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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. The SEC regulations to not require companies to follow what?
30
dividend
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)
quorum

2. Under what conditions may an employee claim protection of SOX?
terms - conditions
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.
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

3. Bank statement
preemptive rights
Sarbanes-Oxley Act
Allows a business to reconcile the cash transactions recorded
stock dividend

4. Bank reconcilation
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
petition - Administrative Review Board - 10
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.
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

5. An agreement between two or more shareholders that stipulates how they will vote their shares
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
shareholder voting agreement
Allows a business to reconcile the cash transactions recorded
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.

6. 4 elements that must be proven to show usurping of corporate opportunity:

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7. Internal Complaint Procedures
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
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.
The person or company must present it's evidence within 20 days after it receives the complaint

8. SOX (or SARBOX)
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
Sarbanes-Oxley
proxy
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

9. 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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10. SOX generally only applies to __ - however - it's whistleblower provision also applies to company representatives.
public companies
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
Investigations - Legal proceedings
officer

11. The penalties that may be imposed under SOX.
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.
right of first refusal
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

12. SOX deadlines

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13. A panel of decision makers who are elected by the shareholders
board of directors
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
personal liability
They can have their stocks delisted by the national securities exchange and associations

14. Bank reconcilation steps
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
personal liability
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

15. 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
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
termination - demotion - suspension - threats - harassment
fiduciary duties

16. 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
Sarbanes-Oxley Act
voting trust
petition - Administrative Review Board - 10
terms - conditions

17. Elements of Internal Control
piercing the corporate veil
negligence
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
stock dividend

18. Additional shares of stock distributed as a dividend
all employees who work for public companies as long as they qualify as a whistleblower
review
stock dividend
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.

19. A distribution of profits of the corporation to 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
board of directors
dividend
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.

20. A rule that says directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment
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
Allows a business to reconcile the cash transactions recorded
business judgment rule
15

21. Examples of complaints found not to be covered under SOX
special shareholders' meetings
review
business judgment rule
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)

22. The employee is required to do what relative to protected whistleblowers?

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23. 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
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fiduciary duties
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations

24. Types of proceedings protected under SOX?
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)
Providing information about conduct he or she reasonably believes violates the federal laws - SEC regulations - or federal laws against shareholder fraud
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.
Investigations - Legal proceedings

25. 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)
fiduciary duties
straight voting
administrative law judge - decision - order

26. What procedures must the audit committee of a public company establish?
interference with employment or livelihood of the informant
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.
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

27. A report provided to shareholders that contains a balance sheet - an income statement - and a statement of changes in shareholder equity
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
personal liability
cumulative voting
annual report

28. The criminal provision could apply to anyone who ____________ - whether or not the perpetrator works for or has any association with a public company
retaliates against a whistleblower
administrative law judge - decision - order
The employee can file a lawsuit in federal district court
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

29. A duty that directors and officers of a corporation have to act within the authority conferred upon them by state corporation codes - the articles of incorporation - the corporate bylaws - and the resolutions adopted by the board of directors
derivative lawsuit
Cash Register
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
duty of obedience

30. A duty of corporate directors and officers to use care and diligence when acting on behalf of the corporation
duty of care
Any officer - contractor - subcontractor - agent - or employee of a company
proxy
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

31. Employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation
voting trust
officer
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
fiduciary duties

32. What is one of the most important controls to protect cash received in over-the-counter sales?
Cash Register
petition - Administrative Review Board - 10
board of directors
They are not protected

33. Sox important Organizations that you must know
record date
They are not protected
SEC - PCAOB - FASB - IASB - AICPA - CPA - IFRS - GAAP - GAO - CRARA - PSLRA - FINRA - FCPA - OSHA - ERISA - FSG
supramajority voting requirement

34. The criminal provision of SOX
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
quorum
review
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

35. Personal liability provision
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 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
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
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

36. If a hearing is requested - it will be held before an __ who will issue a __ and __.
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
officer
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
administrative law judge - decision - order

37. 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
quorum
Providing information about conduct he or she reasonably believes violates the federal laws - SEC regulations - or federal laws against shareholder fraud
Sarbanes-Oxley

38. A lawsuit a shareholder brings against an offending party on behalf of a corporation when the corporation fails to bring the lawsuit
derivative lawsuit
15
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
Any company that has a class of securities registered with the Securities and Exchange Commission (SEC) under 15 U.S.C.

39. 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
personal liability
terms - conditions
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 person or company must present it's evidence within 20 days after it receives the complaint

40. What is the stated purpose of SOX?
officer
petition - Administrative Review Board - 10
retaliates against a whistleblower
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

41. A system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates
cumulative voting
The employee can file a lawsuit in federal district court
personal liability
administrative law judge - decision - order

42. Even if the employee provides evidence of individual complaints - OSHA will not investigate under what condition?
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
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud
termination - demotion - suspension - threats - harassment
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)

43. Why did Congress pass SOX?
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
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)
Any officer - contractor - subcontractor - agent - or employee of a company
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)

44. Sarbanes-Oxley Act of 2002
terms - conditions
negligence
right of first refusal
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.

45. SOX states that __ - __ - __ - __ and __ all constitute retaliation.
derivative lawsuit
buy-and-sell agreement
termination - demotion - suspension - threats - harassment
20

46. 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
proxy
Sarbanes-Oxley Act
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

47. An arrangement in which the shareholders transfer their stock certificates to a trustee who is empowered to vote the shares
termination - demotion - suspension - threats - harassment
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations
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
voting trust

48. The employee must file a notice with the administrative law judge assigned to the original complaint __ days before filing the lawsuit.
15
public companies
supramajority voting requirement
officer

49. What about an employee whose complaint is based on a feeling or hunch - in the absence of any evidence?
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
30
supramajority voting requirement
They are not protected

50. A requirement that a greater than majority of shares constitutes a quorum of the vote of the shareholders
supramajority voting requirement
personal liability
SEC - PCAOB - FASB - IASB - AICPA - CPA - IFRS - GAAP - GAO - CRARA - PSLRA - FINRA - FCPA - OSHA - ERISA - FSG
public companies