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BUS Law II Final Exam Wilson

Terms in this set (94)

Dodd-Frank Wall Street Reform and Consumer Protection Act
Legislation that was promoted as the "fix" for the extreme mismanagement of risk in the financial sector that lead to a global financial crisis in 2008-2010
Code of Ethics
A formal, written document that defines the ethical standards of an organization and gives employees the information they need to make ethical decisions across a range of situations
Ethics
A system of moral principles.
Ethics and the Law
The relationship between ethics and the law. Sometimes the rule of law and the rule of ethics demand the same response by a person confronted with a problem, while in some situations the law may permit an act that is ethically wrong.
Ethical Fundamentalism
Individuals look to a central authority or set of rules to guide them in ethical decision making.
Administrative Agency
A federal, state, or local government unit established to perform a specific function. Administrative agencies are created and authorized by legislative bodies to administer and enforce specific laws.
Rule Making Power (essay question)
The power of an administrative agency to issue statutes that have the force of law. Many federal statues expressly authorize an administrative agency to issue substantive rules. Substantive rule is much like a statue. It has the force of law, and covered persons and businesses must adhere to it. Violators may be held civilly or criminally depending on the rule. These are subject to judicial review. The agency must do the following:
1) Publish a general notice of the proposed rule making in the Federal Registrar. The notice must include A) the time, place and nature of the rule making proceeding B) the legal authority pursuant to which the rule is proposed. C) the terms or substance of the proposed rule
2) Give interested persons an opportunity to participate in the rule-making process. This may involve oral hearings
3) Review all written and oral comments. Then the agency announces its final rule making in the matter. AKA informal rule making. 4) Require in some instances, formal rule making where the agency must conduct a trial-like hearing.
Substantial Evidence Act
requires that the conclusions reached to be supported by "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion."
Freedom of Information Act
1966 Act allowing citizens to inspect all government records with the exception of classified military or intelligence documents, trade secrets or private personnel files.
Sunshine Act
Adopted in 1977, this act requires that most government meetings be conducted in public and that a notice of such meetings must be posted in advance (Adopted first in Florida)
Administrative Searches
Inspection or search carried out under a regulatory or statutory scheme especially in public or commercial premises and use to enforce compliance with regulations or laws pertaining to health, safety, or security.
Food and Drug Administration
A federal agency whose mission is to promote and protect public health by helping safe and effective products reach the market in a timely way and to monitor products for continued safety after they are in use.
Federal Trade Commission
1st Consumer protection agency-
1914 legislation that formed an organization to monitor practices that could lead to monopoly and to regulate false advertising.
Consumer Protection Act
laws and organizations designed to ensure the rights of consumers as well as fair trade competition and the free flow of truthful information in the marketplace.
National Environmental Policy Act
A law passed in 1969 requiring agencies to issue an environmental impact statement before undertaking any major action affecting the environment.
Environmental Protection Agency
An independent federal agency established to coordinate programs aimed at reducing pollution and protecting the environment
Various Environmental Acts
NEPA
Clean Air Act
Clean Water Act
Safe Drinking Water Act - A federal statute that authorizes the EPA to establish national primary drinking water standards.
Marine Protection, Research, and Sanctuaries Act - A federal statute that extends limited environmental protection to the oceans.
Oil Pollution Act - A federal statute that requires the oil industry to take measures to prevent oil spills and to readily respond to and clean up oil spills.
Toxic Substances Control Act - A federal statute that authorizes the EPA to regulate toxic substances
Insecticide, Fungicide, and Rodenticide Act - A federal statute that requires pesticides, herbicides, fungicides, and rodenticides to be registered with the EPA; the EPA may deny, suspend, or cancel registration.
Resource Conservation and Recovery Act (RCRA) - A federal statute that authorizes the EPA to regulate facilities that generate, treat, store, transport, and dispose of hazardous waste.
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) - A federal statute that authorizes the federal government to deal with hazardous wastes. The act creates a monetary fund to finance the cleanup of hazardous waste sites.
Endangered Species Act - A federal statute that protects endangered and threatened species of wildlife.
Anti-Competitive Behavior
behavior aimed at harming actual or potential competitors, most often by using monopoly power
Sherman Act
First United States law to limit trusts and big business. Said that any trust that was purposefully restraining interstate trade was illegal.
"Rule of Reason" Analysis
an inquiry into the competitive effects of a company's behavior to determine whether the benefits of the behavior outweigh the harm of the anticompetitive behavior
Exclusive Dealing Agreements
distributor/retailer agrees with a supplier not to carry the products of any other supplier (Rule of Reason violation - illegal if severely limit the competition)
Product Market
The marketplace in which a final good or service is bought and sold. A product market does not include trading in raw or other intermediate materials, and instead focuses on finished goods purchased by consumers, businesses, the public sector and foreign buyers.
Treble Damages
penalties awarded to the injured party equal to three times the value of the injury.
Monopoly Power
The ability of individuals or firms currently in business to prevent other individuals or firms from entering the same kind of business
Horizontal Mergers
the combining of two companies in the same industry. Ex. A railroad buying out another railroad.
Antitrust Exceptions and Exemptions
(1) Statutory Exemptions (2) Implied Exemptions (3) State Action Exemptions
Ultramares Test
A rule that says an accountant is only liable for negligence to third parties who are in privity of contract or in privity-like relationship with the accountant. It provides a narrow standard for holding accountants liable to third parties for negligence
Opinion Letter
A formal expression of a judgment or advice based on an expert's special knowledge. The term is commonly used to refer to a document containing a lawyer's understanding of the law that applies to a particular case. They are usually drafted at a client's request.
Securities Act of 1933
A federal piece of legislation enacted as a result of the market crash of 1929. The legislation had two main goals: (1) to ensure more transparency in financial statements so investors can make informed decisions about investments, and (2) to establish laws against misrepresentation and fraudulent activities in the securities markets.
Mail Fraud
An act of fraud using the Postal Service, as in making false representations through the mail to exploit another party.
RICO
Congressional act passed in 1970 that was established to increase civil penalties and criminal punishment for acts of organized crime by criminal organization such as the Mafia.
Ownership of Working Papers
These papers include plans for conducting audits, work assignments, notes regarding the collection of data, evidence about the testing of accounts, etc. Some state statutes provide work product immunity which means these papers cannot be discovered in a court case against the accountant's clients. Federal law, however, allows for the discovery.
Disclaimer of Opinion
A form of report in which the auditors state that they do not express an opinion on the financial statements; it should include a separate paragraph stating the auditors' reasons for disclaiming an opinion and also disclosing any reservations they may have concerning the financial statements.
Kantian Ethics (Duty Ethics)
Publicly held corporations have an obligation to make a profit based on their charters of incorporation...
Maximize Profits
Theory that a corporation's duty is to take actions that maaximize profit for shareholders.
Rawl's Social Justice Theory
A person has a social contract with all others in society to obey moral rules that are necessary for people to live in peace and harmony
Substantive Rule
a rule that creates, defines, or regulates the legal rights of administrative agencies and the parties they regulate
Independent Agency
an agency of the United States government that is created by an act of Congress and is independent of the executive departments
Procedural Rules
rules issued by an administrative agency establishing its organization, method of operation, and rules of conduct for practice before it
Exhaustion of Remedies
A principle of administrative law that no party may appeal an agency action to a court until she has utilized all available appeals within the agency itself.
Arbitrary and Capricious Test
no rational explanation, changed prior policy without justification, considered legally inappropriate factors, failed to consider a relevant factor, rendered a decision contrary to the evidence
Equal Access to Justice Act
A federal act that protects persons from harassment by federal administrative agencies
Consumer Product Safety Act
Created in 1972 to protect consumers from dangerous products.
Consumer Product Safety Commission
1972- responsible for testing products, and giving warnings if the products have any possible faults if used in intended way. Violator can be fined.
Caveat Emptor
let the buyer beware
Door to Door Sales
sales people have to notify the buyer of the right to cancel the transaction before midnight of the 3rd business day after the sale
Clean Air Act
Set emission standards for cars, and limits for release of air pollutants
Clean Water Act
set maximum permissible amounts of water pollutants that can be discharged into waterways; aims to make surface waters swimmable and fishable
Environmental Impact Statement
Statement required by Federal law from all agencies for any project using Federal funds to assess the potential affect of the new construction or development on the environment.
Reasonable Consumer
In determining reasonableness, FTC considers the group to which the advertising is targeted and whether their interpretation of or reaction to the message is reasonable in light of the circumstances - considers age, education, intellectual capacity, frame of mind,
Legislative Rules
substantive rules issued by an administrative agency under the authority delegated to it by the legislature
Per se Analysis
Certain antitrust violations are considered so harmful to competition that they are always unlawful and no proof of actual harm is required
Monopolization
domination (of a market or commodity) to the exclusion of others
Clayton Act
Act that minimally restricted the use of injunctions against labor and legalized peaceful strikes, picketing, and boycotts.
Defense to Price Discrimination
Defenses established by the Robinson-Patman Act
1) Cost justification: a defense which provides that a seller's price discrimination is not unlawful if the price differential is due to "differences in the cost of manufacture, sale, or delivery" of the product.
2) Changing Conditions: A defense that claims prices were lowered in response to changing conditions in the market for or the marketability of the goods.
3) Meeting the Competition: Defense that says a seller may lawfully engage in price discrimination to meet a competitor's price.
Conglomerate Mergers
the merging of relatively unrelated businesses
Auditor's Opinion
Opinion to the fairness of the financial statements
Primary Benefit Test
Test for imposing liability for negligence - professionals duty of care extends only to those persons for whose primary benefit the professional audits or prepares financial reports and other documents - professional must actually foresee the nonclients use and prepare the document specifically for use by nonclient - nonclient must be foreseen user
Qualified Opinion
a report issued when the auditor believes that the overall financial statements are fairly stated but that either the scope of the audit was limited or the financial data indicated a failure to follow GAAP
Securities and Exchange Act of 1934
monitors the stock market and enforces laws regulating the sale of stocks and bonds
Sarbanes-Oxley Act
A law passed by Congress that requires the CEO and CFO to certify that their firm's financial statements are accurate.
Accountant-Client Privilege
A state law that provides that an accountant cannot be called as a witness against a client in a court action. Federal courts do not recognize this privilege.
Contract Liability
when signing a contract for the principal an agent must disclose that he is only an agent in order for only the principal to be liable for the contract
PCAOB
Public Company Accounting Oversight Board
Utilitarianism
An ethical system stating that the greatest good for the greatest number should be the overriding concern of decision makers
Delegation
Grant of authority by one party (the delegator) to another (the delgatee) for agreed purpose(s).
Executive Agency
An administrative agency within the executive branch of government. At the federal level, executive agencies are those within the cabinet departments.
Interpretive Rules
A formal statement by an administrative agency expressing its view of what existing statutes or regulations mean.
Open End Credit
A line of credit in which loans are made on a continuous basis and the borrower is billed periodically for at least partial payment Ex. Credit card
Privacy Act
Act that protects the employment records of federal government employees from disclosure without prior authorization.
License
a legal document giving official permission to do something. A license is not a right, because the licensor may not have the legal power to give all necessary permissions that constitute a legal right. It is also not a lease, and is not assignable by the licensee. Also called permit.
Bait and Switch
A store advertises bargains that do not really exist to lure customers in, in hopes that they will buy more expensive merchandise.
Deception
Concealment, distortion, or lying in communication
Caveat Venditur
"Let the Seller Beware." Tacit warning to the sellers that, unless they expressly disclaim any responsibility, they will be held liable if the sold items are found defective in any way or vary from the specifications.
NLEA
Nutrition labeling education act, help stop misbranding, clear up confusion 1990
Non-attainment Areas
A geographical area that does not meet established air quality standards by the Clean Air Act
Wetlands
Ecosystems of several types in which vegetation is surrounded by stand water during part of the year. Happens in continually wet conditions.
Discharge Permits
keystone of Clean Water Act - prohibition against persons discharging pollutants from point sources into waters of the U.S. unless obtain a permit for such action
Closed End Credit
you receive a one time loan that you will pay back over a specified period of time and in payments of equal amounts
Tying Agreement
agreement between a buyer and a seller in which the buyer is required to purchase one product to get another
Robinson-Patman Act
Bars manufacturers and wholesalers from discriminating in price or purchase terms in selling to individual retailers if these retailers are purchasing products of "like quality" and the effect of such discrimination is to injure competition.
Geographic Market
Relevant geographic location for a firm's market; used as a basis for determining monopoly power and market share
Illegal restraints
any activity which tends to limit trade, sales and transportation in interstate commerce
Consent Decree
Legal arrangement in which a government agrees to drop charges against an accused who (without admitting guilt) agrees to refrain from the banned activity he or she was accused of.
Vertical Mergers
The combination of two or more firms involved in different stages of producing the same good or service. Ex. A railroad company buying out a steel mill.
GAAS
generally accepted auditing standards
GAAP
Generally Accepted Accounting Principles
Foreseeable User Test
A rule that says that an accountant is liable for negligence to third parties who are foreseeable users of the client's financial statements. It provides the broadest standard for holding accountants liable to third parties for negligence
Unqualified Opinion
Independent auditor's declaration that he or she has no reservation in certifying that the audited firm's financial statements (1) adequately disclose material information, (2) present fairly its financial position, and (3) show results of its operations in conformity with the provisions GAAP.
Criminal Liability
The liability that arises out of breaking a law or committing a criminal act. Liability insurance does not cover criminal liability.
PCAOB
Public Company Accounting Oversight Board A board created by the Sarbanes-Oxley Act of 2002 that has the authority to adopt rules concerning auditing, accounting quality control, independence and ethics of public companies and public accountants.
Tort Liability
Legal obligation of one party to a victim as a results of a civil wrong or injury. This action requires some form of remedy from a court system.
Third Person Liability
Many lawsuits against accountants involve liability of accounts to third parties. There are three major rules to determine if the accountant is liable: (1) Ultramares Doctrine (2) Section 554 of the Restatement of Torts (3) The Foreseeability Standard
Audit
Accounting: Systematic examination and verification of a firm's books of account, transaction records, other relevant documents, and physical inspection of inventory by qualified accountants
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