An S corporation $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$

a$.$ is taxed in the same manner as a C corporation$$

b$.$ is eligible for more efficient financing in the face of company growth than a C corporation$$

c$.$ is usually more difficult to form than a C corporation$$

d$.$ is not taxed at the corporate level, unlike a C corporation$$

$2.$ An important advantage of a sole proprietorship is that $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$

a$.$ it is easier to raise capital under such a structure than under other organizational forms$$

b$.$ it allows for an unlimited life of the business$$

c$.$ it is relatively easy to create$$

d$.$ Both a and b are correct.$$

$3.$ A shareholder is someone who $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$

a$.$ sits on the audit committee of a firm$$

b$.$ is an ex$-$employee of a company$$

c$.$ profits from the favorable results of a company$$

$2$ CFA Institute $61$

d$.$ follows the company for an investment firm$$

$4.$ Effective corporate governance includes all of the following EXCEPT $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$ a$.$ fairness$$

b$.$ accountability$$

c$.$ objectivity$$

d$.$ higher share price$$

$5.$ A stakeholder is someone who $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$

a$.$ is required to read a company$$s annual report$$

b$.$ answers to a board of directors$$

c$.$ has a vested interest in a company$$s success$$

d$.$ is hired to do a specific job$$

$6.$An effective business leader will recognize the social and environmental responsibilities of their business as well as the eventual goal of achieving long$-$term, sustainable global development.$$ This statement refers to $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$

a$.$ employing an experienced environmental consulting firm$$

b$.$ the advantages of having an audit committee$$

c$.$ having a diversified and well$-$experienced board of directors$$

d$.$ practicing strong corporate governance$$

$7.$ An important component of a strong board of directors $($BOD$)$ is having members who are $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$ a$.$ former employees of the company$$

b$.$ able to write a strong corporate press release$$

c$.$ culturally diverse and experienced in the industry$$

d$.$ new to the industry and without preconceptions$$

$8.$ Which of the following is NOT a reason why a company needs good corporate governance?$$

a$.$ to avoid mismanagement of the company$$

b$.$ to enable the company to raise capital more efficiently and mitigate financial and operational risk to stakeholders$$

c$.$ to analyze the company$$s operations and systems of internal control in order to detect and prevent various forms of fraud and other accounting irregularities$$

d$.$ to increase the company$$s overall accountability and prevent significant organizational problems$$

$9.$ Who ultimately runs the company operations for a large corporation?$$

a$.$ shareholders$$

b$.$ board of directors$$

c$.$ external auditors$$

d$.$ stakeholders$$

$10.$ One of the ways in which companies attempt to mitigate short$-$term managerial focus is by offering managers $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$

a$.$ increased vacation time$$

b$.$ increased paid sick leave$$

c$.$ stock options$$

d$.$ comprehensive health insurance$$

$11.$ Which of the following are used to ensure fiduciary responsibility?$$

$622$ Multiple Choice$$

Access for free at openstax.org$$

a$.$ audits$$

b$.$ press releases$$

c$.$ end$-$of$-$year financial ledgers$$

d$.$ a letter from the board of directors$$

$12.$ Which of the following is NOT one of the roles of an audit committee?$$

a$.$ reviewing the work of the internal audit$$

b$.$ reviewing systems of internal control.$$

c$.$ ensuring that appropriate resources are used in company operations$$

d$.$ launching special investigations of employees, company practices, or procedures$$

$13.$ Which of the following is a major issue addressed in corporate governance?$$

a$.$ improving banking relations$$

b$.$ ethics and its implementation$$

c$.$ improving profits for shareholders$$

d$.$ expanding operations internationally$$

$14.$ Agency problems are essentially $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$

a$.$ conflicts of interest$$

b$.$ problems with the IRS$$

c$.$ fraudulent business activities$$

d$.$ nepotism$$