D05

Dart Corp. engages Jay Associates, CPAs, to assist in a public stock offering. Jay audits Dart's financial statements and gives an unqualified opinion, despite knowing that the financial statements contain misstatements. Jay's opinion is included in Dart's registration statement. Larson purchases shares in the offering and suffers a loss when the stock declines in value after the misstatements became known. In a suit against Jay, under the anti-fraud provisions of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, Larson must prove all of the following, except A. Larson was an intended user of the false registration statement. B. Larson relied on the false registration statement. C. The transaction involved some form of interstate commerce. D. Jay acted with intentional disregard of the truth.

A

Dice, Inc. is a reporting company under the Securities Exchange Act of 1934. The only security Dice issued is voting common stock. With regard to Dice's proxy solicitation requirements, which of the following statements is correct? A. Dice must file its proxy statements with the SEC even though it has only one class of stock outstanding. B. Dice's current unaudited financial statements must be sent to each shareholder with every proxy solicitation. C. Shareholder proposals need not be included in the proxy statements unless consented to by a majority of Dice's board of directors. D. Dice need not provide any particular information to its shareholders unless Dice is soliciting proxies from them.

A

Link Corp. is subject to the reporting provisions of the Securities Exchange Act of 1934. Which of the following documents must Link file with the SEC? Quarterly reports (Form 10-Q), Proxy Statements A. Yes, Yes B. Yes, No C. No, Yes D. No, No

A

Link Corp. is subject to the reporting provisions of the Securities Exchange Act of 1934. Which of the following reports must also be submitted to the SEC? *Report by any party making a tender offer to purchase Link's stock *Report of proxy solicitations by Link stockholders A. Yes, Yes B. Yes, No C. No, Yes D. No, No

A

The Securities Exchange Act of 1934 requires that certain persons register and that the securities of certain issuers be registered. In respect to such registration under the 1934 Act, which of the following statements is incorrect? A. All securities offered under the Securities Act of 1933 also must be registered under the 1934 Act. B. National securities exchanges must register. C. The equity securities of issuers, which are traded on a national securities exchange, must be registered. D. The equity securities of issuers having in excess of $10 million in assets and 500 or more stockholders which are traded in interstate commerce must be registered.

A

The Securities Exchange Commission promulgated Rule 10b-5 from power it was given the Securities Exchange Act of 1934. Under this rule, it is unlawful for any person to use a scheme to defraud another in connection with the * Purchase of any security * Sale of any security A. Yes, Yes B. Yes, No C. No, Yes D. No, No

A

The registration provisions of the Securities Exchange Act of 1934 require disclosure of all of the following information except the A. Names of owners of at least 5% of any class of nonexempt equity security. B. Bonus and profit-sharing arrangements. C. Financial structure and nature of the business. D. Names of officers and directors.

A

Which of the following is required under the Securities Exchange Act of 1934 or the SEC's reporting requirements issued pursuant thereto? A. Current reporting by issuers of registered securities of certain specified corporate and financial events within 4 days of occurrence. B. Quarterly audited financial reports and statements by those corporations listed on a national exchange. C. Reporting by issuers of securities which are traded over-the-counter, but only if the securities are actively traded. D. Annual filing of audited financial reports by all corporations engaged in interstate commerce.

A

Which of the following provisions of the Securities Exchange Act of 1934 applies despite the fact that a corporation's securities are exempt from registration? A. The antifraud provisions. B. The provisions dealing with the filing of periodic and annual reports. C. The proxy provisions. D. The provisions imposing internal accounting controls.

A

Which of the following statements is correct with respect to the Securities Exchange Act of 1934? A. Issuers whose securities are registered under the Act are required to comply with its reporting requirements. B. The Act applies only to issuers whose securities are traded on a national securities exchange. C. The Act subjects all issuers of securities to its registration requirements if the issuer has more than $2.5 million of assets or more than 250 shareholders. D. The antifraud provisions of the Act do not apply to issuers of securities that are exempt from the Act's registration requirements.

A

Which of the following statements is correct with respect to the registration requirements of the Securities Exchange Act of 1934? A. They require issuers of nonexempt securities traded on a national securities exchange to register with the SEC. B. They permit issuers who comply with the Securities Act of 1933 to avoid the registration requirements of the Securities Exchange Act of 1934. C. They permit issuers who comply with those requirements to avoid state registration requirements. D. They permit issuers who comply with those requirements to avoid the registration requirements of the Securities Act of 1933.

A

Which of the following statements is(are) correct concerning issuers of securities registered under the Securities Exchange Act of 1934? I. The issuers must have each Form 10-K audited by an independent public accountant. II. The issuers must have each Form 10-Q audited by an independent public accountant. III. The issuers must have each Form 10-Q audited by an independent public accountant except for the fourth fiscal quarter of each of its fiscal years. A. I only. B. II only. C. I and II only. D. I and III only.

A

An accountant will be liable for damages under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 only if the plaintiff proves that A. The accountant was negligent. B. There was a material omission. C. The security involved was registered. D. The security was part of an original issuance.

B

Burk Corporation has issued securities that must be registered with the Securities Exchange Commission under the Securities Exchange Act of 1934. A material event took place yesterday, that is, there was a change in the control of Burk Corporation. Which of the following statements is correct? A. Because of this material event, Burk Corporation is required to file with the SEC, Forms 10-K and 10-Q. B. Because of this material event, Burk Corporation is required to file Form 8-K. C. Burk Corporation need not file any forms with the SEC concerning this material event if the relevant facts are fully disclosed in the audited financial statements. D. Burk Corporation need not file any form concerning the material event if Burk Corporation has an exemption under Rules 504, 505, or 506 of Regulation D.

B

For a CPA to be liable for damages under the anti-fraud provisions of Section 10(b) and rule 10b-5 of the Securities Exchange Act of 1934, a plaintiff must prove all of the following, except that A. The plaintiff relied on the financial statements audited by the CPA. B. The CPA violated generally accepted auditing standards. C. There was a material misrepresentation of fact in the financial statements audited by the CPA. D. The CPA acted with scienter.

B

Link Corp. is subject to the reporting provisions of the Securities Exchange Act of 1934. Which of the following situations would require Link to be subject to the reporting provisions of the 1934 Act? * Shares listed on a national securities exchange * More than one class of stock A. Yes, Yes B. Yes, No C. No, Yes D. No, No

B

The Securities Exchange Commission promulgated Rule 10b-5 under Section 10(b) of the Securities Exchange Act of 1934. Which of the following is (are) purpose(s) of the Act? To rate * securities so investors can choose more wisely * To encourage disclosure of information relevant to investors *To deter fraud involving securities A. No, No, Yes B. No, Yes, Yes C. Yes, Yes, Yes D. Yes, Yes, No

B

The provisions of the Securities Exchange Act of 1934 A. Do not require distribution of an annual report unless proxies are solicited. B. Require the distribution of financial statements prior to or concurrent with a proxy solicitation. C. Apply only to those corporations engaged in interstate commerce where there is a significant dispute between management and dissenting shareholders. D. Apply only to those corporations that have securities traded on a national securities exchange.

B

Tweed Manufacturing, Inc. plans to issue $10 million of common stock to the public in interstate commerce after its registration statement with the SEC becomes effective. What, if anything, must Tweed do in respect to those states in which the securities are to be sold? A. Nothing, since approval by the SEC automatically constitutes satisfaction of any state requirements. B. Make a filing in those states which have laws governing such offerings and obtain their approval. C. Simultaneously apply to the SEC for permission to market the securities in the various states without further clearance. D. File in the appropriate state office of the state in which it maintains its principal office of business, obtain clearance, and forward a certified copy of that state's clearance to all other states.

B

Under the Section 10(b) Rule 10b-5 antifraud provisions of the Securities Exchange Act of 1934, which of the following conditions must a plaintiff prove to recover damages from an accountant? A. The plaintiff is in privity of contract with the accountant. B. The plaintiff relied on the accountant's intentional misstatement of material facts. C. The plaintiff is free from contributory negligence. D. The accountant acted without due diligence.

B

Wane Corporation has issued securities that are traded on a national securities exchange. Wane just had a significant change in its assets due to a large acquisition of real property. Which of the following is true? A. Wane must file Form 10-K with the SEC within 4 days. B. Wane must file Form 8-K with the SEC within 4 days. C. Wane need not file any additional reports with the SEC if Wane consistently files with the SEC on a timely basis its annual report. D. Wane need not disclose this material event separately to the SEC if it is covered in sufficient detail in the quarterly financial statements.

B

What is the standard that must be established to prove a violation of the anti-fraud provisions of Rule 10b-5 of the Securities Exchange Act of 1934? A. Negligence. B. Intentional misconduct. C. Criminal intent. D. Strict liability.

B

What is the standard that must be established to prove a violation of the antifraud provisions of Rule 10b-5 of the Securities Exchange Act of 1934? A. Negligence. B. Intentional misconduct. C. Criminal intent. D. Strict liability.

B

Which of the following factors, by itself, requires a corporation to comply with the reporting requirements of the Securities Exchange Act of 1934? A. Six hundred employees. B. Shares listed on a national securities exchange. C. Total assets of $2 million. D. Four hundred holders of equity securities.

B

Which of the following persons is not an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements? A. An attorney for the corporation. B. An owner of 5% of the corporation's outstanding debentures. C. A member of the board of directors. D. A stockholder who owns 10% of the outstanding common stock.

B

A CPA firm issues an unqualified opinion on financial statements not prepared in accordance with GAAP. The CPA firm will have acted with scienter in all the following circumstances, except where the firm A. Intentionally disregards the truth. B. Has actual knowledge of fraud. C. Negligently performs auditing procedures. D. Intends to make monetary gain by concealing fraud.

C

Adler, Inc. is a reporting company under the Securities Exchange Act of 1934. The only security it has issued is voting common stock. Which of the following statements is correct? A. Because Adler is a reporting company, it is not required to file a registration statement under the Securities Act of 1933 for any future offerings of its common stock. B. Adler need not file its proxy statements with the SEC because it has only one class of stock outstanding. C. Any person who owns more than 10% of Adler's common stock must file a report with the SEC. D. It is unnecessary for the required annual report (Form 10-K) to include audited financial statements.

C

Craven was the CEO of Engines Plus, Inc., a publicly traded company. Hanson, CPA, was the longtime controller for the company. Engines Plus was about to be sued in a class action suit for defective engines. Only Craven knew about the impending suit. On March 1, Craven told Hanson about the impending suit. On March 2, Craven told Spore, an old friend, about the suit. Spore knew that Craven was the CEO of Engines Plus. On March 3, Craven, Hanson, and Spore all sold the stock they owned in Engines Plus. On March 4, the class action suit was filed and the value of Engine Plus stock plummeted. Under the insider trading provisions of the Securities Exchange Act of 1934, which of the following statements is correct regarding Craven, Hanson, and Spore? A. Only Craven would be considered an insider having knowledge of material, non public information. B. Craven, Hanson, and Spore would all be considered insiders with knowledge of material, nonpublic information. C. Craven and Hanson would be considered insiders and Spore would be considered a tippee, all with knowledge of material, nonpublic information. D. Craven would be considered an insider and Hanson and Spore would be considered tippees, all with knowledge of material, nonpublic information.

C

Dart Corp. engaged Jay Associates, CPAs, to assist in a public-stock offering. Jay audits Dart's financial statements and gives an unqualified opinion, despite knowing that the financial statements contain misstatements. Jay's opinion is included in Dart's registration statement. Larson purchases shares in the offering and suffers a loss when the stock declines in value after the misstatements become known. If Larson succeeds in the Section 10(b) and Rule 10b-5 suit, Larson would be entitled to A. Only recover the original public-offering price. B. Only rescind the transaction. C. The amount of any loss caused by the fraud. D. Punitive damages.

C

Dean, Inc., a publicly traded corporation, paid a $10,000 bribe to a local zoning official. The bribe was recorded in Dean's financial statements as a consulting fee. Dean's unaudited financial statements were submitted to the SEC as part of a quarterly filing. Which of the following federal statutes did Dean violate? A. Federal Trade Commission Act. B. Securities Act of 1933. C. Securities Exchange Act of 1934. D. North American Free Trade Act.

C

If securities are registered under the Securities Exchange Act of 1934, which of the following disclosure provisions apply? *Notice of sales of the registered securities by the corporation's officers must be filed with the SEC *Proxy material for the registered securities must be filed with the SEC A. No, Yes B. Yes, No C. Yes, Yes D. No, No

C

The antifraud provisions of Rule 10b-5 of the Securities Exchange Act of 1934 A. Apply only if the securities involved were registered under either the Securities Act of 1933 or the Securities Exchange Act of 1934. B. Require that the plaintiff show negligence on the part of the defendant in misstating facts. C. Require that the wrongful act must be accomplished through the mail, any other use of interstate commerce, or through a national securities exchange. D. Apply only if the defendant acted with intent to defraud.

C

Tulip Corp. is a registered and reporting corporation under the Securities Exchange Act of 1934. As such it A. Can offer and sell its securities to the public without the necessity of registering its securities pursuant to the Securities Act of 1933. B. Cannot make a tender offer for the equity securities of another registered and reporting corporation without the consent of the SEC. C. Must file annual reports (Form 10-K) with the SEC. D. Must distribute a copy of the annual report (Form 10-K) to each of its shareholders.

C

Under the Sarbanes-Oxley Act which of the following officers must periodically certify that reports comply fully with relevant securities laws and also fairly present the financial condition of company in all material aspects? A. The chairman of the board and the chief executive officer. B. The secretary and the chief executive officer. C. The chief financial officer and the chief executive officer. D. The chief risk officer and the chief executive officer.

C

Under the liability provisions of Section 18 of the Securities Exchange Act of 1934, for which of the following actions would an accountant generally be liable? A. Negligently approving a reporting corporation's incorrect internal financial forecasts. B. Negligently filing a reporting corporation's tax return with the IRS. C. Intentionally preparing and filing with the SEC a reporting corporation's incorrect quarterly report. D. Intentionally failing to notify a reporting corporation's audit committee of defects in the verification of accounts receivable.

C

Which defense must an accountant establish to be absolved from civil liability under Section 18 of the Securities Exchange Act of 1934 for false or misleading statements made in reports or documents filed under the Act? A. Lack of gross negligence. B. Exercise of due care. C. Good faith and lack of knowledge of the statement's falsity. D. Lack of privity with an injured party.

C

Which of the following is correct concerning financial statements in annual reports (Form 10-K) and quarterly reports (Form 10-Q)? A. Both Form 10-K and Form 10-Q must be audited by independent public accountants and both must be filed with the SEC. B. Both Form 10-K and Form 10-Q must be audited by independent public accountants but neither need be filed with the SEC. C. Although both Form 10-K and Form 10-Q must be filed with the SEC, only Form 10-K need be audited by independent public accountants. D. Form 10-K must be audited by independent public accountants and must also be filed with the SEC; however, Form 10-Q need not be audited by independent public accountants nor filed with the SEC.

C

Rey Corp.'s management intends to solicit proxies relating to its annual meeting at which directors will be elected. Rey is subject to the registration and reporting requirements of the Securities Exchange Act of 1934. As a result, Rey must furnish its shareholders with A. A copy of its registration statement and bylaws. B. A copy of its proxy statement 2 weeks before the proxy solicitation. C. An annual report containing its audited statements of income for the 5 most recent years. D. An annual report containing its audited balance sheets for the 2 most recent years.

D

Ted buys Synchotic Corporation shares based on Synchotic's announcement of record earnings. But just a few days later, on July 1, 2010, Synchotic admits that its earnings had been artificially inflated via fraudulent earnings management. Its stock price drops dramatically that day, and Ted makes a significant loss. Ted wishes to bring a 1934 Act securities-fraud lawsuit against Synchotic. In terms of the statute of limitations, when must Ted bring his lawsuit? A. Within one year of when he should have discovered the fraud or within three years of the fraud. B. Within one year of when he should have discovered the fraud and within three years of the fraud. C. Within two years of when he should have discovered the fraud or within five years of the fraud. D. Within two years of when he should have discovered the fraud and within five years of the fraud.

D

Under Section 12 of the Securities Exchange Act of 1934, in addition to companies whose securities are traded on a national exchange, what class of companies is subject to the SEC's continuous disclosure system? A. Companies with annual revenues in excess of $5 million and 300 or more shareholders. B. Companies with annual revenues in excess of $10 million and 500 or more shareholders. C. Companies with assets in excess of $5 million and 300 or more shareholders. D. Companies with assets in excess of $10 million and 500 or more shareholders.

D

Under the anti-fraud provisions of Section 10(b) of the Securities Exchange Act of 1934, a CPA may be liable if the CPA acts A. Negligently. B. With independence. C. Without due diligence. D. Without good faith.

D

Under the provisions of the Securities Exchange Act of 1934, a corporation whose common stock is listed on a national stock exchange A. Is prohibited from making private placement offerings. B. Must submit Form 10-K to the SEC except in those years in which the corporation has made a public offering. C. Must distribute copies of Form 10-K to its shareholders. D. Is subject to having the registration of its securities suspended or revoked.

D

Which of the following might prevent a plaintiff investor from recovering from a defendant accountant in a Section 18(a) lawsuit? A. The document containing the false statement was not filed with the SEC. B. The plaintiff did not read the false document. C. The defendant established that it acted in good faith and did not know of the error in the document. D. All of the above.

D

Which of the following persons is not an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements? A. The president. B. A member of the board of directors. C. A shareholder who owns 8% of the outstanding common stock and whose wife owns 4% of the outstanding common stock. D. An owner of 15% of the total face value of the corporation's outstanding debentures.

D

Which of the following statements concerning the scope of Section 10(b) of the Securities Exchange Act of 1934 is correct? A. In order to come within its scope, a transaction must have taken place on a national stock exchange. B. It applies exclusively to securities of corporations registered under the Securities Exchange Act of 1934. C. There is an exemption from its application for securities registered under the Securities Act of 1933. D. It applies to purchases as well as sales of securities in interstate commerce.

D