Sarbanes Oxley Act: SOX Corporate Governance

Instructions:

• Answer 50 questions in 15 minutes.
• If you are not ready to take this test, you can study here.
• Match each statement with the correct term.
• Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

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. Personal liability provision
quorum
Managers and supervisors who violate SOX by retaliating against whistle blowers may be held personally liable and have to pay judgment awarded to the employee
buy-and-sell agreement
Investigations - Legal proceedings


2. Example of whistle blowing activities that DOL has found to be covered under SOX.
right of first refusal
officer
60
Providing information about conduct he or she reasonably believes violates the federal laws - SEC regulations - or federal laws against shareholder fraud


3. Voucher System
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.
voting trust
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)
They are not protected


4. A lawsuit a shareholder brings against an offending party on behalf of a corporation when the corporation fails to bring the lawsuit
Investigations - Legal proceedings
derivative lawsuit
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
negligence


5. A system in which each shareholder votes the number of share he or she own on candidates for each of the positions open - also called noncumulative voting
straight voting
voting trust
The person or company must present it's evidence within 20 days after it receives the complaint
quorum


6. A report provided to shareholders that contains a balance sheet - an income statement - and a statement of changes in shareholder equity
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
stock dividend
annual report
public companies


7. 4 elements that must be proven to show usurping of corporate opportunity:

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8. The penalties that may be imposed under SOX.
petition - Administrative Review Board - 10
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
right of first refusal
Any officer - contractor - subcontractor - agent - or employee of a company


9. A distribution of profits of the corporation to shareholders
dividend
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
Sarbanes-Oxley Act
supramajority voting requirement


10. Rights that give existing shareholders the option of subscribing to new share being issued in proportion to their current ownership interests
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud
preemptive rights
Sarbanes-Oxley
Managers and supervisors who violate SOX by retaliating against whistle blowers may be held personally liable and have to pay judgment awarded to the employee


11. What are the conditions under which OSHA will investigate individual complaints?
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
board of directors
retaliates against a whistleblower
Cash Register


12. 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
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
right of first refusal
record date
A control for cash recevied throught the mail


13. What new employee right was created by SOX?
The person or company must present it's evidence within 20 days after it receives the complaint
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
inside director
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud


14. Sarbanes-Oxley Act of 2002
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
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.
negligence
Managers and supervisors who violate SOX by retaliating against whistle blowers may be held personally liable and have to pay judgment awarded to the employee


15. Bank reconcilation
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
buy-and-sell agreement
Allows a business to reconcile the cash transactions recorded
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.


16. To be protected by sox an employee must do one of what activities?
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
piercing the corporate veil
15
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct


17. The employee must also service the notice on whom?
interference with employment or livelihood of the informant
preemptive rights
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)
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


18. Establishes establishes far reaching rules regarding coporate governance; CEO and CFO certification; reimbursement of bonuses and incentive pay; prohibition on personal loans; tampering with evidence; bar from acting as an officer/director
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
quorum
Sarbanes-Oxley Act


19. What employees are protected under SOX?
public companies
record date
all employees who work for public companies as long as they qualify as a whistleblower
outside director


20. What is one of the most important controls to protect cash received in over-the-counter sales?
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations
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
negligence
Cash Register


21. Either party may object to these findings and request a hearing within __ days after receiving the finding and order.
They can have their stocks delisted by the national securities exchange and associations
30
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
retaliates against a whistleblower


22. A duty of corporate directors and officers to use care and diligence when acting on behalf of the corporation
They can have their stocks delisted by the national securities exchange and associations
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
duty of care
proxy


23. A rule that says directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment
Cash Register
There is no avenue for employee complains regarding a public company's failure to adopt an appropriate system for confidential employee complaints. This provision is enforced by the SEC only.
business judgment rule
public companies


24. What is required to qualify as a protected whistleblower
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.
buy-and-sell agreement
board of directors
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


25. 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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26. 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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27. A panel of decision makers who are elected by the shareholders
annual report
board of directors
Any document that serves as proof of authority to pay cash or issue an electronic funds transfer.
outside director


28. Voucher
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
Any document that serves as proof of authority to pay cash or issue an electronic funds transfer.
Allows a business to reconcile the cash transactions recorded
inside director


29. Additional shares of stock distributed as a dividend
cumulative voting
stock dividend
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
buy-and-sell agreement


30. Remittance Advice
annual report
administrative law judge - decision - order
A control for cash recevied throught the mail
review


31. What procedures must the audit committee of a public company establish?
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
right of first refusal
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
Any document that serves as proof of authority to pay cash or issue an electronic funds transfer.


32. Types of proceedings protected under SOX?
supramajority voting requirement
voting trust
termination - demotion - suspension - threats - harassment
Investigations - Legal proceedings


33. Elements of Internal Control
Any officer - contractor - subcontractor - agent - or employee of a company
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
outside director
15


34. SOX deadlines

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35. What provision is enforced by the SEC only?

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36. 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
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
Providing information about conduct he or she reasonably believes violates the federal laws - SEC regulations - or federal laws against shareholder fraud
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
terms - conditions


37. SOX generally only applies to __ - however - it's whistleblower provision also applies to company representatives.
inside director
The financial safeguards imposed by SOX include numerous reporting requirements - but there are no reporting requirements associated solely with its whistleblower provisions - The National securities exchanges and commissions may require public compa
They are not protected
public companies


38. Internal Complaint Procedures
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
Any company that has a class of securities registered with the Securities and Exchange Commission (SEC) under 15 U.S.C.
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
annual report


39. An agreement between two or more shareholders that stipulates how they will vote their shares
shareholder voting agreement
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.
record date
business judgment rule


40. Employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation
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
terms - conditions
duty of obedience
officer


41. Under what conditions may an employee claim protection of SOX?
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)
review
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
Allows a business to reconcile the cash transactions recorded


42. Bank accounts
interference with employment or livelihood of the informant
fiduciary duties
board of directors
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations


43. SOX creates __ for company representatives.
public companies
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
personal liability
voting trust


44. The number of directors necessary to hold a board meeting or transact business of the board
quorum
Managers and supervisors who violate SOX by retaliating against whistle blowers may be held personally liable and have to pay judgment awarded to the employee
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
opportunity was presented to the director/officer in his or her corporate capacity - opportunity is related to or connected with teh corporation's current or propsed business - corporation has the financial ability to take advantage of the opportunit


45. 'The employee's claim of shareholder fraud does not have to be correct.'
fiduciary duties
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud
annual shareholders' meeting
dividend


46. The company or person must present evidence within __ days after receiving notice of the complaint.
public companies
20
The person or company must present it's evidence within 20 days after it receives the complaint
preemptive rights


47. 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
proxy
preemptive rights
opportunity was presented to the director/officer in his or her corporate capacity - opportunity is related to or connected with teh corporation's current or propsed business - corporation has the financial ability to take advantage of the opportunit
piercing the corporate veil


48. An agreement that requires selling shareholders to sell their shares to the other shareholders or to the corporation at the price specified in the agreement
buy-and-sell agreement
Sarbanes-Oxley
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
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations


49. What about an employee whose complaint is based on a feeling or hunch - in the absence of any evidence?
board of directors
They are not protected
annual report
60


50. How does this Act define 'harm'?
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
interference with employment or livelihood of the informant
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.
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)