Regulation and Compliance for Managers Practice Questions
Course Introduction
This course explores the principles and practices of regulatory compliance in domestic and international business environments, focusing on legal frameworks, ethical standards, and industry-specific regulations. Students will examine the role of managers in developing, implementing, and monitoring compliance programs to reduce organizational risk. Topics include the regulatory landscape, compliance risk assessment, internal controls, reporting obligations, enforcement actions, and strategies for fostering a culture of compliance. Real-world case studies and scenarios will provide practical insight into managing compliance in various sectors, preparing participants to navigate complex regulatory challenges effectively.
Recommended Textbook Managers and the Legal Environment Strategies for the 21st Century 7th Edition by Constance E.
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Chapter 1: law, value creation, and risk management
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Q1) A legally astute manager would wait as long as possible to consult legal counsel once a problem arises in order to keep legal fees to a minimum.
A)True
B)False
Answer: False
Q2) Promoting economic growth is one of the primary public policy objectives of laws and regulations applicable to business.
A)True
B)False
Answer: True
Q3) Under the resource-based view of a firm,when can a firm's resources be a source of sustained competitive advantage?
Answer: When they are valuable,rare,and imperfectly imitable by competitors and have no strategically equivalent substitutes.
Q4) How does U.S.business law provide worker protection?
Answer: By regulating certain terms and conditions of employment,by requiring the employer to provide certain benefits,and by protecting workers' civil rights.
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Chapter 2: Ethics ant the law
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Q1) Which of the following is the leading association of CEOs in the United States?
A) The Ethical Association of CEOs
B) The CEO Association of America
C) The Business Roundtable
D) The World Concern Association of CEOs
Answer: C
Q2) What was the result in the case of Bammert v.Don's Super Valu,Inc.,the case in the text involving the alleged retaliatory firing by the defendant of the wife of a police officer after the officer arrested the wife of the owner of Don's Super Valu?
A) That the firing was prohibited because of the at-will employment principle.
B) That the firing was legal because of the at-will employment principle.
C) That the firing was prohibited because of a public policy exception to the at-will principle.
D) That the firing was legal because of the employment contract involved.
Answer: B
Q3) Kantian theory considers universalizability and reversibility.
A)True
B)False
Answer: True
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Chapter 3: Courts, sources of law, and dispute resolution
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Q1) Set forth when courts in the United States will honor a choice-of-forum clause.
Answer: Courts in the United States will honor clauses in a valid contract requiring disputes to be resolved in another forum under its laws unless (1)the clause was fraudulently included in the contract,(2)enforcement would deprive a party "of his day in court," or (3)enforcement would contravene a strong public policy of the forum in which suit is brought.
Q2) Under the ________ doctrine,the outcome of a diversity case in federal court will be similar to the outcome in a state court because the same substantive law will govern either adjudication.
A) Erie
B) common law
C) venue
D) total activity
Answer: A
Q3) Jurisdiction over the location of property at issue in a lawsuit is called in rem jurisdiction.
A)True
B)False
Answer: True
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Chapter 4: Constitutional bases for business regulation
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Q1) Which of the following was the result at the U.S.Supreme Court level in the case of Board of Education of Independent School District No.92 of Pottawatomie County v.Earls,the case in the text involving whether a school system requiring student-athletes to take a drug test without any suspicion of drug use violates the Fourth Amendment?
A) That individualized suspicion is not a consideration in determining whether a search is reasonable and that the searches at issue were, therefore, constitutional.
B) That the searches were unconstitutional because no individual suspicion was present.
C) That the searches were unconstitutional because minors were involved regardless of whether or not individual suspicion was present.
D) That individualized suspicion is not always required and that the searches in the case were constitutional.
Q2) The U.S.Supreme Court has original jurisdiction over cases affecting ambassadors and cases in which a state is a party.
A)True
B)False
Q3) Under what circumstances is state law preempted in favor of federal law?
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Chapter 5: Agency
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Q1) Which of the following is an example of a hallmark of the fiduciary relationship?
A) Loyalty
B) Subservience
C) Politeness
D) Both loyalty and subservience, but not politeness
Q2) Principals may be held liable for the torts of independent contractors involving highly dangerous acts.
A)True
B)False
Q3) An independent contractor is also considered an employee of the person for whom work is being done.
A)True
B)False
Q4) What factors do courts consider in determining whether an act of an agent was within the scope of employment?
Q5) The most common form of agency relationship is employer-employee.
A)True
B)False
Q6) What is considered in determining the scope of an agent's implied authority?
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Chapter 6: Administrative Law
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Q1) What three-step procedure does an agency follow in order to promulgate rules or regulations,and in what order is the procedure performed?
A) (1) Evaluation of comments (2) notice to the public (3) adoption.
B) (1) Notice to the public (2) evaluation of comments (3) adoption.
C) (1) Voting (2) evaluation of comments (3) adoption.
D) (1) Adoption (2) notice (3) evaluation of results.
Q2) Statutes and agency rules often provide that courts performing judicial review of agency action may not rule on which of the following issues?
A) issues raised with the agency and won.
B) issues raised with the agency and lost.
C) issues raised with the lower courts and lost.
D) issues not raised with the agency.
Q3) Which of the following presides over formal agency adjudications at the federal level?
A) An administrative law judge
B) A federal magistrate
C) A federal district judge
D) A judicial commissioner
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Chapter 7: Contracts
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Q1) Under traditional common law,the acceptance must be the ________ of the offer.
A) essential terms
B) consideration
C) understanding
D) mirror image
Q2) A counteroffer does not terminate the original offer.
A)True
B)False
Q3) Which of the following is a type of conditional promise?
A) Condition concurrent
B) Condition subsequent
C) Condition illusory
D) Both a condition concurrent and a condition subsequent
Q4) To develop rules for behavior,civil law countries rely primarily on civil codes,or statutes,rather than on case-by-case common law.
A)True
B)False
Q5) Courts enforce liquidated damages as a form of a penalty.
A)True
B)False
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Chapter 8: sales,licensing,and e-commerce
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Q1) What must be established in order for goods to be considered merchantable under the UCC?
Q2) To which of the following does the term "battle of the forms" refer?
A) The situation in which one of the parties wishes to use a preprinted form, but the other party wishes to engage in direct negotiation.
B) The situation in which the parties entered into a formal contract, but the contract has been misplaced by both parties resulting in uncertainty regarding the exact terms of the original contract.
C) The situation in which parties have neglected to bargain over items and then exchange standard printed forms resulting in confusion regarding the terms of the contract.
D) The situation in which a party wishes to claim unconscionability based upon another party's use of a preprinted form.
Q3) Which of the following will not create an express warranty under the UCC?
A) Making a statement or promise relating to the goods.
B) Expressing an opinion about the quality of the goods.
C) Providing a description of the goods.
D) Stating any fact regarding the quality of the goods.
Q4) Explain the different types of warranties that exist under the UCC.
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Chapter 9: Torts and Privacy protection
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Q1) In which of the following situations would the doctrine of res ipsa loquitur apply?
A) A truck backed into a fence.
B) A jar of jam fell on your foot.
C) A post operative x-ray showed a surgical sponge in your stomach.
D) A door slammed on your foot.
Q2) Which of the following is the best defense to negligence?
A) The plaintiff was a friend of the defendant.
B) The defendant did not intend to harm the plaintiff.
C) The defendant was concerned for the safety of the plaintiff.
D) The plaintiff contributed to his own injuries.
Q3) Trespass to personal property and conversion are different names for the same tort.
A)True
B)False
Q4) Playing loud music late at night for recreation in a residential neighborhood can constitute a private nuisance.
A)True
B)False
Q5) Define and explain the theory behind the economic loss rule.
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Chapter 10: product liability
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Q1) Under the preemption defense,certain federal laws and regulations that set minimum safety standards are held to preempt state-law product liability claims.
A)True
B)False
Q2) Sally purchased a used toaster at a yard sale. The seller told Sally that although the toaster was over ten years old,she had not had any problems with it. Sally takes the toaster home and uses if for a few months. One day,however,as Sally was using the toaster,it malfunctioned and caused a small fire in Sally's kitchen along with significant smoke damage. Sally decides that she wants to sue the manufacturer of the toaster and that she is going to do so within one month of the fire. What would likely be the manufacturer's best defense in a strict liability in tort action brought by Sally?
A) The statute of limitations
B) The statute of repose
C) The fact that Sally bought the toaster at a yard sale, not from a recognized retailer
D) There would be no viable defense.
Q3) Set forth the elements of a strict liability claim.
Q4) What are the four basic parts of the rationale for strict product liability?
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Chapter 11: Intellectual property
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Q1) The duration of a copyright granted to a known individual,not a work done for hire,will be
A) the life of the author plus 100 years.
B) the life of the author plus 70 years.
C) 75 years after the first publication.
D) 100 years after the creation of the work.
Q2) Chef Susan has developed a great new recipe for homemade ice cream that she serves at her restaurant. She would like to keep the recipe secret and prevent anyone else from using it. What four areas should a trade secret program cover?
Q3) Refer to fact pattern 11-2. Can Copy Store be found guilty of copyright infringement?
A) No, because the use was for education and would be considered a fair use.
B) No, because Professor Peter ordered the copying, and the store was simply following directions.
C) Yes, copy stores can be found liable for copyright infringement for copying without obtaining permission.
D) Yes, but only if the store failed to have Professor Peter agree to indemnify it for any alleged copyright infringement.
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Chapter 12: The employment agreement
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Q1) The Fair Labor Standards act does not limit the number of hours that an employee may work in a workweek or workday,as long as the employee is paid appropriate overtime.
A)True
B)False
Q2) List exceptions,if any,to the Employee Polygraph Protection Act's ban on polygraph testing.
Q3) In states that apply the doctrine of ________,a defamatory statement by an employer to an employee may constitute publication where it is foreseeable that the employee would be required to repeat it.
A) tort law
B) self-publication
C) slander
D) libel
Q4) The Employee Polygraph Protection Act completely bans the use of polygraph exams.
A)True
B)False
Q5) What standards are applied in regard to judicial review of ERISA decisions by plan administrators?
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Chapter 13: civil rights and employment discrimination
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Q1) Refer to fact pattern 13-1. Did the agreement Sam signed comply with the Older Workers' Benefit Protection Act?
A) No, because it did not give Sam at least twenty-one days to consider whether to enter into the agreement.
B) No, because it did not give Sam at least seven days following execution of the agreement during which he could revoke it.
C) No, because it did not give Sam at least twenty-one days to consider whether to enter into the agreement, and also because it did not give Sam at least seven days following execution of the agreement during which he could revoke it.
D) Yes, it complied with the act.
Q2) Discuss in detail the response of the EEOC in regard to the protection from discrimination of temporary workers supplied by an employment agency along with remedies available to temporary employees suffering discrimination.
Q3) Under federal law,employees may not waive their rights under the Age Discrimination in Employment Act (ADEA).
A)True
B)False
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Chapter 14: Criminal law
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Q1) Evidence found as the result of an illegal search may be characterized as A) irrelevant.
B) the fruit of the poisonous tree.
C) prosecutorial misconduct.
D) tainted goods
Q2) The ________ prohibits the introduction of evidence offered as proof of guilt in a criminal trial that was illegally obtained in violation of the Fourth Amendment.
A) exclusionary rule
B) involuntary evidence bar
C) good faith exception
D) inevitable discovery exception
Q3) Under the ________ rule,a statement made by a defendant in custody is admissible only if the defendant was informed prior to police interrogation of his or her constitutional rights.
A) forced self-incrimination
B) double jeopardy
C) Miranda
D) due process
Q4) Fully discuss limitations on the protection against double jeopardy.
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Chapter 15: Environmental law
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Q1) Compare the substantial continuity test in regard to successor liability with the mere continuation test. Which test is applied by the majority of states?
Q2) Contractual arrangements to shift environmental liability between companies are binding on federal and state governments.
A)True
B)False
Q3) Under the Clean Air Act,if a nonattainment area fails to develop an adequate plan to attain the national standard,which of the following penalties may be imposed?
A) No penalties may be imposed by the federal government because only individual states may impose penalties.
B) Limits on the use of federal highway funds.
C) Limits on drinking-water hookups.
D) Both limits on the use of federal highway funds and limits on drinking-water hookups.
Q4) What is the Kyoto Protocol? Is the U.S.a signatory?
Q5) Environmental laws establish minimum standards to which companies must adhere.
A)True
B)False
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Chapter 16: Antitrust
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Q1) In a ________ action under the Sherman Act,state attorneys general may bring civil actions for injuries sustained by residents of their respective states.
A) parens patriae
B) private attorneys general
C) Herfindahl-Hirschman
D) resale price maintenance
Q2) Which of the following is true regarding private suits to enforce the Sherman Act?
A) Private plaintiffs may recover three times the damages they have sustained as a result of violations of the act.
B) Liability is joint and several among all conspirators.
C) There is no requirement of standing.
D) Private plaintiffs may recover three times the damages they have sustained as a result of violations of the act, and liability is joint and several among all conspirators.
Q3) How would a plaintiff establish the existence of a tying arrangement,and under what laws may tying arrangements be challenged?
Q4) What types of price-fixing agreements are considered horizontal price-fixing?
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Page 18
Chapter 17: Consumer Protection
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Q1) Refer to fact pattern 17-2. Is it legal for her to advertise the product?
A) No
B) Only if it has been approved by the Food and Drug Administration
C) Only if it is sold for under $50
D) Yes
Q2) Unsolicited merchandise sent by U.S.mail may be kept by the recipient without incurring any obligation to the sender.
A)True
B)False
Q3) The Food and Drug Administration shares with the _________ the responsibility for regulating pesticide residues on food.
A) Department of Agriculture.
B) Department of Insecticide.
C) Federal Trade Commission.
D) Environmental Protection Agency.
Q4) Generic drugs can be approved for use on a showing that they are identical to approved brand-name drugs.
A)True
B)False
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Chapter 18: real property and land use
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Q1) Bob is selling his home.During the inspection with his broker,Bob discovered that some of the pipes in the walls had developed tiny leaks.The cost of fully repairing this condition would cost thousands of dollars and take approximately three months.Instead,Bob verbally represented to each and every buyer that the house was "in great shape" and "had no problems." Carl bought Bob's house; and six months after the deal closed,a pipe broke causing ten thousand dollars in damages.What remedies does Carl have against Bob regarding the sale of the house? Discuss fully.
Q2) A sublease is legally the same thing as an assignment of a lease.
A)True
B)False
Q3) What is generally meant by a reference to a triple net industrial lease?
A) That the tenant pays all taxes, insurance, and operating maintenance expenses.
B) That the lessor pays all taxes, insurance, and operating maintenance expenses.
C) That the tenant pays insurance and operating maintenance expenses, but that the lessor pays taxes.
D) That the lessor pays insurance and operating maintenance expenses, but that the tenant pays taxes.
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Page 20
Chapter 19: Forms of business organizations
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Q1) Explain requirements for formation of an S corporation.
Q2) The _______ theory applies to the situation in which owners of a corporation have so mingled their own affairs with those of the corporation that the corporation does not exist as a distinct entity.
A) undercapitalization
B) alter ego
C) per se
D) absolute
Q3) A creditor of a sole proprietorship may seek recovery only from business assets of the sole proprietorship,not from personal assets of the sole proprietor.
A)True
B)False
Q4) Which of the following statements is not true regarding the advantages and disadvantages of a sole proprietorship?
A) A sole proprietorship can be created without formal agreements or state filings.
B) The proprietor reports income from the business on a personal tax return.
C) The proprietor alone bears liability for the losses.
D) It is usually easy for sole proprietorships to raise capital.
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Chapter 20: Directors, Officers, and Controlling
Shareholders
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Q1) The business judgment rule is applicable only if the directors make an informed decision.
A)True B)False
Q2) What are the seven key factors that directors should consider in deciding whether to sell a company?
Q3) What is greenmail? What is a standstill agreement? When,if ever,is the process of greenmail protected by the business judgment rule?
Q4) A[n] _______ gives the person to whom it is granted the right to buy a certain number of shares at a fixed price for a fixed number of years during a period known as the ______ period which is not usually for more than _______.
A) call right, exercise, twelve months
B) option, redemption, twelve months
C) option, redemption, ten years
D) option, exercise, ten years
Q5) What is a poison pill? What factors favor keeping a poison pill in place?
Q6) Termination fees are sometimes characterized as liquidated damages.
A)True B)False
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Chapter 21: Public and Private Offerings of Securities
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Q1) Which of the following was the result on appeal in In re Lehman Bros.Mortgage-Backed Securities Litigation,the case in the text involving whether rating agencies that helped select a pool of mortgages for a mortgage-backed security were underwriters under the 1933 Act or controlling persons under section 15 of the 1933 Act?
A) The court ruled that the proof established that the rating agencies were both underwriters and controlling persons under the 1933 Act.
B) The court ruled that the proof failed to establish that the rating agencies were either underwriters or controlling persons under the 1933 Act.
C) The court ruled that the proof established that the rating agencies were underwriters under the 1933 Act but that the proof failed to establish that the rating agencies were controlling persons under the 1933 Act.
D) The court ruled that the proof established that the rating agencies were controlling persons under the 1933 Act but that the proof failed to establish that the rating agencies were underwriters under the 1933 Act.
Q2) Discuss when a promissory note will be considered a security including a detailed discussion of the family resemblance test.
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Chapter 22: Securities Fraud and insider trading
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Q1) Temporary insiders are persons not directly employed by the corporation,but who acquire confidential information through the performance of professional services.
A)True
B)False
Q2) There is no provision in the security laws for the payment of bounties to individuals whose tips result in insider trading prosecutions.
A)True
B)False
Q3) Under Rule 10b-5,any use of the mails is sufficient to satisfy the interstate commerce condition even if the mail does not leave the state.
A)True
B)False
Q4) What is the duty of an independent public accountant if,in the course of an audit,the accountant detects information indicating that an illegal act has or may have occurred?
Q5) A controlling shareholder is traditionally considered an insider.
A)True
B)False
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Chapter 23: Debtor-Creditor Relations and Bankruptcy
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Q1) The ________ interest rate is based on the cost of borrowing offshore U.S.dollars in the global interbank market.
A) International Rate Exchange
B) Frankfurt International Trade Rate
C) London Interbank Offered Rate
D) New York Exchange Rate
Q2) Interest is generally computed on a ________ basis.
A) yearly
B) monthly
C) weekly
D) daily
Q3) In order to arrive at an actual interest rate,a ________ is an amount added to the bank's theoretical cost of obtaining funds to lend.
A) spread
B) base
C) reference
D) security
Q4) What is required in a filing for a voluntary petition in bankruptcy? An involuntary petition?
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Chapter 24: International Business
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Q1) A product is ________ when it is sold abroad below the current selling price in the exporter's home market or below the exporter's cost of production.
A) subsidized
B) dumped
C) underpriced
D) undervalued
Q2) Some countries require employers to fund employee benefits that are not expected in the U.S.
A)True
B)False
Q3) What is the act-of-state doctrine,and how is it generally applied by U.S.courts?
Q4) The ________ provides for temporary relief to domestic industries seriously injured by increasing imports,regardless of whether unfair practices are involved.
A) fair trade law
B) import-relief law
C) duty free zone
D) foreign trade zone
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