to prevent bribery.
A. Bribery of a foreign official.
The UKBA recognizes four offenses: (1) offering, promising, or giving an advantage; (2) requesting, agreeing to receive, or accepting an advantage; (3) bribery of a foreign public official; and (4) failure by a commercial organization to prevent a bribe being paid to gain or retain business or a business advantage.
The FCPA prohibits corrupt payments (bribery) to any (1) foreign official, (2) foreign political party or official thereof, or (3) candidate for a political office in a foreign country. But it does not prohibit commercial bribery (of a foreign business owner or corporate officer), passive bribery (receipt of a bribe), or failure to prevent bribery.
What law prohibits U.S. companies from paying bribes to foreign officials for the purpose of obtaining or retaining business?
A. North American Free Trade Agreement.
B. Robinson-Patman Act.
C. Foreign Corrupt Practices Act.
D. Federal Ethical Standards Act.
C. Foreign Corrupt Practices Act.
The Foreign Corrupt Practices Act of 1977 prohibits bribes to foreign officials for purposes of obtaining or retaining business. The Act also requires companies to maintain effective systems of internal control.
