BEC #1

An issuer's annual report contains the following statements: 1.) Management and the external auditors have taken responsibility for establishing and maintaining an adequate system of internal control over financial reporting. 2.) COSO was the internal control framework used to design and assess the effectiveness of the internal control system. 3.) Management has assessed that internal control over financial reporting is effective. 4.) An independent public accounting firm that is registered with the AICPA also assessed the system.

2 & 3 only

An internal auditor is considering a client's organizational structure as it affects the ethical climate established by company management. Each of the following considerations is valid in this regard except

A company that is highly centralized will have a more diverse ethical culture than a company that is decentralized.

Corp governance influenced by

Corporate charters and bylaws, BOD, code of ethics, and internal audit functions

Articles of incorporation are filed with the secretary of state

Corporation name, # of authorized shares of stock, street address of corporations initial registered office, name of registered agent at that office, and name and address of each incorporator

According to SOB2002, following statements is correct

If issuer doesn't have an audit committee financial expert, issuer must disclose reason why role isn't filled

unknowingly certifying fillings that don't meet SOX can result in fines up to $1m or up to 10 yrs of imprisonment

Knowingly certifying fillings that don't meet SOX can result in fines up to $5m or up to 20 yrs of jail

Which of the following will most likely call into question the expertise of an audit committee's financial expert?

Lack of experience with internal accounting controls

Who is responsible for designing, implementing, and maintaining internal control over financial reporting?

Management

The business judgment rule is a rule that immunizes corporate

Management from liability for actions that result in corporate losses or damages if the actions are undertaken in good faith and are within both the power of the corporation and the authority of management to make.

One member of the audit committee must be a financial expert

Must have knowledge of GAAP, experience in preparation or audit of financial statements of general comparable issuers, connection with accounting estimates, accruals and reserves

Officers

Responsible for carrying out day to day operations, CEO selects CFO and CIO, are agents of the corporation.

Internal auditor

is independent, objective assurance and consulting activity designed to add value and improve an organization's operations.

PCAOB established to oversee the audits of public companies

issues auditing and related standards, inspects and investigates accounting firms and enforces compliance with its rules

Audit committee must be directly responsible for appointing, compensating and overseeing the work

must also establish procedures for receipt, retention, and treatment of complaints received regarding accounting, internal control, or auditing matters.

Following is least likely to influence corporate governance

number of authorized shares of stock

In order to comply with a director's duty of loyalty to a corporation, director duty of loyalty to a corporation, director should

offer the opportunity to the corporation and accept it if the corporation rejects it

SOB2002 requires mgmt of a public biz to

provide a statement that the board approves the choice of accounting methods and policies

MGMT responsible for preparation and fair presentation of the financial statements and

design, implementation, and maintenance of internal control relevant to their preparations and fair presentation

a member of the BOD of Center Communication is offered a license by a 3rd party to operate a cell phone system. Director doesn't present to board but mentions to another BOD who doesn't think it'll be a huge problem. Director buys license. Correct statement regarding actions

director breached a duty of loyalty by usurping a corporate opportunity

Independent auditor's responsibility is to

express an opinion on whether the financial statements are fairly presented in accordance with GAAP

Acts performed by shareholders at annual meetings

Amending the articles of incorporation, voting on matters regarding a general vote, electing or removing directors

Which of the following person(s) may bring a whistleblower claim under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010? -An employee of the issuer -An individual whose claim originates from information obtained while auditing the issuer -An individual whose claim originates from information obtained while investigating the issuer

An employee of the issuer

Violates the Sarbanes Oxley Act of 2002

An issuer compensated a director on the audit committee for providing consulting services regarding the purchase of real estate

Which of the following represents a violation of the Sarbanes-Oxley Act of 2002?

An issuer's audit committee delegates to management the responsibility to oversee the work of the independent auditor.

SOB2002 imposes following requirement

Audit committee must be composed entirely of independent members of the board

Publicly held company must issue annual report of audited financial statements

BOD is responsible for hiring, setting the compensation for, and overseeing work independent auditor

Which of the following documents is a source of authority for directors and officers?

Bylaws

Audit committee consists of its CEO and 3 outside board members. Issuer compensates the outside board members for their services on the BOD. Under SOA2002 Following is a deficiency in the issuer's audit committee

CEO is an audit committee member

SOX requires each member of the audit committee to be an independent member of the issuer's BOD

COSO - Internal control - integrated framework

Governance

Combination of ppl, policies, procedures and processes. Ensures an entity is effectively and efficiently directing its activities towards meeting the objectives of its stakeholders

Following actions is required to ensure the validity of a contract between a corporation and a director of the corporation

Director must disclose the interest to the Independent members of the board and refrain from voting

Issuer is preparing to file its annual report prior to adopting a code of ethics for is senior financial officers. Issuer must do ____ to comply with SOB2002

Disclose in the annual report the lack of code of ethics and the reasons

A company officer who is not a director is authorized to perform which of the following duties

Enter into a contract with a vendor of computers for the company.

Which of the following positions best describes the nature of the board of directors of XYZ Co.'s relationship to the company?

Fiduciary

Code of Ethics

Promote an ethical culture within the corporation, best promoted by senior mgmt. Communicate acceptable values, establishing objective standards, communicating corporate values to outsiders

Internal auditor should assess

Promoting appropriate ethics and values in the organization Ensuring effective organization performance management and accountability Communicating risk and control info to appropriate areas of the organization Coordinating the activities of and communication info among the board, external and internal auditor and management

Which of the following provisions must a for-profit corporation include in its articles of incorporation to obtain a corporate charter?

Provision for the issuance of voting stock Name of the corporation

Articles may include

Purpose dan powers of corporation, internal mgmt, any required or allowable subject addressed in bylaws

Generally, a corporations articles of incorporation must include everything except the

Quorum requirements

Following corporate actions is subject to

Removal of directors

The Sarbanes-Oxley Act of 2002 has strengthened auditor independence by requiring that management

Select auditors through audit committees

Board of Directors (BOD)

Selection and removal of officers, decision about capital structuring, adding amending and repealing bylaws, ignition of fundamental changes, decision to declare and distribute dividends, setting of mgmt compensation, coordinating audit activities, evaluating and hanging risk. Every public comp must have an audit committee consisting of independent directors

Which of the following statements is correct regarding the requirements of the Sarbanes-Oxley Act of 2002 for an issuer's board of directors?

The board of directors must have an audit committee entirely composed of members who are independent from management influence

According to to Sarbanes Oxley act of 2002, a CO or CFO who misrepresents company's finances may be

fined and imprisioned

A public accounting firm performs both audit and nonaudit services for an issuer. A violation of the Sarbanes-Oxley Act of 2002 occurs if The issuer's audit committee preapproves the nonaudit services. The issuer's audit committee preapproves the audit services. The issuer's board preapproves the nonaudit services. The issuer's board preapproves the audit services.

The issuer's board preapproves the nonaudit services. The issuer's board preapproves the audit services.

All of the directors on an issuer's audit committee are independent. However, none of the directors on the committee is a financial expert. The issuer disclosed this fact in its most recent annual filing. The issuer has complied with the Sarbanes-Oxley Act of 2002 if it also disclosed

The reason(s) why its audit committee lacks a financial expert

Each member of the issuer's audit committee must be an independent member of the board.

To be independent, a director must not be affiliated with or receive any compensation (other than for their services on the BOD) from the issuer. Must be three

An issuer's CEO and CFO certified the company's annual filing for Year 1 pursuant to the Sarbanes-Oxley Act of 2002. However, only the CEO certified the issuer's first quarterly filing for Year 2. The issuer has

Violated SOX because the CFO did not certify the quarterly filing.

bylaws

any provision for managing its business and affairs that doesn't conflict with law or articles of incorporation

Independent auditing companies can not do the

bookkeeping, financial info design and implementation, appraisal or valuation services, actuarial services, mgmt function or human resources, broker dealer, i-b provider, legal services. Permitted non audit services (tax) are pre approved by audit committee

President of a biz signed a $10mm contract with a construction company to build new corporate office. Following corporate documents set forth the scope of authority under

bylaws