Question 1

Shareholders of a corporation generally have limited liability.

Accepted Answer

A) True 
 B)False

Question 2

The board of directors of a corporation is elected by the shareholders of the corporation.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a similarity between the duty of loyalty and the duty of care?

Accepted Answer

A)  Both entail directors and officers fulfilling their fiduciary duties. 
B)  Both encourage directors and officers to make secret profits. 
C)  Both require directors and officers to pursue healthy self-dealing practices. 
D)  Both need directors and officers to usurp corporate opportunity where available. 
A)  Both entail directors and officers fulfilling their fiduciary duties. 
B)  Both encourage directors and officers to make secret profits. 
C)  Both require directors and officers to pursue healthy self-dealing practices. 
D)  Both need directors and officers to usurp corporate opportunity where available.

Question 4

The Sarbanes-Oxley Act requires public companies to make personal loans to their directors.

Accepted Answer

A) True 
 B)False

Question 5

________ are a panel of decision makers who are elected by the shareholders.

Accepted Answer

A)  Registered agents 
B)  Corporate officers 
C)  Resident agents 
D)  Board of directors 
A)  Registered agents 
B)  Corporate officers 
C)  Resident agents 
D)  Board of directors

Question 6

Explain the effect of the Sarbanes-Oxley Act on corporate governance.

Accepted Answer

The Sarbanes-Oxley Act of 2002 establish

Question 7

The ________ Act prohibits public companies from making personal loans to their directors or executive officers.

Accepted Answer

A)  Foreign Corrupt Practices 
B)  Deregulation and Monetary Control 
C)  Sarbanes-Oxley 
D)  Commodity Futures Modernization 
A)  Foreign Corrupt Practices 
B)  Deregulation and Monetary Control 
C)  Sarbanes-Oxley 
D)  Commodity Futures Modernization

Question 8

David,the CEO of Nivera Furnishings,stealthily utilizes confidential patents and processes of the company to start a similar furnishing company that grows to be Nivera's biggest rival in the market.In terms of the duty of loyalty,David's act is an example of ________.

Accepted Answer

A)  violating a voting trust 
B)  piercing the corporate veil 
C)  competing with the corporation 
D)  breaking the business judgment rule 
A)  violating a voting trust 
B)  piercing the corporate veil 
C)  competing with the corporation 
D)  breaking the business judgment rule

Question 9

A system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates is known as the straight voting system.

Accepted Answer

A) True 
 B)False

Question 10

Helen works as the vice president of Gotspeed Corporation,a company that develops and sells sports shoes.Nestor,a home-based shoemaker,meets Helen privately in order to present a model for a more cost-efficient and durable shoe.Instead of taking the idea to Gotspeed's board of directors,Helen pays Nestor's asking price and purchases the Anklator model for herself.Helen leaves Gotspeed Corporation and forms her own company that manufactures and markets the Anklator shoe models.What breach of the duty of loyalty has Helen committed here?

Accepted Answer

A)  piercing the corporate veil 
B)  usurping a corporate opportunity 
C)  breaching the business judgment rule 
D)  denial of right to first refusal 
A)  piercing the corporate veil 
B)  usurping a corporate opportunity 
C)  breaching the business judgment rule 
D)  denial of right to first refusal

Question 11

A(n)________ is a member of the board who is not an officer of the corporation.

Accepted Answer

A)  outside director 
B)  shareholder 
C)  stakeholder 
D)  inside director 
A)  outside director 
B)  shareholder 
C)  stakeholder 
D)  inside director

Question 12

Ella owns 30 shares of a company.She attends an annual shareholders' meeting held for the purpose of electing three directors to the board.The voting system used allows Ella to multiply the number of shares she owns (30)by the number of directors to be elected (3),which allows her to cast 90 votes for one candidate or a combination of multiple candidates.The elected candidate won by a simple majority of votes.The voting system used is ________.

Accepted Answer

A)  straight voting 
B)  cumulative voting 
C)  supramajority voting requirement 
D)  supermajority voting requirement 
A)  straight voting 
B)  cumulative voting 
C)  supramajority voting requirement 
D)  supermajority voting requirement

Question 13

Alan owns 90 percent of the shares of Whitesoft,Inc.He wrongfully uses his dominance to force the company to spend money on ventures that benefit him alone.When sued by other shareholders,Alan defends by arguing that Whitesoft as a whole is liable,but he was not personally liable as he was a mere shareholder of the company.Which of the following doctrines is the court,presiding over this case,likely to adopt in order to enforce justice?

Accepted Answer

A)  attractive nuisance doctrine 
B)  crashworthiness doctrine 
C)  transferred intent doctrine 
D)  alter ego doctrine 
A)  attractive nuisance doctrine 
B)  crashworthiness doctrine 
C)  transferred intent doctrine 
D)  alter ego doctrine

Question 14

Which of the following is an example of a corporate officer?

Accepted Answer

A)  an ombudsman 
B)  a treasurer 
C)  an outside director 
D)  a non-executive director 
A)  an ombudsman 
B)  a treasurer 
C)  an outside director 
D)  a non-executive director

Question 15

The Sarbanes-Oxley Act officially applies only to a ________ corporation.

Accepted Answer

A)  close 
B)  nonprofit 
C)  public 
D)  noncommercial 
A)  close 
B)  nonprofit 
C)  public 
D)  noncommercial

Question 16

Which of the following is true of shareholder voting agreements?

Accepted Answer

A)  They are limited in duration. 
B)  They are specifically enforceable. 
C)  They are neither revocable nor irrevocable. 
D)  They are required to be filed with the corporation. 
A)  They are limited in duration. 
B)  They are specifically enforceable. 
C)  They are neither revocable nor irrevocable. 
D)  They are required to be filed with the corporation.

Question 17

Making a secret profit on corporate transactions is considered a breach of duty of loyalty.

Accepted Answer

A) True 
 B)False

Question 18

A system in which each shareholder votes the number of shares he or she owns on candidates for each of the positions open is the cumulative voting system.

Accepted Answer

A) True 
 B)False

Question 19

Failure of a corporate director or officer to exercise the duty of care while conducting the corporation's business is called ________.

Accepted Answer

A)  defamation 
B)  negligence 
C)  extortion 
D)  embezzlement 
A)  defamation 
B)  negligence 
C)  extortion 
D)  embezzlement

Question 20

Stock dividends do not increase a shareholder's proportionate ownership interest.

Accepted Answer

A) True 
 B)False

Exam 28: Corporate Governance and the Sarbanes-Oxley Act

Shareholders of a corporation generally have limited liability.

The board of directors of a corporation is elected by the shareholders of the corporation.

Which of the following is a similarity between the duty of loyalty and the duty of care?

The Sarbanes-Oxley Act requires public companies to make personal loans to their directors.

________ are a panel of decision makers who are elected by the shareholders.

Explain the effect of the Sarbanes-Oxley Act on corporate governance.

The ________ Act prohibits public companies from making personal loans to their directors or executive officers.

David,the CEO of Nivera Furnishings,stealthily utilizes confidential patents and processes of the company to start a similar furnishing company that grows to be Nivera's biggest rival in the market.In terms of the duty of loyalty,David's act is an example of ________.

A system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates is known as the straight voting system.

A(n)________ is a member of the board who is not an officer of the corporation.

Which of the following is an example of a corporate officer?

The Sarbanes-Oxley Act officially applies only to a ________ corporation.

Which of the following is true of shareholder voting agreements?

Making a secret profit on corporate transactions is considered a breach of duty of loyalty.

A system in which each shareholder votes the number of shares he or she owns on candidates for each of the positions open is the cumulative voting system.

Failure of a corporate director or officer to exercise the duty of care while conducting the corporation's business is called ________.

Stock dividends do not increase a shareholder's proportionate ownership interest.

Legal Heritage and the Digital Age

Constitutional Law for Business and E-commerce

Courts and Jurisdiction

Judicial Alternative Administrative and E-Dispute Resolution

Intentional Torts and Negligence

Criminal Law and Cyber Crimes

Intellectual Property and Cyber Piracy

Ethics and Social Responsibility of Business

Nature of Traditional and E-Contracts

Agreement and Consideration

Capacity and Legality

Genuineness of Assent and Statute of Frauds

Third-Party Rights and Discharge

Breach of Contract and Remedies

Digital Law and E-Commerce

Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

Remedies for Breach of Sales and Lease Contracts

Warranties and Product Liability

Creation and Transfer of Negotiable Instruments

Holder in Due Course and Liability of Parties

Banking System and Electronic Financial Transactions

Credit, Real Property Financing, and Secured Transactions

Bankruptcy and Reorganization

Agency law

Small Business, Entrepreneurship, and Partnerships

Corporate Formation and Financing

Corporate Acquisitions and Multinational Corporations

Limited Liability Companies and Limited Liability Partnerships

Franchise and Special Forms of Business

Investor Protection, E-Securities, and Wall Street Reform

Antitrust Law and Unfair Trade Practices

Consumer Safety and Environmental Protection

Labor, Worker Protection, and Immigration Laws

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Personal Property, Bailment, and Insurance

Real Property, Landlord-Tenant Law, and Land Use Regulation

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Accountants' Duties and Liability

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