Home › Certifications › CPA REG › Governance
12 multiple-choice questions and 14 flashcards on Governance, about 3% of the CPA REG bank. Every one carries a written rationale.
Governance is one of 6 chapters in CoStudy's CPA — Taxation & Regulation (REG) [Core] bank, and it holds 12 of the bank's 420 multiple-choice questions — roughly 3% of the total. That proportion is not arbitrary: chapters follow the certifying body's published exam outline, and the number of questions in each is set by that domain's published weight, so the share of your practice time this chapter takes matches the share of the real exam it accounts for.
Studying by chapter is worth doing once you have a diagnostic score. A single overall percentage tells you whether you are close; it does not tell you which domain is dragging. Working a weak chapter in isolation, and re-testing it in isolation, is the fastest way to move a score that has stalled — and it is why the mock exams in CoStudy report by domain rather than as one number.
3 questions drawn from this chapter, with the full rationale shown — the controlling principle behind the right answer, and why each wrong option tempts and fails.
Under the Sarbanes-Oxley Act (2002), the CEO and CFO of a public company must:
Answer: D — Certify quarterly reports and internal control assessments
A) External auditors, not executives, audit the statements. B) Journal-level signatures are not required. C) SOX imposes no CPA licensing requirement on executives. D) Correct — §302 and §404 require certification of reports and ICFR.
Under §11 of the Securities Act of 1933, which party generally CANNOT assert a due diligence defense to liability for a materially misleading registration statement?
Answer: D — The issuer of the securities, whose liability under §11 is essentially strict
A) Underwriters can assert a due diligence defense for the non-expertized portions they reasonably investigated. B) Directors may rely reasonably on expert-certified portions and assert due diligence as a defense. C) Experts (such as accountants) can defend the portions they certified if they conducted a reasonable investigation. D) Correct — the issuer's §11 liability is essentially strict; the due diligence defense is not available to the issuer itself, only to other defendants such as underwriters, directors, and experts.
The legal consequence of a court's decision to pierce the corporate veil is that:
Answer: C — One or more shareholders lose the protection of limited liability and become personally liable for the corporation's debts or obligations at issue
A) Veil piercing is a judicial remedy in a specific case; it does not automatically revoke the corporate charter with the state. B) The remedy targets the shareholders whose conduct or control justified piercing, not merely the officers. C) Correct — piercing the veil strips the offending shareholder(s) of limited liability protection, exposing them to personal liability for the corporation's obligations at issue in that case. D) The corporation's legal form and existence are not converted into a partnership; only the liability shield for the implicated shareholders is disregarded.
4 cards from the 14 in this chapter.
Piercing the corporate veil — fraud as a factor?
Using the corporate form as a mere instrumentality to perpetrate a fraud on creditors or third parties is one of the strongest grounds courts cite for piercing the veil.
Shareholder derivative suit — demand requirement?
A shareholder generally must first demand that the board of directors pursue the claim, unless demand would clearly be futile (for example, because a majority of the board is implicated in the alleged wrongdoing).
Securities Act 1933 vs 1934?
1933: registration of new issues. 1934: ongoing reporting, anti-fraud (10b-5).
Piercing the corporate veil — key abuse factors?
Courts weigh factors such as undercapitalization at formation, commingling of corporate and personal funds, and disregard of corporate formalities; closely held or single-shareholder status alone is not enough.
These are a sample. The full Governance chapter runs 26 items with per-chapter progress tracking, on the web and in the iOS app.