Question 1

Which of the following is a part of the Global Legal Settlement of 2002?

Accepted Answer

A)   The establishment of a Public Company Accounting Oversight Board (PCAO
B)   to supervise accounting firms and thus insure that audits are independent and controlled for quality.
B)   Increased penalties for white-collar crime and obstruction of official investigations.
C)   Requires a CEO and CFO to certify that periodic financial statements and disclosure of the firm are accurate.
D)   Requires investment banks to make public their analysts' recommendations.E) A) and C)
F) None of the above

Question 2

When investment banks allocate shares of a popular but underpriced IPO to executives of other firms in order to attract their business, it is called

Accepted Answer

A)   spinning.
B)   a bribe.
C)   reputational activities.
D)   a kickback.E) B) and C)
F) A) and C)

Question 3

Under the Global Legal Settlement of 2002, the provision that requires, for a period of five years, brokerage firms to contract with independent research firms to provide information to their customers is an example of

Accepted Answer

A)   regulate for transparency.
B)   supervisory oversight.
C)   separation of functions.
D)   socialization of information production.E) A) and D)
F) All of the above

Question 4

In 2008, it became clear that the credit-rating agencies ________ the risk of the subprime products that ________.

Accepted Answer

A)   overstated; they helped create
B)   understated; they helped create
C)   overstated; they were paid to rate
D)   understated; they were paid to rateE) B) and D)
F) A) and B) B

Question 5

Which of the following policy measures created an Office of Credit Ratings at the SEC with its own staff and the authority to fine credit-rating agencies and to deregister an agency if it produces bad ratings?

Accepted Answer

A)   The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
B)   Sarbanes-Oxley Act of 2002.
C)   Global Legal Settlement of 2002.
D)   Gramm-Leach-Bliley Act of 1999.
E)   Riegle-Neal Act of 1994.F) A) and E)
G) A) and D)

Question 6

When the SEC requires companies to publicly release financial statements, which of the following remedies of conflicts of interest does this fall under?

Accepted Answer

A)   Leave it to the market
B)   Regulate for transparency
C)   Supervisory oversight
D)   Separation of functionsE) A) and C)
F) A) and D)

Question 7

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 included which of the following provisions to deal with conflicts of interest in the credit-rating Industry? 1. Created an Office of Credit Ratings at the SEC with its own staff and the authority to fine credit-rating agencies and to deregister an agency if it produces bad ratings.
2)  Forced credit-rating agencies to provide reports to the SEC when their employees go to work for a company that has been rated by them in the last twelve months.
3)  Prohibited compliance officers from being involved in producing or selling credit ratings.
4)  Required the SEC to prevent issuers of asset-backed securities from choosing the credit-rating agencies that will give them the highest rating and supported earlier initiatives by the SEC.
5)  Authorized investors to bring lawsuits against credit-rating agencies for a reckless failure to get the facts when providing a credit rating.

Accepted Answer

A)   1, 2, 3, and 4.
B)   2, 3, 4, and 5.
C)   none.
D)   1, 2, 3, 4, and 5.E) None of the above
F) B) and C)

Question 8

Which of the following is not a part of the Sarbanes-Oxley Act of 2002?

Accepted Answer

A)   The establishment of a Public Company Accounting Oversight Board (PCAO
B)   to supervise accounting firms and thus insure that audits are independent and controlled for quality.
B)   Increased penalties for white-collar crime and obstruction of official investigations.
C)   Requires a CEO and CFO to certify that periodic financial statements and disclosure of the firm are accurate.
D)   Requires investment banks to make public their analysts' recommendations.E) B) and C)
F) A) and B)

Question 9

Describe what is meant by economies of scope and explain how financial institutions' realizing economies of scope has led to an increase in conflicts of interest.

Accepted Answer

Economies of scope is when firms can red...

Question 10

Under the Sarbanes-Oxley Act of 2002, the provision that established the PCAOB to supervise accounting firms is an example of

Accepted Answer

A)   regulate for transparency.
B)   supervisory oversight.
C)   separation of functions.
D)   socialization of information production.E) B) and C)
F) None of the above

Question 11

Which policy measure requires investment banks to sever the links between research and securities underwriting?

Accepted Answer

A)   Sarbanes-Oxley Act of 2002.
B)   Global Legal Settlement of 2002.
C)   Gramm-Leach-Bliley Act of 1999.
D)   Riegle-Neal Act of 1994E) B) and D)
F) C) and D)

Question 12

The problem with spinning is that it may ________ the cost of capital to a firm and thus ________ the efficiency of the capital market.

Accepted Answer

A)   increase; increase
B)   increase; decrease
C)   decrease; increase
D)   decrease; decreaseE) A) and B)
F) All of the above

Question 13

If there isn't sufficient information available, then which of the following approaches to reduce conflicts of interest will have the lowest probability of working?

Accepted Answer

A)   Leave it to the market
B)   Supervisory oversight
C)   Separation of functions
D)   Socialization of information productionE) B) and C)
F) A) and D)

Question 14

Which policy measure increases the punishment for white-collar crime and obstruction of official investigations?

Accepted Answer

A)   Sarbanes-Oxley Act of 2002.
B)   Global Legal Settlement of 2002.
C)   Gramm-Leach-Bliley Act of 1999.
D)   Riegle-Neal Act of 1994E) A) and B)
F) A) and C)

Question 15

Conflicts of interest arising from management advisory services brought down ________ in 2002.

Accepted Answer

A)   Enron
B)   WorldComm
C)   Arthur Andersen
D)   Global CrossingE) B) and C)
F) A) and D)

Question 16

Under the Sarbanes-Oxley Act of 2002, the clause that makes it unlawful for a registered public accounting firm to provide any nonaudit service to a client contemporaneously with an impermissable audit is an example of which remedy of conflicts of interest?

Accepted Answer

A)   Regulate for transparency
B)   Supervisory oversight
C)   Separation of functions
D)   Socialization of information productionE) C) and D)
F) None of the above C

Question 17

Which of the following policy measures authorized investors to bring lawsuits against credit-rating agencies for a reckless failure to get the facts when providing a credit rating?

Accepted Answer

A)   The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
B)   Sarbanes-Oxley Act of 2002.
C)   Global Legal Settlement of 2002.
D)   Gramm-Leach-Bliley Act of 1999.
E)   Riegle-Neal Act of 1994.F) A) and E)
G) A) and D)

Question 18

Which of the following is not a conflict of interest in accounting firms?

Accepted Answer

A)   The firm provides consulting as well as rating creditworthiness.
B)   Auditors may be pressured to skew their opinions so the client will stay with the firm.
C)   Auditors may be reluctant to criticize advice put into place by nonaudit personnel of the firm.
D)   Auditors release an overly favorable audit in order to solicit business.E) All of the above
F) C) and D)

Question 19

A type of ________ problem that occurs when a person or institution has multiple objectives that conflict with each other is called ________.

Accepted Answer

A)   moral hazard; conflicts of interest
B)   adverse selection; conflicts of interest
C)   moral hazard; spinning
D)   adverse selection; spinningE) A) and B)
F) A) and C) A

Question 20

If a conflict of interest exists

Accepted Answer

A)   it will always have serious adverse consequences.
B)   it may not have a serious adverse consequences if the incentive to take advantage of the conflict is low.
C)   the government needs to step in to pass legislation to remove the conflict.
D)   there will not be serious adverse consequences, even if the incentive to take advantage of the conflict is low.E) All of the above
F) B) and D)

Exam 15: Conflicts of Interest in the Financial Industry

Which of the following is a part of the Global Legal Settlement of 2002?

Correct Answer
verified

When investment banks allocate shares of a popular but underpriced IPO to executives of other firms in order to attract their business, it is called

Correct Answer
verified

Under the Global Legal Settlement of 2002, the provision that requires, for a period of five years, brokerage firms to contract with independent research firms to provide information to their customers is an example of

Correct Answer
verified

In 2008, it became clear that the credit-rating agencies the risk of the subprime products that .

Correct Answer
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B

Which of the following policy measures created an Office of Credit Ratings at the SEC with its own staff and the authority to fine credit-rating agencies and to deregister an agency if it produces bad ratings?

Correct Answer
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When the SEC requires companies to publicly release financial statements, which of the following remedies of conflicts of interest does this fall under?

Correct Answer
verified

Correct Answer
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Which of the following is not a part of the Sarbanes-Oxley Act of 2002?

Correct Answer
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Describe what is meant by economies of scope and explain how financial institutions' realizing economies of scope has led to an increase in conflicts of interest.

Correct Answer
verified
Economies of scope is when firms can red...
View Answer

Under the Sarbanes-Oxley Act of 2002, the provision that established the PCAOB to supervise accounting firms is an example of

Correct Answer
verified

Which policy measure requires investment banks to sever the links between research and securities underwriting?

Correct Answer
verified

The problem with spinning is that it may the cost of capital to a firm and thus the efficiency of the capital market.

Correct Answer
verified

If there isn't sufficient information available, then which of the following approaches to reduce conflicts of interest will have the lowest probability of working?

Correct Answer
verified

Which policy measure increases the punishment for white-collar crime and obstruction of official investigations?

Correct Answer
verified

Conflicts of interest arising from management advisory services brought down ________ in 2002.

Correct Answer
verified

Under the Sarbanes-Oxley Act of 2002, the clause that makes it unlawful for a registered public accounting firm to provide any nonaudit service to a client contemporaneously with an impermissable audit is an example of which remedy of conflicts of interest?

Correct Answer
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C

Which of the following policy measures authorized investors to bring lawsuits against credit-rating agencies for a reckless failure to get the facts when providing a credit rating?

Correct Answer
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Which of the following is not a conflict of interest in accounting firms?

Correct Answer
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A type of problem that occurs when a person or institution has multiple objectives that conflict with each other is called .

Correct Answer
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A

If a conflict of interest exists

Correct Answer
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Exam 15: Conflicts of Interest in the Financial Industry

Which of the following is a part of the Global Legal Settlement of 2002?

Correct AnswerverifiedShow Answer

When investment banks allocate shares of a popular but underpriced IPO to executives of other firms in order to attract their business, it is called

Correct AnswerverifiedShow Answer

Under the Global Legal Settlement of 2002, the provision that requires, for a period of five years, brokerage firms to contract with independent research firms to provide information to their customers is an example of

Correct AnswerverifiedShow Answer

In 2008, it became clear that the credit-rating agencies ________ the risk of the subprime products that ________.

Correct AnswerverifiedB

Which of the following policy measures created an Office of Credit Ratings at the SEC with its own staff and the authority to fine credit-rating agencies and to deregister an agency if it produces bad ratings?

Correct AnswerverifiedShow Answer

When the SEC requires companies to publicly release financial statements, which of the following remedies of conflicts of interest does this fall under?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not a part of the Sarbanes-Oxley Act of 2002?

Correct AnswerverifiedShow Answer

Describe what is meant by economies of scope and explain how financial institutions' realizing economies of scope has led to an increase in conflicts of interest.

Correct AnswerverifiedEconomies of scope is when firms can red...View AnswerShow Answer

Under the Sarbanes-Oxley Act of 2002, the provision that established the PCAOB to supervise accounting firms is an example of

Correct AnswerverifiedShow Answer

Which policy measure requires investment banks to sever the links between research and securities underwriting?

Correct AnswerverifiedShow Answer

The problem with spinning is that it may ________ the cost of capital to a firm and thus ________ the efficiency of the capital market.

Correct AnswerverifiedShow Answer

If there isn't sufficient information available, then which of the following approaches to reduce conflicts of interest will have the lowest probability of working?

Correct AnswerverifiedShow Answer

Which policy measure increases the punishment for white-collar crime and obstruction of official investigations?

Correct AnswerverifiedShow Answer

Conflicts of interest arising from management advisory services brought down ________ in 2002.

Correct AnswerverifiedShow Answer

Under the Sarbanes-Oxley Act of 2002, the clause that makes it unlawful for a registered public accounting firm to provide any nonaudit service to a client contemporaneously with an impermissable audit is an example of which remedy of conflicts of interest?

Correct AnswerverifiedC

Which of the following policy measures authorized investors to bring lawsuits against credit-rating agencies for a reckless failure to get the facts when providing a credit rating?

Correct AnswerverifiedShow Answer

Which of the following is not a conflict of interest in accounting firms?

Correct AnswerverifiedShow Answer

A type of ________ problem that occurs when a person or institution has multiple objectives that conflict with each other is called ________.

Correct AnswerverifiedA

If a conflict of interest exists

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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In 2008, it became clear that the credit-rating agencies the risk of the subprime products that .

Correct Answer
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B

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Economies of scope is when firms can red...
View Answer

Correct Answer
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Correct Answer
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The problem with spinning is that it may the cost of capital to a firm and thus the efficiency of the capital market.

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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A type of problem that occurs when a person or institution has multiple objectives that conflict with each other is called .

Correct Answer
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A

Correct Answer
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