BEC 1 - Topic 1 Flashcards
What is the primary role of Board of Directors?
1) Safeguard the company’s assets
2) Maximize shareholder return
What does Board of Directors have sole discretion?
Declare distributions to shareholders. including dividends.
What is the director entitled to?
A director is entitled to rely on information, opinions, reports or statements if prepared by corporate officers and Legal counsel accountants.
What will directors be held liable for?
Authorizing a distribution in violation of law:
1) The corporation would not be able to pay its debts as they become due in regular course of business
2) The corporation’s total assets would be less than its total liabilities.
What is Sarbanes-Oxley Act of 2002?
A profound effect on the financial reporting requirements of public companies. There are numerous provisions for expanded disclosures.
What is the audit committees responsible for?
Public companies are responsible for establishing an audit committee that is directly responsible for appointment, compensation and oversight of the work.
What are duties of audit committee?
1) The auditor reports to audit committee.
2) Resolving disputes between auditor and management.
How does audit committee to be independent?
1) May not accept compensation for consulting or advisory services.
2) May not be an affiliated person of the issuer.
What is penalty for accounting restatement?
1) CEO/ CFO pay bonuses or incentive based compensation.
2) Gains on sale of securities during that 12 month period.
What are disclosure requirements involving management and principal stockholders?
Disclosures are required of direct or indirect ownership of more than 10 percent of any class of equity security.
Is there code of ethics for senior officers?
Issuers must disclose whether or not the issuer has adopted code of conduct for senior officers. If no code of conduct, the issuer must disclose the reasons.
What constitutes of financial expert for audit committee?
A financial expert qualifies through education, past experience as public accountant or past experience as principal financial officer, comptroller or principal accounting officer for an issuer.
When scheduling reviews, what should SEC consider?
1) Material restatements (risks)
2) Significant volatility in their stock (motivation)
3) Largest market capitalization (Material to market)
4) Disparities in price to earning ratios
5) Significantly affect any material sector of economy.
For how long auditors should retain paper work?
7 years
What is Whistle Blower protection?
Employee who lawfully provides evidence of fraud cannot be discharged or suspended.
