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Chapter 06
The Role of Government
True / False Questions
1. The Foreign Corrupt Practices Act was introduced to more effectively control bribery and
other less obvious forms of payment to foreign officials and politicians by American publicly
traded companies as they pursued international growth.
2. Prior to the passing of the Foreign Corrupt Practices Act, making illegal payments to
foreign officials was not punishable through any type of legislation.
3. Prior to the passing of the Foreign Corrupt Practices Act, the Securities and Exchange
Commission was not authorized to penalize company executives for failing to disclose payments
under its securities rules.
4. The Credit Rating Agency and the New York Stock Exchange are the only bodies
authorized to enforce the Foreign Corrupt Practices Act.
5. The Foreign Corrupt Practices Act encompasses all the secondary measures that were in
use to prohibit bribery and other illegal forms of payment to foreign officials by focusing on two
distinct areas—disclosure and prohibition.
6. The Foreign Corrupt Practices Act focuses on disclosure, which requires corporations to
fully reveal any and all transactions conducted with foreign officials and politicians, in line with
the Securities and Exchange Commission provisions.
7. Under the Foreign Corrupt Practices Act, facilitation payments are payments that are
acceptable (legal), provided they expedite or secure the performance of a routine governmental
action.
8. The processing of governmental papers, such as visas, is an example of a routine
governmental action.
9. A company can be found in violation of the Foreign Corrupt Practices Act even if its bribe
is unsuccessful.
10. The Securities and Exchange Commission can enforce criminal penalties of up to $2
million per violation of the Foreign Corrupt Practices Act for corporations and other business
entities.
11. Grease payments are illegal under the Foreign Corrupt Practices Act.
12. Payments to foreign officials made in connection with expediting lawful customs
clearances and obtaining the issuance of entry or exit visas are considered bribes under the
Foreign Corrupt Practices Act.
13. Under the Foreign Corrupt Practices Act, payments to foreign officials made in connection
with the promotion or demonstration of company products or services are legal.
14. According to the Federal Sentencing Guidelines for Organizations, businesses cannot be
held liable for the criminal acts of their employees and agents.
15. In its mission to promote ethical organizational behavior and increase the costs of
unethical behavior, the Federal Sentencing Guidelines for Organizations establishes a definition
of an organization that is so broad as to prompt the assessment that "no business enterprise is
exempt."
16. The sentence of an organization punished under the Federal Sentencing Guidelines for
Organizations is calculated through a three-step process: determination of mitigating factors,
evaluating the credit rating, and the determination of base fine.
17. The Federal Sentencing Guidelines for Organizations table factors in both the nature of
the crime and the amount of the loss suffered by the victim.
18. The base fine of an organization sentenced under the Federal Sentencing Guidelines for
Organizations is always calculated after its culpability score.
19. The culpability score, according to the Federal Sentencing Guidelines for Organizations,
is the calculation of an organization's degree of blame or guilt, and it is a multiplier of the base
fine up to 40 times.
20. Under no circumstances can the culpability score be increased or decreased.
21. Under the Federal Sentencing Guidelines for Organizations, a judge has the discretion to
impose a so-called death penalty upon an organization, where the fine matches all the
organization's assets.
22. In order to minimize an organization's culpability score, the Federal Sentencing
Guidelines for Organizations prescribes that its employees be granted absolute discretionary
authority.
23. According to the Federal Sentencing Guidelines for Organizations, criminal offenses,
whether actual or suspected, must generate an appropriate response, analysis, and corrective
action in order to establish an effective compliance program.
24. The concept of an ethical culture was recognized, for the first time, as a foundational
component of an effective compliance program under the Revised Federal Sentencing Guidelines
for Organizations.
25. The Revised Federal Sentencing Guidelines for Organizations required evidence of actively
promoting ethical conduct rather than just complying with legal obligations.
26. The Sarbanes-Oxley Act is a legislative response to the corporate accounting scandals of
the early 2000s that covers the financial management of businesses.
27. The creation of the Public Company Accounting Oversight Board (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.
28. As an oversight board, the Public Company Accounting Oversight Board (PCAOB) was
charged with maintaining compliance with established standards and enforcing rules and
disciplinary procedures for those organizations that found themselves out of compliance.
29. Title III of the Sarbanes-Oxley Act requires senior auditors to rotate off an account every
five years and junior auditors every seven years.
30. Title VI of the Sarbanes-Oxley Act provides additional funding and authority to the
Securities and Exchange Commission to follow through on all the new responsibilities outlined in
the act.
31. Title VIII of the Sarbanes-Oxley Act imposes fines on employees for lying to other
employees regarding company benefits and pay.
32. Title IX of the Sarbanes-Oxley Act requires CEOs and CFOs to certify their periodic reports
and imposes penalties for certifying a misleading or fraudulent report.
33. In September and October 2008, financial markets around the world suffered a severe
crash as a consequence of aggressive lending to subprime borrowers in a deregulated
environment.
34. The Dodd-Frank Wall Street Reform and Consumer Protection Act Legislation was
established to expand the foreign trade sector.
35. The Consumer Financial Protection Bureau is a government agency within the Federal
Reserve that oversees financial products and services.
36. The authority of the Consumer Financial Protection Bureau does not extend to examining
and enforcing regulations for banks and credit unions if their assets exceed $10 billion.
37. The Financial Stability Oversight Council is not authorized to act against a bank that
poses a threat to the financial stability of the United States if its assets exceed $50 billion.
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38. The Financial Stability Oversight Council is led by the Treasury secretary and is made up
of top financial regulators.
39. The Volcker rule proposed that there should be a key restriction in the legislation to limit
the ability of banks to trade on their own accounts.
40. The original Volcker rule sought to allow trading of all derivatives without discrimination.
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-05 Explain the key provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Multiple Choice Questions
41. Which of the following key U.S. legislations is an attempt to discourage, if not prevent,
illegal conduct within organizations?
42. Which of the following did the government formulate to penalize corporate wrongdoing?
43. Which of the following is a legislation that was introduced to control bribery and other
less obvious forms of payment to overseas officials and politicians by American publicly traded
companies?
44. Which of the following legislations could fine companies for failing to disclose bribes and
other forms of payments to foreign officials before the Foreign Corrupt Practices Act was
introduced?
45. Which of the following legislations required full disclosure of funds that were taken out of
or brought into the United States before the Foreign Corrupt Practices Act was introduced?
46. Which of the following statements is true of the Foreign Corrupt Practices Act?
47. Sebastian and Amy are arguing over secondary legislations that were in place prior to the
passing of the Foreign Corrupt Practices Act (FCPA). Amy is of the opinion that the FCPA
encompasses all secondary measures that were in use to prohibit corrupt practices. Sebastian
disagrees with Amy on this point. Which of the following, if true, would strengthen Amy's
argument?
48. Which of the following government agencies jointly enforce the Foreign Corrupt Practices
Act?
49. Why was the Foreign Corrupt Practices Act criticized?
50. Under the Foreign Corrupt Practices Act, payments that are acceptable (legal) provided
they expedite or secure the performance of a routine governmental action are called _____.
51. Brendon Inc. required a permit to open its business in a foreign country. Although it had
met all the requirements for the permit, the officials delayed providing Brendon Inc. with the
permit. To expedite the process, the company made a payment to a high-ranking official who has
the authority to grant the permit. Which of the following types of payment does this scenario
exemplify?
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52. Which of the following is true of facilitation payments under the Foreign Corrupt
Practices Act (FCPA)?
53. Which of the following is a routine governmental action?
54. Which of the following is true of the penalties under the Foreign Corrupt Practices Act?
