Subsequent Employment Flashcards
Michael was on the ABC Accounting Firm’s audit team for the Rasmussen Corporation audit. Rasmussen’s officers were so impressed with Michael that they offered him a job as Director of Internal Audit at Rasmussen. What should Michael do in order to preserve independence?
Tell his superiors as soon as he has decided whether or not to accept the offer.
Remove himself from the engagement as he considers the offer.
Pray for divine guidance.
If he decides to reject the offer, remove himself permanently from the engagement.
Remove himself from the engagement as he considers the offer.
Correct! Michael should both tell his superiors as soon as he receives the offer and remove himself from the engagement as he considers itself.
Teagan was the lead partner on the Bejesus Corporation (BC) audit for her firm, Dapper Accounting, for the last couple of years. When BC’s CFO suddenly died of a heart attack, Teagan was immediately offered the position. BC is a privately-held corporation where Sarbanes-Oxley rules do not apply. Which of the following need not be done if Teagan goes to work for BC as CFO?
Teagan immediately cuts all financial and employment ties with Dapper.
Dapper removes all references to Teagan on firm advertising, directories, etc.
Teagan removes the tattooed “Dapper” on her left buttock.
Senior members of the Dapper firm should review the interactions between Teagan and her former subordinates to ensure that appropriate skepticism is maintained.
Teagan removes the tattooed “Dapper” on her left buttock.
Correct! Teagan may well regret drinking too much the night she had this tattoo put on, but she need not remove it if she doesn’t want to.
Rules issued under the Sarbanes-Oxley Act of 2002 restrict former members of an audit engagement team from accepting employment as a chief executive, chief financial or chief accounting officer, or controller of an audit client that files reports with the Securities and Exchanges Commission. How many annual audit period(s) must be completed before such employment can be accepted?
One.
Two.
Three.
Five.
One.
This answer is correct because the answer is one annual period.
An issuer may hire an employee of a registered public accounting firm who served on the audit engagement team within the previous year for which of the following positions?
Controller.
CFO.
CEO.
Staff accountant.
Staff accountant.
This answer is correct because Section 206 of the Sarbanes-Oxley Act requires a one-year “cooling off” period for auditors hired by clients in the position of CEO, controller, CFO, chief accounting officer or person in a similar capacity; it does not include a staff accountant.
A cooling-off period of how many years is required before a member of an issuer’s audit engagement team may begin working for the registrant in a key position?
One year.
Two years.
Three years.
Four years.
One year.
This answer is correct because the requirement is one year.
Teagan was the lead partner on the Bejesus Corporation (BC) audit for her firm, Dapper Accounting, for the last couple of years. When BC’s CFO suddenly died of a heart attack, Teagan was immediately offered the position. BC is a publicly-held corporation where Sarbanes-Oxley rules govern. Which of the following is true if Teagan goes to work for BC as CFO?
Teagan must observe a one-year cooling-off period before going to work for BC as CEO.
Teagan may immediately go to work for BC as CAO and then assume the CEO position after one year.
Teagan may immediately go to work for BC as head of internal audit and then assume the CFO position after one year.
If Teagan observes a nine-month cooling-off period, that is close enough to one year to satisfy SOX.
Teagan must observe a one-year cooling-off period before going to work for BC as CEO.
Correct! Teagan must observe a one-year cooling off period and remember that this entails passage of an entire audit cycle, which often means that the cooling-off period lasts well more than 12 months.
