Assessing Control Risk under AICPA Standards,
Audit - Chapter 7, Audit Quiz 5 (Part 2) Global
Insights A+ Graded Exams from Renowned Sources
High-Quality Questions with Expert Answers
An issuer may hire an employee of a registered public accounting firm who served on the
audit engagement team within the previous year for which of the following positions? -
CORRECT ANSWER- -Staff accountant
As set forth by Title I of the Sarbanes-Oxley Act of 2002, Section 105, "Investigations and
Disciplinary Proceeding," the PCAOB may investigate any act or practice, or omission to
act, by a registered public accounting firm that may violate any provision of the Sarbanes-
Oxley Act, PCAOB rules, securities laws, and professional standards. Possible disciplinary
actions include: - CORRECT ANSWER- -All of the answer choices are correct.
In order to participate on the PCAOB Board, members must: - CORRECT ANSWER- -
demonstrate commitment to the interests of investors and the public.
According to the Sarbanes-Oxley Act of 2002, the PCAOB has the legal authority to perform
each of the following, except: - CORRECT ANSWER- -prosecute suspected criminal
violations by registered public accounting firms.
Which of the following documents would most likely contain specific rules for the
management of a business corporation? - CORRECT ANSWER- -Bylaws.
Davis, a director of Active Corp., is entitled to - CORRECT ANSWER- -Rely on information
provided by a corporate officer.
Which of the following provisions must a for-profit corporation include in its articles of
incorporation to obtain a corporate charter?
,I. Provision for the issuance of voting stock
II. Name of the corporation - CORRECT ANSWER- -Both I and II.
Generally, a corporation's articles of incorporation must include all of the following except
the - CORRECT ANSWER- -Quorum requirements.
In general, which of the following must be contained in articles of incorporation? -
CORRECT ANSWER- -Number of shares of stock authorized to be issued by the
corporation.
The president of a company has signed a $10 million contract with a construction company
to build a new corporate office. Which of the following corporate documents sets forth the
scope of authority under which this transaction is governed? - CORRECT ANSWER- -
Bylaws.
Which of the following corporate actions is subject to shareholder approval? - CORRECT
ANSWER- -Removal of directors.
Absent a specific provision in its articles of incorporation, a corporation's board of directors
has the power to do all of the following except - CORRECT ANSWER- -Amend the articles of
incorporation.
Which of the following actions is required to ensure the validity of a contract between a
corporation and a director of the corporation? - CORRECT ANSWER- -The director must
disclose the interest to the independent members of the board and refrain from voting.
The board of directors performs all of the following duties except - CORRECT ANSWER- -
Managing day-to-day operations.
, A corporate director commits a breach of duty if - CORRECT ANSWER- -The director's
action, prompted by confidential information, results in an abuse of corporate opportunity.
Knox, president of Quick Corp., contracted with Tine Office Supplies, Inc., to supply
Quick's stationery on customary terms and at a cost less than that charged by any other
supplier. Knox later informed Quick's board of directors that Knox was a majority
shareholder in Tine. Quick's contract with Tine is - CORRECT ANSWER- -Valid because the
contract is fair to Quick.
Seymore was recently invited to become a director of Buckley Industries, Inc. If Seymore
accepts and becomes a director, Seymore, along with the other directors, will not be
personally liable for - CORRECT ANSWER- -Honest errors of judgment.
The principle that protects corporate directors from personal liability for acts performed in
good faith on behalf of the corporation is known as the - CORRECT ANSWER- -Business
judgment rule.
The business judgment rule is a rule that immunizes corporate - CORRECT ANSWER- -
Management from liability for actions that result in corporate losses or damages if the
actions are undertaken in good faith and are within both the power of the corporation and
the authority of management to make.
Which of the following positions best describes the nature of the board of directors of XYZ
Co.'s relationship to the company? - CORRECT ANSWER- -Fiduciary.
In order to comply with a director's duty of loyalty to a corporation, what action(s) should a
director take when presented with a corporate opportunity? - CORRECT ANSWER- -Offer
the opportunity to the corporation and accept it if the corporation rejects it.
A member of the board of directors of Central Communications Co. is offered a license by a
third party to operate a cellular phone system. The director does not present this offer to
Audit - Chapter 7, Audit Quiz 5 (Part 2) Global
Insights A+ Graded Exams from Renowned Sources
High-Quality Questions with Expert Answers
An issuer may hire an employee of a registered public accounting firm who served on the
audit engagement team within the previous year for which of the following positions? -
CORRECT ANSWER- -Staff accountant
As set forth by Title I of the Sarbanes-Oxley Act of 2002, Section 105, "Investigations and
Disciplinary Proceeding," the PCAOB may investigate any act or practice, or omission to
act, by a registered public accounting firm that may violate any provision of the Sarbanes-
Oxley Act, PCAOB rules, securities laws, and professional standards. Possible disciplinary
actions include: - CORRECT ANSWER- -All of the answer choices are correct.
In order to participate on the PCAOB Board, members must: - CORRECT ANSWER- -
demonstrate commitment to the interests of investors and the public.
According to the Sarbanes-Oxley Act of 2002, the PCAOB has the legal authority to perform
each of the following, except: - CORRECT ANSWER- -prosecute suspected criminal
violations by registered public accounting firms.
Which of the following documents would most likely contain specific rules for the
management of a business corporation? - CORRECT ANSWER- -Bylaws.
Davis, a director of Active Corp., is entitled to - CORRECT ANSWER- -Rely on information
provided by a corporate officer.
Which of the following provisions must a for-profit corporation include in its articles of
incorporation to obtain a corporate charter?
,I. Provision for the issuance of voting stock
II. Name of the corporation - CORRECT ANSWER- -Both I and II.
Generally, a corporation's articles of incorporation must include all of the following except
the - CORRECT ANSWER- -Quorum requirements.
In general, which of the following must be contained in articles of incorporation? -
CORRECT ANSWER- -Number of shares of stock authorized to be issued by the
corporation.
The president of a company has signed a $10 million contract with a construction company
to build a new corporate office. Which of the following corporate documents sets forth the
scope of authority under which this transaction is governed? - CORRECT ANSWER- -
Bylaws.
Which of the following corporate actions is subject to shareholder approval? - CORRECT
ANSWER- -Removal of directors.
Absent a specific provision in its articles of incorporation, a corporation's board of directors
has the power to do all of the following except - CORRECT ANSWER- -Amend the articles of
incorporation.
Which of the following actions is required to ensure the validity of a contract between a
corporation and a director of the corporation? - CORRECT ANSWER- -The director must
disclose the interest to the independent members of the board and refrain from voting.
The board of directors performs all of the following duties except - CORRECT ANSWER- -
Managing day-to-day operations.
, A corporate director commits a breach of duty if - CORRECT ANSWER- -The director's
action, prompted by confidential information, results in an abuse of corporate opportunity.
Knox, president of Quick Corp., contracted with Tine Office Supplies, Inc., to supply
Quick's stationery on customary terms and at a cost less than that charged by any other
supplier. Knox later informed Quick's board of directors that Knox was a majority
shareholder in Tine. Quick's contract with Tine is - CORRECT ANSWER- -Valid because the
contract is fair to Quick.
Seymore was recently invited to become a director of Buckley Industries, Inc. If Seymore
accepts and becomes a director, Seymore, along with the other directors, will not be
personally liable for - CORRECT ANSWER- -Honest errors of judgment.
The principle that protects corporate directors from personal liability for acts performed in
good faith on behalf of the corporation is known as the - CORRECT ANSWER- -Business
judgment rule.
The business judgment rule is a rule that immunizes corporate - CORRECT ANSWER- -
Management from liability for actions that result in corporate losses or damages if the
actions are undertaken in good faith and are within both the power of the corporation and
the authority of management to make.
Which of the following positions best describes the nature of the board of directors of XYZ
Co.'s relationship to the company? - CORRECT ANSWER- -Fiduciary.
In order to comply with a director's duty of loyalty to a corporation, what action(s) should a
director take when presented with a corporate opportunity? - CORRECT ANSWER- -Offer
the opportunity to the corporation and accept it if the corporation rejects it.
A member of the board of directors of Central Communications Co. is offered a license by a
third party to operate a cellular phone system. The director does not present this offer to
