US Securities and Exchange Commission

Question 1

Who has the legal authority to prescribe accounting standards?

Answer 1

the SEC

Question 2

What is the mission of the SEC?

Answer 2

to protect investors, maintain fair, orderly and efficient markets, and facilitate capital information

Question 3

In order to be a “foreign private issuer” what requirements must be met?

Answer 3

A foreign private issuer is any foreign issuer other than a foreign government, except an issuer that meets the following conditions (Rule 205, Securities Act 1933):

a. More than 50% of the outstanding voting securities are directly or indirectly owned by residents of the U.S. and
b. Any of the following:
i. The majority of its executive officers or directors are U.S. citizens or residents;
ii. More than 50% of the assets of the issuer are located in the U.S.;
iii. The business of the issuer is administered principally in the U.S.

Question 4

What are the 4 divisions of the SEC?

Answer 4

The division of Corporate Finance, Enforcement, Trading & Markets, Investment management

Question 5

What does the SEC’s Division of Corporate Finance do?

Answer 5

This division oversees the compliance with the securities acts and examines all filings made by publicly held companies. All filings go to this division.

Question 6

What does the SEC’s Division of Enforecement do?

Answer 6

When there is a violation of a securities law (except the Public Utility Holding Company Act), this division completes the investigation and takes appropriate actions. This division makes recommendations to the Justice Department concerning any punishments or potential criminal prosecution.

Question 7

What does the SEC’s Division of Trading and Markets do?

Answer 7

This division oversees the secondary markets, exchanges, brokers, and dealers.

Question 8

What does the SEC’s Division of Investment Management do?

Answer 8

This division oversees the investment advisers and investment companies under the Investment Company Act of 1940 and the Investment Advisers Act of 1940.

Question 9

What are the 2 main pronouncements that are published by the SEC?

Answer 9

Financial Reporting Releases (FRR) and Staff Accounting Bulletins (SAB)

Question 10

What are Financial Reporting Releases (FRR)?

Answer 10

These are formal pronouncements and are the highest-ranking authoritative source of accounting for public companies.

Question 11

What are Staff Accounting Buleltins? (SAB)

Answer 11

These provide the SEC’s current position on technical issues. While SABs are not formal pronouncements (in the sense that they have not gone through any due process), they still are of importance to financial statement preparers, because they reflect the staff’s current thinking on various technical issues.

Question 12

What is an Accounting and Auditing Enforcement Release? (AAER)

Answer 12

These report the enforcement actions that have been taken against accountants, brokers or others

Question 13

What does the 1933 Securities Act require?

Answer 13

The 1933 Securities Act requires publicly traded firms offering securities for sale to the public in primary and secondary markets to file a registration statement, and to provide each investor with a proxy statement before each shareholders’ meeting.

Question 14

What does the 1934 Securities Act regulate?

Answer 14

The 1934 Securities Act regulates the trading of securities after they are issued and provides the requirements for periodic reporting and disclosures.

Question 15

What does Regulations S-X govern?

Answer 15

Regulations S-X governs the form and content of financial statements and financial statement disclosures.

Question 16

What does Regulations S-K govern?

Answer 16

Regulation S-K governs the form and content of nonfinancial statement. The nonfinancial statement disclosures are

a. Description of the business;
b. Description of stockholder matters;
c. Management’s discussion and analysis (MD&A);
d. Changes in and disagreements with accountants; and
e. Information on directors and management.

Question 17

What is Form S-1?

Answer 17

Form S-1 is the basic registration form for new securities and it includes a list of required disclosures

Question 18

Waht are the filing deadlines of a Large Accelerated Filer?

Answer 18

10-K - 60 days after the fiscal year end

10-Q - 40 days after the quarter end

Question 19

What are the filing deadlines for an Accelerated Filer?

Answer 19

10-K - 75 days after the fiscal year end

10-Q - 40 days after the quarter end

Question 20

What are the filing deadlines for a Non-accelerated Filer?

Answer 20

10-K - 90 days after the fiscal year end

10-Q - 45 days after the quarter end

Question 21

What is the Management’s Discussion and Analysis (MD&A)?

Answer 21

Required by the SEC

Provides discussion of important aspects of hte firm from the viewpoint of management.

Question 22

What is the point of a quarterly report for the SEC?

Answer 22

The quarterly report is intended to provide investors with an update since the last annual report. The 10-Q is not required to be audited, but must be reviewed by the independent auditor.
The financial statements presented are:
a. Balance sheet for the quarter and prior fiscal year end;
b. Quarterly and year-to-date income statements for this quarter and the same period in the previous year;
c. Cumulative year-to-date statements of cash flow for the current and prior fiscal years.

Question 23

What is the Foreign Corrupt Practices Act of 1977?

Answer 23

The Foreign Corrupt Practices Act of 1977 prohibits bribes of foreign governmental or political officials for the purpose of securing contracts or business

Question 24

What is the purpose of Sarbanes-Oxley Act of 2002

Answer 24

The Sarbanes-Oxley Act of 2002 (SOX) contains provisions to enhance corporate governance and to mitigate financial accounting abuses