Unit 2 - Accounting Cycles and Corporate Governance

Question 1

Corporate director fiduciary duty to the company is…

Answer 1

Provide company with business opportunities that come through their position as director of company. If a director takes PERSONALLY such business opportunity than has breached duty of loyalty.

• Also have duty to used good business judgment, BUT is not responsible for highest standard of care and skill as they can rely on information from competent officers, EEs, etc.
• NOT PROHIBITED from entering into a conflicting interest transaction as long as 1) fair to the company and 2) approved after required disclosure by directors/shares.

Question 2

Service Type 1 Report (SOC) report should have a statement that…

Answer 2

Auditor did not test the effectiveness of the controls.

Question 3

SOC 2 and SOC 3 reports provide..

Answer 3

Assurance on more than IC over financial reporting (eg. security, availability, processing integrity, etc)

SOC 2 reports are ONLY to be used by those identified in report

SOC 3 reports may be used by any user