Corp Rights & Responsibilities

Question 1

Define the “SOX Clawback provision”.

Answer 1

This provision allows firms to reclaim incentive and bonus payments to officers that turn out to have been made based on wrongdoing by those officers.

Question 2

Under the Sarbanes-Oxley Act of 2002, what are the requirements and responsibilities of Audit Committees?

Answer 2

All directors must be independent;
New role: select, compensate, fire outside auditor;
set up whistleblower procedures.

Question 3

Describe the three levels of the corporate pyramid.

Answer 3

Bottom: shareholders (vote for directors);
Middle: directors (select officers and set broad policies);
Top: officers (run firm day-to-day).

Question 4

What does the acronym SOX mean?

Answer 4

Sarbanes-Oxley Act.

Question 5

Pro forma financial statements must be reconciled with what?

Answer 5

They must also include comparable GAAP numbers.

Question 6

List prohibitions observed by corporate insiders and outside auditors.

Answer 6

They must observe the following prohibitions:
fraudulent influence;
coercion;
manipulation;
and misleading.