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Sarbanes Oxley Act: SOX Corporate Governance

Subjects : certifications, sarbanes-oxley

Instructions:

Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.

1. A duty of corporate directors and officers to use care and diligence when acting on behalf of the corporation
buy-and-sell agreement
straight voting
60
duty of care

2. Remittance Advice
officer
duty of care
violation of a director's or officer's duty of loyalty. if proven - corporation can (1) acquire opportunity from director/officer and (2) recover any profits made by the director/officer
A control for cash recevied throught the mail

3. Rights that give existing shareholders the option of subscribing to new share being issued in proportion to their current ownership interests
The person or company must present it's evidence within 20 days after it receives the complaint
Employees who complain of violations of state law - or those who complain of violations of internal company policies or procedures (unless the violation could also mislead shareholders)
review
preemptive rights

4. Bank accounts
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations
board of directors
15
Sarbanes-Oxley Act

5. Sox important Organizations that you must know
derivative lawsuit
SEC - PCAOB - FASB - IASB - AICPA - CPA - IFRS - GAAP - GAO - CRARA - PSLRA - FINRA - FCPA - OSHA - ERISA - FSG
all employees who work for public companies as long as they qualify as a whistleblower
inside director

6. Under what conditions may an employee claim protection of SOX?
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations
Anyone who intentionally harms someone else for providing truthful information to a law enforcement officer relating to the commission of any federal offense faces up to ten years in prison
voting trust
If they provide information to be provided to - or assists in an investigation conducted by: A federal regulatory or law enforcement agency (such as the SEC) - A member of committee of Congress - A person who either has supervisory authority over the

7. If a public company fails to adopt the complaint procedures mandated by SOX what may happen?
The employee engaged in protected activity - The person accused of retaliation knew of the activity - The employee suffered an adverse employment action - The circumstances create an inference that the adverse employment action was due to the employe
Allows a business to reconcile the cash transactions recorded
They can have their stocks delisted by the national securities exchange and associations
business judgment rule

8. Why did Congress pass SOX?
piercing the corporate veil
If they provide information to be provided to - or assists in an investigation conducted by: A federal regulatory or law enforcement agency (such as the SEC) - A member of committee of Congress - A person who either has supervisory authority over the
Any officer - contractor - subcontractor - agent - or employee of a company
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders

9. The required number of share that must be represented in person or by proxy to hold a shareholders' meeting - the RMBCA establishes a majority of outstanding share as this term
officer
business judgment rule
buy-and-sell agreement
quorum

10. Sarbanes-Oxley Act of 2002
Allows a business to reconcile the cash transactions recorded
Cash Register
Applies only to companies whose stock is traded on public exchanges. Its purpose is to restore public confidence and trust in the financial statements of companies.
all employees who work for public companies as long as they qualify as a whistleblower

11. Audit committee

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12. A lawsuit a shareholder brings against an offending party on behalf of a corporation when the corporation fails to bring the lawsuit
derivative lawsuit
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
15
annual shareholders' meeting

13. SOX generally only applies to __ - however - it's whistleblower provision also applies to company representatives.
termination - demotion - suspension - threats - harassment
personal liability
public companies
terms - conditions

14. Employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation
officer
SEC - PCAOB - FASB - IASB - AICPA - CPA - IFRS - GAAP - GAO - CRARA - PSLRA - FINRA - FCPA - OSHA - ERISA - FSG
public companies
personal liability

15. The Board can either adopt the judge's decision as its own or __ the case itself
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
annual report
review
administrative law judge - decision - order

16. Objectives of Internal Control
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
cumulative voting
The employee engaged in protected activity - The person accused of retaliation knew of the activity - The employee suffered an adverse employment action - The circumstances create an inference that the adverse employment action was due to the employe
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders

17. SOX (or SARBOX)
Sarbanes-Oxley
Applies only to companies whose stock is traded on public exchanges. Its purpose is to restore public confidence and trust in the financial statements of companies.
They are not protected
An employee who wishes to bring a lawsuit claiming that he or she was discriminated or retaliated against in violation of SOX's whistleblower protections must first file a complaint with the Occupational Safety and Health Administration (OSHA) within

18. SOX creates __ for company representatives.
duty of loyalty
annual report
negligence
personal liability

19. Public company
record date
E.g. The Management of General Electric Company is responsible for establishing and maintaining adequate internal control over financial reporting for this company With particaipation of the CEO and the CFO.
business judgment rule
Any company that has a class of securities registered with the Securities and Exchange Commission (SEC) under 15 U.S.C.

20. What new employee right was created by SOX?
Cash balance according to bank statement - Add deposit not recorded by bank (outstanding deposit) - Deduct outstanding checks (+/- Errors) - Adjusted Balance - Cash balance according to company - Add note and interest collected by bank - Deduct servi
Creates employee whistleblower protections: Employees who complain of - or provide information about - actions they believe to be shareholder fraud are protected from discrimination and retaliation. The law also obligates covered companies to create
derivative lawsuit
Providing information about conduct he or she reasonably believes violates the federal laws - SEC regulations - or federal laws against shareholder fraud

21. Failure of a corporate director or officer to exercise the duty of care while conducting the corporation's business
quorum
negligence
fiduciary duties
interference with employment or livelihood of the informant

22. The employee must file a notice with the administrative law judge assigned to the original complaint __ days before filing the lawsuit.
15
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
violation of a director's or officer's duty of loyalty. if proven - corporation can (1) acquire opportunity from director/officer and (2) recover any profits made by the director/officer
inside director

23. A report provided to shareholders that contains a balance sheet - an income statement - and a statement of changes in shareholder equity
annual report
The employee engaged in protected activity - The person accused of retaliation knew of the activity - The employee suffered an adverse employment action - The circumstances create an inference that the adverse employment action was due to the employe
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct
The employee can file a lawsuit in federal district court

24. The company or person must present evidence within __ days after receiving notice of the complaint.
personal liability
quorum
20
voting trust

25. An agreement between two or more shareholders that stipulates how they will vote their shares
Cash balance according to bank statement - Add deposit not recorded by bank (outstanding deposit) - Deduct outstanding checks (+/- Errors) - Adjusted Balance - Cash balance according to company - Add note and interest collected by bank - Deduct servi
shareholder voting agreement
30
The employee must also serve this notice on the other parties to the dispute (the employer and any other companies or individuals whom the employee accuses of retaliation)

26. If OSHA does not issue a final decision on the employee's complaint within 180 days after the complaint is filed - the employee can do what?
The employee can file a lawsuit in federal district court
violation of a director's or officer's duty of loyalty. if proven - corporation can (1) acquire opportunity from director/officer and (2) recover any profits made by the director/officer
piercing the corporate veil
To protect investors by improving the accuracy and reliability of corporate disclosures - and much of the law seeks to further this goal by imposing strict rules for audits and auditors of publicly traded companies - preventing insider trading and de

27. Special-purpose cash funds
officer
Allows a business to reconcile the cash transactions recorded
business judgment rule
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed

28. A distribution of profits of the corporation to shareholders
dividend
board of directors
If they provide information to be provided to - or assists in an investigation conducted by: A federal regulatory or law enforcement agency (such as the SEC) - A member of committee of Congress - A person who either has supervisory authority over the
The employer has 20 days to respond to an employee's complaint to OSHA - The employer has 30 days to object to the administrative law judge's findings and request a hearing - The employer has 60 days to appeal the board's decision to the U.S. Court o

29. A rule that says directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment
Cash Register
review
record date
business judgment rule

30. What about an employee whose complaint is based on a feeling or hunch - in the absence of any evidence?
An employee who wishes to bring a lawsuit claiming that he or she was discriminated or retaliated against in violation of SOX's whistleblower protections must first file a complaint with the Occupational Safety and Health Administration (OSHA) within
officer
retaliates against a whistleblower
They are not protected

31. Types of proceedings protected under SOX?
Investigations - Legal proceedings
Any company that has a class of securities registered with the Securities and Exchange Commission (SEC) under 15 U.S.C.
The employee can file a lawsuit in federal district court
Cash balance according to bank statement - Add deposit not recorded by bank (outstanding deposit) - Deduct outstanding checks (+/- Errors) - Adjusted Balance - Cash balance according to company - Add note and interest collected by bank - Deduct servi

32. If a hearing is requested - it will be held before an __ who will issue a __ and __.
15
administrative law judge - decision - order
Analysis of the items and amounts that cause the cash balance reported in the bank statement to differ from the balance of the cash account in the ledger in order to determine the adjusted cash balance.
Anyone who intentionally harms someone else for providing truthful information to a law enforcement officer relating to the commission of any federal offense faces up to ten years in prison

33. The penalties that may be imposed under SOX.
quorum
Cash Register
Reinstate the worker to the same position - with the same benefits - responsibilities - and seniority - that the worker would have had absent the retaliation - Pay worker all the compensation and benefits lost as a result of the retaliation with inte
retaliates against a whistleblower

34. Employees wishing to bring a lawsuit claiming they were discriminated or retaliated against in violation of SOX's whistleblower protection must first do what?

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35. A doctrine that says if a shareholder dominates a corporation and uses it for improper purposes - a court of equity can disregard the corporate entity and hold the shareholder personally liable for the corporation's debts and obligations - also calle
piercing the corporate veil
15
Sarbanes-Oxley Act
Reinstate the worker to the same position - with the same benefits - responsibilities - and seniority - that the worker would have had absent the retaliation - Pay worker all the compensation and benefits lost as a result of the retaliation with inte

36. Either party may request a review of the judge's decision by filing a __ with the __ within __ days after the date on the judge's order
annual report
The SEC regulations do not require companies to follow particular procedures for taking employee complaints (such as setting up an ethics hotline or a Web-based complaint system)
derivative lawsuit
petition - Administrative Review Board - 10

37. Either party may object to these findings and request a hearing within __ days after receiving the finding and order.
A control for cash recevied throught the mail
business judgment rule
30
They can have their stocks delisted by the national securities exchange and associations

38. What procedures must the audit committee of a public company establish?
terms - conditions
15
If the company or person named can show by clear and convincing evidence that it would have taken the same action against the employee even in the absence of the employees protected activity
Receiving - keeping - and handling complaints the company receives regarding its accounting - auditing - or internal accounting controls Allowing employees to submit confidential - anonymous complaints and concerns about questionable accounting or

39. The employee must also service the notice on whom?
The employee must also serve this notice on the other parties to the dispute (the employer and any other companies or individuals whom the employee accuses of retaliation)
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
The requirement that public companies create procedures for anonymous employee complaints is enforced by the SEC. The SEC has issued rules requiring the national securities exchanges and associations to delist the stock of companies that fail to comp
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud

40. Meetings of a shareholders that may be called to consider and vote on important or emergency issues - such as a proposed merger or amending the articles of incorporation

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41. Example of whistle blowing activities that DOL has found to be covered under SOX.
Providing information about conduct he or she reasonably believes violates the federal laws - SEC regulations - or federal laws against shareholder fraud
Investigations - Legal proceedings
To protect investors by improving the accuracy and reliability of corporate disclosures - and much of the law seeks to further this goal by imposing strict rules for audits and auditors of publicly traded companies - preventing insider trading and de
derivative lawsuit

42. To be protected by sox an employee must do one of what activities?
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct
violation of a director's or officer's duty of loyalty. if proven - corporation can (1) acquire opportunity from director/officer and (2) recover any profits made by the director/officer
The employee engaged in protected activity - The person accused of retaliation knew of the activity - The employee suffered an adverse employment action - The circumstances create an inference that the adverse employment action was due to the employe
The employee engaged in protected activity - The person accused of retaliation knew of the activity - The employee suffered an adverse employment action - The circumstances create an inference that the adverse employment action was due to the employe

43. Usurping of corporate opportunity

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44. Public companies and company representatives are not permitted to retaliate against an employee in the __ or __ of his/her employment because the employee provided information - participated in an investigation - or participated in a proceeding relat
voting trust
terms - conditions
review
stock dividend

45. Bank reconcilation
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
business judgment rule
Analysis of the items and amounts that cause the cash balance reported in the bank statement to differ from the balance of the cash account in the ledger in order to determine the adjusted cash balance.
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct

46. An agreement that requires a selling shareholder to offer his or her shares for sale to the other parties to the agreement before selling them to anyone else
negligence
right of first refusal
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
Reinstate the worker to the same position - with the same benefits - responsibilities - and seniority - that the worker would have had absent the retaliation - Pay worker all the compensation and benefits lost as a result of the retaliation with inte

47. 'The employee's claim of shareholder fraud does not have to be correct.'
The requirement that public companies create procedures for anonymous employee complaints is enforced by the SEC. The SEC has issued rules requiring the national securities exchanges and associations to delist the stock of companies that fail to comp
Providing information about conduct he or she reasonably believes violates the federal laws - SEC regulations - or federal laws against shareholder fraud
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud

48. The SEC regulations to not require companies to follow what?
The SEC regulations do not require companies to follow particular procedures for taking employee complaints (such as setting up an ethics hotline or a Web-based complaint system)
To protect investors by improving the accuracy and reliability of corporate disclosures - and much of the law seeks to further this goal by imposing strict rules for audits and auditors of publicly traded companies - preventing insider trading and de
30
termination - demotion - suspension - threats - harassment

49. Voucher System
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.
A committee of members of the board of directors of a public company - formed to oversee the company's audits and accounting and financial reporting processes. Has a number of legal obligations under SOX. If a public company does not establish a sepa
30
15

50. The duties of obedience - care - and loyalty owed by directors and officers to their corporation and its shareholders
fiduciary duties
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations
annual report
The employee engaged in protected activity - The person accused of retaliation knew of the activity - The employee suffered an adverse employment action - The circumstances create an inference that the adverse employment action was due to the employe

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Sarbanes Oxley Act: SOX Corporate Governance

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