BEC 1 Corporate Governance Part 2 Flashcards
For purpose of service on the audit committee, what qualifies an individual for classification as a financial expert?
A financial expert qualifies throughout education, past experience as a public accountant, or past experience as a financial officer for an issuer. Knowledge of the financial expert should include:
- Understanding of GAAP
- Experience in the preparation or auditing of F/S for comparable issuers.
- Application of GAAP
- Experience with I/C
- Understanding of audit committee functions.
Title VIII of the SOX Act considers what topics?
- Criminal penalties for altering documents
- Statute of limitations for securities fraud
- Whistle-blower protection
- Criminal penalties for securities fraud
Title IX of the SOX Act consider what topics for white collar crime penalty enhancement?
- Attempt and conspiracy
- Amended sentencing guidelines for white-collar offenses
- Failure of corporate officers to certify financial reports.
An issuer periodic report containing F/S filed with the SEC must include the following certifications:
Each certified financial report must include a written statement:
1 That the periodic report complies with the SEC Act of 1934.
- That information in the report fairly presents, in all material respects, the financial condition and operating result of the issuer.
- Which must be signed by the CEO and CFO of the issuer, who bear responsibility for these statements.
Title XI of the SOX consider Corporate Fraud Accountability for the following:
- Tampering with a record or impeding an official proceeding
- Temporary freeze of authority for the SEC
- Authority of the SEC to prohibit persons from serving as officers or directors
- Retaliation against informants
Under Title XI, Corporate Fraud Accountability, what are the penalties for tampering with a document used in an official proceeding or retaliating against an informant providing information to the SEC?
Document tampering will result in fines and/or a prison term of not more than 20 years.
Retaliation against informants providing information to the SEC will result in fines and / or a prison term of not more than 10 years.
How does the principles-based approach support an effective system of i/c under the COSO framework?
An effective system of i/c requires the use of judgement in determining the sufficiency of controls, applying the proper controls, and assessing the effectiveness of the system of i/c.
The principles-based approach of the COSO framework emphasizes the importance of management judgement.
What are the 5 components of COSO I/C integrated Framework?
CRIME
- Control Environment
- Risk Assessment
- Information and Communication
- Monitoring
- Existing Control Activities
What are the 5 principles associated with the COSO I/C Framework?
- Commitment to ethics and integrity
- Board Independence and oversight
- Organizational Structure
- Commitment to Competence
- Accountability
What are the 4 principles associated with the risk assessment component of the COSO Internal Control Integrated Framework?
- Specify objectives
- Identify and analyze risks
- Consider potential for fraud
- Identify and assess changes
What are the 3 principles associated with the (existing) control activities component of the COSO ICIF?
- Select and develop control activities
- Select and develop technology controls
- Deploy through policies and procedures
What are the 3 principles associated with the Information and Communication component of the COSO ICIF?
- Obtain and use information
- Internally communicate information
- Communicate with external parties
Name and describe the 3 objectives within the COSO framework?
The 3 framework objectivies with COSO are:
- Operating objectives pertain to the effectiveness and efficiency of the entity’s operations.
- Reporting objectives pertain to the reliability, timeliness, and transparency of an entity’s reporting.
- Compliance objectives are necessary to ensure the entity is adhering to all laws and regulations.
What is the purpose of the COSO cube?
The COSO cube shows a graphical 3-dimensional depiction of the relationship between an entity’s three objectives, its five integrated control components, and the entity’s organization structure.
What is necessary for the 5 components of the COSO framework to create an effective i/c environment for an entity?
In order to have an effective i/c for an entity, the five components and 17 related principles must be both present and functioning.
Additionally, the 5 components must operate together as an integrated system, to reduce the risk to an acceptable level, that the entity will not achieve its objectives.
