MORE Major Keys

Question 1

What are the penalties for intentional violations of section 302 of SOX?

Answer 1

1. Forfeiture of any bonus or other incentive-based compensation received during the previous 12 months
2. Forfeiture of any profits received from the sale of stock during the previous 12 months

Question 2

WHAT is section 906 of the U.S. Code?

Answer 2

Talks about corporate responsibility for financial reports

E.g. Says that the CEO and CFO can receive penalties of:

• $1,000,000 Fine and 10 years of imprisonment for Unknowingly certifying filings
• $5,000,000 Fine and 20 years of imprisonment for Knowingly certifying filings

Question 3

WHAT is section 1103 of the U.S. Code?

Answer 3

Talks about the Temporary Freeze Authority by the SEC

E.g. Gives the SEC the power to petition a federal district court to temporarily place an escrow on extraordinary payments to executives for 45 Days

Question 4

WHAT is section 1107 of the U.S. Code?

Answer 4

Talks about the penalties for Retaliation against informants

E.g. Says that a company executive or “person” that retaliates against an informant can face a fine or jail time up to 10 years OR both

Question 5

WHAT are (2) major factors a company must consider to be listed on the stock exchange?

Answer 5

Companies may:

• Be required to maintain levels of capital; and
• Face large compliance costs

Question 6

What is another name for the National Commission on Fraudulent Financial Reporting (NCFFR)?

Answer 6

THE TREADWAY COMMISSION

E.g. they later became known as the COSO (Committee On Sponsoring Organizations)

Question 7

What are the (3) achievement objectives of Internal Controls?

Answer 7

1. Operations
2. Reporting
3. Compliance

Question 8

How does management set the tone at the top?

Answer 8

Through words and actions

i.e. Management communicates its attitude toward integrity and ethical values

Question 9

WHAT would be considered a “Limiting Factor” for management in achieving their internal control objectives?

Answer 9

The cost of internal control should not exceed its benefits

NOTE: The cost-benefit relationship is a primary criterion that should be considered in designing and implementing internal control

Question 10

WHAT does “present and functioning effectively” mean regarding ERM?

Answer 10

(1) No material weaknesses exist; and

(2) Risks are within the risk appetite

Question 11

WHAT is involved in the Enterprise Risk Management process?

Answer 11

(1) The identification of events with negative impacts on organizational objectives

Question 12

What does Enterprise risk management (ERM) help management achieve?

Answer 12

ERM helps management:

1. Reach objectives
2. Prevent loss of reputation and resources
3. Report effectively
4. Comply with laws and regulations

Question 13

WHAT are some included categories of entity objectives in the enterprise risk management framework?

Answer 13

Compliance with applicable laws and regulations

Reliability of reporting

Effective and efficient use of the entity’s resources

Question 14

WHAT objective of enterprise risk management (ERM) addresses an entity’s high-level goals, aligned with and supporting its mission?

Answer 14

Strategy

E.g. Strategy refers to a company’s high-level goals, aligned with and supporting its mission

Question 15

WHAT objective of enterprise risk management (ERM) addresses a company’s effective and efficient use of its resources?

Answer 15

ITS Operations

Question 16

WHAT objective of enterprise risk management (ERM) addresses a company’s compliance with applicable laws and regulations?

Answer 16

This is Compliance

Question 17

WHAT objective of enterprise risk management (ERM) addresses a company’s reliability of reporting?

Answer 17

REPORTING

Question 18

WHAT is considered an essential element of the internal environment under COSO?

Answer 18

Ethical values

Question 19

WHAT would be considered a comprehensive reason for establishing internal controls?

Answer 19

TO provide reasonable assurance that the objectives of the organization are achieved

E.g. This is considered the “Overall” purpose for establishing internal controls

Question 20

Under COSO, WHAT are Control activities?

Answer 20

Policies and procedures that help ensure that management directives are carried out

E.g. They are the necessary actions taken to address risks to achieve the entity’s objectives