ITN 267: Chapter 7
Which of the following SOX titles establishes rules to make sure that securities analysts can give independent opinions about a public company's stock risk?
Analyst Conflicts of Interest (Title V)
Form 10-Q quarterly report is a very detailed disclosure of a company's financial condition.
False
In its decision in the case Free Enterprise Fund and Beckstead and Watts v. Public Company Accounting Oversight Board, the U.S. Supreme Court found that the way that the PCAOB was created does indeed violate the separation of powers doctrine and could no longer continue to function.
False
SOX Section 404 imposes criminal liability for fraudulent certifications. Under this section, CEOs and CFOs that knowingly certify fraudulent reports may be fined up to $1 million.
False
The Enron scandal proved that self-regulation has only benefits and little to no drawbacks, as evidenced by the role of their accounting firm, Arthur Andersen.
False
The SEC has five commissioners. The U.S. President must appoint them. They serve for five-year terms. All five commissioners can belong to the same political party.
False
The SEC requires that CEO and CFO each must certify that the executive is responsible for creating internal controls and procedures that are designed to bring material information about the company to the executive's attention, and the controls are reviewed 90 days prior to filing the report
False
Under SEC rules, internal controls over financial reporting (ICFR) are processes that provide reasonable assurance that financial reports are reliable. Which of the following is not assured by ICFR?
IT controls that contain financial data are maintained.
_________________ are the processes and procedures that a company uses to provide reasonable assurance that its financial reports are reliable.
Internal controls
Which of the following was not one of the outcomes of the Enron scandal?
Public companies are required to file one comprehensive financial disclosure statement with the SEC.
Which of the following reports, which generally are shared only between the organizations that are doing business with one another, are used by auditors to assess the ICFR at one entity that does business with another entity?
SOC-1
The main goal of ______________ is to protect shareholders and investors from financial fraud.
Sarbanes-Oxley Act (SOX)
SOX _________ requires a company's executive management to report on the effectiveness of the company's internal controls over financial reporting (ICFR).
Section 404
SOX ___________ imposes criminal liability for fraudulent financial certifications.
Section 906
The U.S. Securities and Exchange Commission reviews a public company's Form 10-K at least once every ____________ years
Three
In 1992, COSO issued guidance on internal controls. The COSO framework says that internal controls are effective when they give the management of a company reasonable assurance that: 1) It understands how the entity's operational objectives are being achieved; 2) Its published financial statements are being prepared reliably; and 3) It's complying with applicable laws and regulations.
True
Many SOX provisions require companies to verify the accuracy of their financial information. Because IT systems hold many types of financial information, companies and auditors quickly realized that these systems were in scope for SOX compliance. That meant that how those systems are used and the controls used to safeguard those systems had to be reviewed.
True
One of the main functions of the PCAOB is to set standards for how auditors review public companies. It has created standards related to auditing, ethics, independence, and quality control.
True
Public companies are required to file a number of financial disclosure statements with the SEC. These forms help investors understand the financial stability of a company. The most commonly filed forms are: 1) Form 10-K—Annual report, 2) Form 10-Q—Quarterly report, and 3) Form 8-K—Current report.
True
SOX sections 302 and 906 were created in response to the Enron scandal.
True
The three major corporate privacy concerns are: 1) privacy of employee data, 2) privacy of customer data, and 3) privacy of corporate data
True
Which of the following is not one of the events that that triggers a Form 8-K disclosure requirement?
acquiring an inheritance
SOX requires the SEC to review a public company's Form 10-K and Form 10-Q reports at least once every three years. It must do this to try to detect fraud and inaccurate financial statements that could harm the investing public. SOX states the factors that the SEC should consider when deciding to conduct a review. Which of the following is not one of the factors that SEC must consider?
how long the company has been in existence
The penalties for failing to retain records for the right amount of time can be severe. SOX makes it a crime for a person or company to knowingly and willfully violate its records retention provisions. A person who violates this provision can face fines and up to 10 years in prison.
True