Advanced Business Law for Accountants Exam

Sample Questions and Answers

Which of the following is true about “respondeat superior” in employment law?

A) Respondeat superior is a legal doctrine that holds an employer vicariously liable for the actions of employees performed within the scope of their employment

B) Respondeat superior applies only when an employee intentionally harms a third party while at work

C) Respondeat superior exempts employers from liability if the employee acts outside the course of employment, even if it is during working hours

D) Respondeat superior does not apply to independent contractors working for the employer

Answer: A

Which of the following is true about “Securities and Exchange Commission (SEC)”?

A) The SEC is a U.S. government agency responsible for enforcing federal securities laws and regulating the securities industry

B) The SEC is responsible only for regulating the banking sector and does not have authority over the stock market

C) The SEC is an independent regulatory body that can make binding decisions without oversight from Congress

D) The SEC only oversees corporate mergers and acquisitions but does not regulate securities trading

Answer: A

Which of the following is true about “consumer protection laws” in business law?

A) Consumer protection laws are designed to safeguard the rights of consumers against fraudulent, deceptive, and unfair business practices

B) Consumer protection laws only apply to physical products and not services provided by businesses

C) Consumer protection laws prevent businesses from advertising products or services that are non-essential

D) Consumer protection laws allow businesses to refuse refunds for defective goods

Answer: A

 

Which of the following is true about “shareholder rights” in corporate governance?

A) Shareholders have the right to vote on important corporate matters, such as mergers, acquisitions, and amendments to the company’s articles of incorporation

B) Shareholders can only vote on matters related to the election of directors and cannot participate in decisions about mergers or acquisitions

C) Shareholders have the right to vote on matters related to employee salaries and compensation packages

D) Shareholders’ voting rights are limited to the amount of profit the company generates

Answer: A

Which of the following is true about “exculpatory clauses” in contracts?

A) Exculpatory clauses limit a party’s liability for certain types of damages or breaches, often relieving them from responsibility for negligence

B) Exculpatory clauses automatically void the contract if one party has committed a breach of any kind

C) Exculpatory clauses are never enforceable if they involve personal injury or death

D) Exculpatory clauses allow the non-breaching party to receive financial compensation regardless of the situation

Answer: A

Which of the following is true about “arbitration” as an alternative dispute resolution (ADR) method?

A) Arbitration is a process in which a neutral third party makes a binding decision to resolve a dispute between parties

B) Arbitration is a non-binding method of resolving disputes and does not require the parties to comply with the decision

C) Arbitration is used exclusively for labor disputes and is not applicable to commercial or consumer contracts

D) Arbitration hearings are always held in a courtroom with judicial oversight and cannot be conducted privately

Answer: A

Which of the following is true about “non-compete clauses” in employment contracts?

A) Non-compete clauses are enforceable only if they are reasonable in duration, geographic scope, and protect legitimate business interests

B) Non-compete clauses are illegal in all states and cannot be enforced under any circumstances

C) Non-compete clauses automatically terminate once an employee is laid off from their job

D) Non-compete clauses are enforced regardless of whether they are reasonable or not

Answer: A

Which of the following is true about “U.S. antitrust laws”?

A) U.S. antitrust laws aim to prevent anti-competitive practices and promote fair competition in the marketplace

B) U.S. antitrust laws apply only to companies that operate internationally and not to those that conduct business solely in the U.S.

C) U.S. antitrust laws allow monopolies to form as long as they offer products or services at lower prices than competitors

D) U.S. antitrust laws do not regulate pricing strategies, only mergers and acquisitions

Answer: A

Which of the following is true about “bankruptcy proceedings” under U.S. law?

A) Bankruptcy proceedings allow an individual or business to discharge or restructure debts under the protection of the bankruptcy court

B) Bankruptcy proceedings are used to help businesses and individuals increase their debts, not reduce them

C) Bankruptcy proceedings can only be initiated by creditors, not debtors

D) Bankruptcy proceedings are not available to publicly traded companies

Answer: A

Which of the following is true about “federal income tax law” in relation to business organizations?

A) Federal income tax law governs the taxation of business income, expenses, and profits, depending on the type of business entity

B) Federal income tax law does not apply to partnerships or LLCs, only corporations

C) Federal income tax law requires all businesses to pay the same tax rate, regardless of size or structure

D) Federal income tax law exempts certain types of business income, including revenue from international trade

Answer: A

Which of the following is true about “publicly held corporations” and their financial disclosures?

A) Publicly held corporations must disclose financial statements regularly to the public and regulatory authorities to ensure transparency

B) Publicly held corporations are not required to disclose their financial performance to the public unless requested by shareholders

C) Publicly held corporations can choose to disclose financial information only to their employees and executives

D) Publicly held corporations are only required to disclose financial information annually, with no obligation to do so quarterly

Answer: A

Which of the following is true about “compensatory damages” in business law?

A) Compensatory damages are awarded to compensate the injured party for actual losses or injuries caused by the other party’s breach or wrongdoing

B) Compensatory damages are awarded for punitive purposes to punish the breaching party, regardless of actual damages

C) Compensatory damages are only awarded in cases involving contract breaches, not torts

D) Compensatory damages cannot be awarded for emotional distress caused by a breach of contract

Answer: A

Which of the following is true about “limited liability” in business law?

A) Limited liability protects business owners from being personally responsible for the debts and obligations of the business

B) Limited liability applies only to sole proprietors and not to corporations or limited liability companies (LLCs)

C) Limited liability allows business owners to avoid paying taxes on any profits earned by the business

D) Limited liability is automatically granted to all business owners without the need for legal formation of an entity

Answer: A

Which of the following is true about “patents” in intellectual property law?

A) Patents grant exclusive rights to inventors for a specified period of time, preventing others from making, using, or selling their inventions without permission

B) Patents are granted automatically upon the creation of an invention, without the need for filing an application

C) Patents are only available for artistic works, not for functional inventions or processes

D) Patents last indefinitely as long as the invention remains in use

Answer: A

Which of the following is true about “breach of fiduciary duty” in corporate law?

A) Breach of fiduciary duty occurs when a corporate officer or director fails to act in the best interests of the corporation or its shareholders

B) Breach of fiduciary duty is a civil offense but is not grounds for civil lawsuits or penalties

C) Breach of fiduciary duty only applies to executives and not directors or officers

D) Breach of fiduciary duty does not result in any legal consequences if the corporation’s financial performance is still strong

Answer: A

Which of the following is true about “liquidation of a corporation” in business law?

A) Liquidation of a corporation is the process of winding down the company’s affairs, selling off assets, and distributing proceeds to creditors and shareholders

B) Liquidation is a process in which a corporation reorganizes its business model without selling assets or paying off debts

C) Liquidation applies only to publicly traded companies and does not affect private corporations

D) Liquidation results in the permanent dissolution of a corporation, which cannot be reversed under any circumstances

Answer: A

Which of the following is true about “trademarks” in intellectual property law?

A) Trademarks are distinctive symbols, words, or other identifiers used to distinguish goods or services from those of other businesses

B) Trademarks are automatically granted as soon as a business adopts a logo or name, with no need for registration

C) Trademarks are only available for artistic works and not for commercial products

D) Trademarks are only valid for a limited period of time and cannot be renewed

Answer: A

 

Which of the following is true about “res judicata” in legal terms?

A) Res judicata prevents the same parties from litigating the same issue more than once after it has been resolved by a court

B) Res judicata only applies to criminal cases and not to civil litigation

C) Res judicata allows a court to reopen a case even after a final judgment has been made

D) Res judicata refers to a party’s ability to appeal a decision after a trial has ended

Answer: A

Which of the following is true about “indemnification” in business law?

A) Indemnification refers to a party’s agreement to compensate another party for losses incurred as a result of certain actions or events

B) Indemnification clauses are only enforceable if both parties to the contract agree to them in writing

C) Indemnification does not apply to corporate officers or directors under any circumstances

D) Indemnification is generally not available in cases of gross negligence or intentional wrongdoing

Answer: A

Which of the following is true about “agency law” in business?

A) Agency law governs the relationship between a principal and an agent, where the agent is authorized to act on behalf of the principal

B) Agency law only applies to employment relationships and does not extend to other types of business relationships

C) Agency law allows agents to make decisions that are binding on the principal only if the agent has written authority

D) Agency law is only applicable when the principal and agent have a formal written agreement

Answer: A

Which of the following is true about “piercing the corporate veil”?

A) Piercing the corporate veil allows creditors to hold individual shareholders personally liable for the corporation’s debts under certain circumstances

B) Piercing the corporate veil is a practice that applies only in cases involving publicly traded companies

C) Piercing the corporate veil can occur if shareholders follow corporate formalities and do not mix personal and business affairs

D) Piercing the corporate veil can only happen if the corporation’s assets are insufficient to cover the debts owed

Answer: A

Which of the following is true about “U.S. Securities Exchange Act of 1934”?

A) The Securities Exchange Act of 1934 regulates the trading of securities in secondary markets and mandates full disclosure of material information

B) The Securities Exchange Act of 1934 applies only to securities issued by private companies and does not affect public companies

C) The Securities Exchange Act of 1934 allows companies to manipulate stock prices to ensure profitability

D) The Securities Exchange Act of 1934 requires that all securities be registered with the SEC before they can be sold to investors

Answer: A

Which of the following is true about “legal capacity” in contract law?

A) Legal capacity refers to a party’s ability to enter into a legally binding contract, which may be limited for minors, intoxicated persons, or individuals lacking mental competence

B) Legal capacity only applies to individuals and not to corporate entities or other business structures

C) Legal capacity is irrelevant if the contract involves an exchange of goods or services for a monetary consideration

D) Legal capacity requires that both parties be of the same age and mental state to form a valid contract

Answer: A

Which of the following is true about “comparative negligence” in tort law?

A) Comparative negligence reduces the damages a party can recover based on the degree of fault attributed to them in causing an injury

B) Comparative negligence allows a defendant to avoid liability if the plaintiff was partially at fault for their injury

C) Comparative negligence applies only in cases of intentional torts, not negligence

D) Comparative negligence increases the damages awarded to a plaintiff based on the defendant’s fault

Answer: A

Which of the following is true about “trade secrets” in intellectual property law?

A) Trade secrets are confidential business information that provides a competitive edge and is protected by law from unauthorized use or disclosure

B) Trade secrets must be patented to receive legal protection

C) Trade secrets cannot be protected once they are publicly disclosed

D) Trade secrets apply only to the technology sector and do not apply to other industries

Answer: A

Which of the following is true about “antidumping laws”?

A) Antidumping laws are designed to prevent foreign companies from selling products in the U.S. at below-market prices to unfairly compete with domestic companies

B) Antidumping laws only apply to goods that are manufactured in the U.S. and sold abroad

C) Antidumping laws allow foreign companies to sell goods at reduced prices as long as they meet minimum wage standards in their home country

D) Antidumping laws are unrelated to trade and only govern the pricing of financial securities

Answer: A

Which of the following is true about “exclusive dealing contracts”?

A) Exclusive dealing contracts involve an agreement between a supplier and a retailer that the retailer will only purchase goods from that supplier

B) Exclusive dealing contracts are always illegal under U.S. antitrust law, as they restrict market competition

C) Exclusive dealing contracts are only allowed when the supplier is also a manufacturer of the goods

D) Exclusive dealing contracts require that the retailer can sell only one type of product, even if it limits consumer choice

Answer: A

Which of the following is true about “statute of limitations” in business law?

A) The statute of limitations sets a time limit for initiating a lawsuit after an event or legal cause of action has occurred

B) The statute of limitations prevents legal claims from being filed after a predetermined period, regardless of the type of claim

C) The statute of limitations does not apply to contract disputes, only to tort claims

D) The statute of limitations can be extended indefinitely under certain circumstances

Answer: A

Which of the following is true about “the Foreign Corrupt Practices Act (FCPA)”?

A) The FCPA prohibits U.S. companies from bribing foreign officials to obtain or retain business or to influence business decisions

B) The FCPA only applies to businesses that operate within the United States and does not apply to foreign subsidiaries

C) The FCPA allows U.S. companies to engage in bribery as long as the payment is made through intermediaries

D) The FCPA only applies to large corporations, not small businesses or individual executives

Answer: A

Which of the following is true about “agency relationships” in business law?

A) An agency relationship arises when one party, the agent, is authorized to act on behalf of another party, the principal, in business dealings

B) An agency relationship can only be formed through a written agreement and cannot arise by implication

C) An agency relationship automatically terminates once the agent completes the transaction for which they were hired

D) An agency relationship requires the agent to act in their own personal interest rather than the principal’s best interest

Answer: A