Sarbanes-Oaxly Act Of 2002

Question 1

What were the effects of Sarbanes Oxley Act (SOX Act) of 2002 on public companies?

Answer 1

Created corporate responsibility
Enhanced disclosures
Identified fraud

Question 2

Title III (Corporate Responsibility) section of the SOX Act relates to:

Answer 2

The establishment of an audit committee and a CFO/CEO representation

Question 3

Who is responsible for the appointment, compensation, and oversight of the work of the public accounting firm employed by the company?

Answer 3

The audit committee

Question 4

An auditor reports directly to who within the company?

Answer 4

The audit committee

NOT the board

Question 5

Who is responsible for resolving disputes between the auditor and management?

Answer 5

The audit committee

Question 6

Audit committee members are to be members of what?

Answer 6

The issuers board of directors, but are to remain otherwise independent

Question 7

Who is responsible for establishing procedures to accept reports or complaints regarding audit, accounting, or internal control issues as well as have a method of addressing said reports?

Answer 7

The audit committee

Question 8

Who must sign certain representations regarding annual and quarterly reports?

Answer 8

CEO and cfo

Question 9

When signing the reports, the CFO and CEO assert that they have made the following disclosures to the issuer’s auditors an audit committee:

Answer 9

All significant deficiencies and material weaknesses in the design or operation of internal controls.
Any fraud.
Significant changes to internal controls.

Question 10

If an issuer is required to prepare an accounting restatement due to material noncompliance, the CEO and CFO may be required to reimburse the issuer:

Answer 10

Bonuses or incentive-based or equity-based compensations, or gains on sale of securities during that 12 month period

Question 11

Enhanced financial disclosures include:

Answer 11

Additional details

Question 12

Enhanced disclosure requirements include:

Answer 12

All material correcting adjustments identified by the auditor (externally identified)
All material off-balance sheet transactions (operating leases, contingent obligations, and relationships with unconsolidated subsidiaries)

Question 13

Who is prohibited from making personal loans to directors or executive officers?

Answer 13

Issuers

EXCEPTION: if the consumer credit loans are made in the ordinary course of business

Question 14

Disclosures are required for persons who have direct or indirect ownership of what amount?

Answer 14

More than 10 percent

Question 15

Who is responsible for establishing and maintaining an adequate internal control structure?

Answer 15

Management

Question 16

Who must disclose whether the issuer has adopted a code of conduct for senior officers?

Answer 16

The issuer

Question 17

The code of ethics for senior officers must promote:

Answer 17

Honest and ethical conduct
Full, fair, accurate, and timely disclosures in periodic financial reports
Compliance with laws, rules, and regulations

Question 18

At least one member of the audit committee should be a what?

Answer 18

Financial expert

Question 19

The financial expert should have knowledge of:

Answer 19

GAAP
Experience in the preparation or auditing of financial statements
Application of GAAP
Experience with Internal controls
Understanding of audit committee functions

Question 20

Who is required to review disclosures made by issuers on a regular basis for the protection of investors?

Answer 20

The Securities and Exchange Commission (SEC)

Question 21

The SEC should consider the following when scheduling reviews of disclosures by issuers:

Answer 21

Material restatements
Significant volatility in stock prices
Largest market capitalizations
Issuers whose operations significantly affect any material section of the economy

Question 22

What are the criminal penalties for altering documents?

Answer 22

Fined and/or imprisoned for up to 20 years

Question 23

What is the statute of limitations for securities fraud?

Answer 23

The earlier of 2 years after the discovery or 5 years after the violation
(2 and 5 rule)

Question 24

Criminal penalties fo securities fraud include:

Answer 24

Fined and/or imprisoned for up to 25 years

Question 25

Who reviews and amends, as needed, the Federal Sentencing Guidelines and policy statements to carry out the provision of the Attempt to Conspiracy Act?

Answer 25

The United States Sentencing Commission

Question 26

Any party that certifies a financial report knowing that it does not satisfy all the requirements will be fined and/or imprisoned based on the following:

Answer 26

Certifies: fined up to $1,000,000 and/or imprisoned for up to 10 years
Willfully Certifies: fined up to $5,000,000 and/or imprisoned for up to 20 years

Question 27

Penalties for tampering with record or impeding and official proceeding include:

Answer 27

Fined and/or imprisoned for up to 20 years