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AICPA CPA-Business Exam - Topic 3 Question 111 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 111
Topic #: 3
[All CPA-Business Questions]

Smith was an officer of CCC Corp. As an officer, the business judgment rule applies to Smith in which of the following ways?

Show Suggested Answer Hide Answer
Suggested Answer: B

Choice 'b' is correct. The business judgment rule applies to officers as well as directors, who in their capacity, act in a manner the officer believes to be in the best interest of the corporation, and with the care an ordinarily prudent person in a like position would exercise. If the standards of the business judgment rule are met, the officer is not liable to the company for resulting damages.

Choices 'a', 'c', and 'd' are incorrect, per the above rule.


by Charolette at May 05, 2025, 07:56 AM

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Ramonita
4 months ago
Totally agree with B! Good faith mistakes shouldn't lead to liability.
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Clement
4 months ago
Wait, I thought officers had more liability than directors?
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Hoa
4 months ago
I think A is misleading. The rule can apply to officers.
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Major
4 months ago
C sounds plausible, but I'm not sure about the reimbursement part.
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Freeman
4 months ago
B is correct! Business judgment rule protects officers too.
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Rolland
5 months ago
I’m leaning towards option B too, but I wonder if there are exceptions that could make Smith liable despite the good faith aspect.
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Lino
5 months ago
I feel like I saw a practice question similar to this, but I can't recall if officers are treated the same as directors under the rule.
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Shad
5 months ago
I think option B sounds right because it mentions good faith and honest mistakes, which are key elements of the business judgment rule.
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Alesia
5 months ago
I remember discussing the business judgment rule in class, but I'm not sure if it applies to officers like Smith.
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Tegan
5 months ago
Hmm, this is a tricky one. I'm not totally sure about the differences between the options, but I think option B sounds right based on my understanding of the business judgment rule.
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Veronika
6 months ago
Easy peasy! Since Smith is an officer, not a director, the business judgment rule doesn't apply to him at all. Gotta be option A.
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Kip
6 months ago
I'm a bit confused on the nuances here. Does the business judgment rule apply differently to officers versus directors? I'll need to re-read the question and options carefully.
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Nickie
6 months ago
Okay, I think I've got this. The business judgment rule generally protects officers like Smith from liability for honest mistakes, so I'll go with option B.
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Ernestine
6 months ago
Hmm, this question seems tricky. I'll need to carefully consider the differences between the answer choices to determine how the business judgment rule applies to Smith as an officer.
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Marjory
10 months ago
I believe the answer is B, as long as Smith acted in good faith.
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Theodora
11 months ago
I'm going with B. The business judgment rule is all about protecting officers from liability for reasonable decisions, even if they turn out badly.
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Julie
10 months ago
I agree with B. The business judgment rule is there to protect officers like Smith from being held personally liable for their decisions.
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Scot
10 months ago
B) If Smith makes, in good faith, a serious but honest mistake in judgment, Smith is generally not liable to CCC for damages caused.
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Mari
10 months ago
A) Because Smith is not a director, the rule does not apply.
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Ruth
11 months ago
Ha! As if Smith would ever make an 'honest' mistake. Probably lining his own pockets, if you ask me.
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Joaquin
10 months ago
Ha! As if Smith would ever make an 'honest' mistake. Probably lining his own pockets, if you ask me.
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Georgiann
10 months ago
B) If Smith makes, in good faith, a serious but honest mistake in judgment, Smith is generally not liable to CCC for damages caused.
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Raylene
10 months ago
A) Because Smith is not a director, the rule does not apply.
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Bok
11 months ago
I'm not sure, but I think it's either B or C.
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Izetta
11 months ago
I agree with Theola, because the business judgment rule protects officers like Smith.
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Theola
11 months ago
I think the answer is B.
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Nieves
11 months ago
I'm not so sure. D seems more accurate to me - if Smith makes a mistake, he's generally liable and CCC can't reimburse him.
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Dallas
11 months ago
Hmm, I think B is the correct answer. The business judgment rule protects officers like Smith from liability for honest mistakes, as long as they act in good faith.
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Rodolfo
10 months ago
That's right, CCC may choose to reimburse Smith for any damages he paid if he made the mistake in good faith.
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Diane
11 months ago
Yes, as long as Smith acts in good faith and makes a serious but honest mistake in judgment, he is generally not liable to CCC for damages.
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Georgiana
11 months ago
I agree, the business judgment rule is there to protect officers like Smith from liability for honest mistakes.
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