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. Internal Complaint Procedures
negligence
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
annual shareholders' meeting
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


2. 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
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
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annual report
straight voting


3. A written document that a shareholder signs - authorizing another person to vote his or her shares at the shareholders' meetings in the event of the shareholder's absence
proxy
Sarbanes-Oxley Act
preemptive rights
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


4. Sarbanes-Oxley Act of 2002
petition - Administrative Review Board - 10
Sarbanes-Oxley
special shareholders' meetings
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.


5. What is one of the most important controls to protect cash received in over-the-counter sales?
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
Cash Register
piercing the corporate veil
The employee can file a lawsuit in federal district court


6. What new employee right was created by SOX?
business judgment rule
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
dividend
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


7. Voucher
Any document that serves as proof of authority to pay cash or issue an electronic funds transfer.
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30
right of first refusal


8. What are the conditions under which OSHA will investigate individual complaints?
petition - Administrative Review Board - 10
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
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


9. If a public company fails to adopt the complaint procedures mandated by SOX what may happen?
They can have their stocks delisted by the national securities exchange and associations
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
public companies
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)


10. 'The employee's claim of shareholder fraud does not have to be correct.'
duty of care
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The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations


11. An arrangement in which the shareholders transfer their stock certificates to a trustee who is empowered to vote the shares
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)
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
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
voting trust


12. 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
quorum
special shareholders' meetings
all employees who work for public companies as long as they qualify as a whistleblower
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


13. SOX deadlines

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14. Example of whistle blowing activities that DOL has found to be covered under SOX.
duty of care
Providing information about conduct he or she reasonably believes violates the federal laws - SEC regulations - or federal laws against shareholder fraud
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
public companies


15. 4 elements that must be proven to show usurping of corporate opportunity:

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16. Either party may object to these findings and request a hearing within __ days after receiving the finding and order.
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
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public companies


17. The company or person must present evidence within __ days after receiving notice of the complaint.
The employee can file a lawsuit in federal district court
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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)
negligence


18. 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 control for cash recevied throught the mail
officer
right of first refusal
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


19. A distribution of profits of the corporation to shareholders
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
straight voting
duty of obedience
dividend


20. 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
petition - Administrative Review Board - 10
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
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed
quorum


21. 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?
outside director
all employees who work for public companies as long as they qualify as a whistleblower
Sarbanes-Oxley Act
The employee can file a lawsuit in federal district court


22. What is required to qualify as a protected whistleblower
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
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
annual report
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations


23. Company representative
cumulative voting
Any officer - contractor - subcontractor - agent - or employee of a company
shareholder voting agreement
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.


24. A member of a board of directors who is not an officer of the corporation
outside director
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
inside director


25. Bank statement
The person or company must present it's evidence within 20 days after it receives the complaint
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.
Allows a business to reconcile the cash transactions recorded
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations


26. Why did Congress pass SOX?
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In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
retaliates against a whistleblower
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


27. A panel of decision makers who are elected by the shareholders
review
Sarbanes-Oxley Act
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.
board of directors


28. Rights that give existing shareholders the option of subscribing to new share being issued in proportion to their current ownership interests
special shareholders' meetings
preemptive rights
Allows a business to reconcile the cash transactions recorded
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


29. The Board can either adopt the judge's decision as its own or __ the case itself
retaliates against a whistleblower
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.
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
review


30. A meeting of the shareholders of a corporation that must be held by the corporation to elect directors and to vote on other matters

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31. The penalties that may be imposed under SOX.
stock dividend
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
preemptive rights
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


32. A duty of corporate directors and officers to use care and diligence when acting on behalf of the corporation
duty of care
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
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.
petition - Administrative Review Board - 10


33. 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
officer
Any company that has a class of securities registered with the Securities and Exchange Commission (SEC) under 15 U.S.C.
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
buy-and-sell agreement


34. 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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35. What about an employee whose complaint is based on a feeling or hunch - in the absence of any evidence?
They are not protected
petition - Administrative Review Board - 10
SEC - PCAOB - FASB - IASB - AICPA - CPA - IFRS - GAAP - GAO - CRARA - PSLRA - FINRA - FCPA - OSHA - ERISA - FSG
retaliates against a whistleblower


36. A report provided to shareholders that contains a balance sheet - an income statement - and a statement of changes in shareholder equity
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The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud
board of directors
annual report


37. SOX (or SARBOX)
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed
supramajority voting requirement
Sarbanes-Oxley
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


38. The employee must file a notice with the administrative law judge assigned to the original complaint __ days before filing the lawsuit.
inside director
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
annual report


39. A lawsuit a shareholder brings against an offending party on behalf of a corporation when the corporation fails to bring the lawsuit
annual report
review
derivative lawsuit
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed


40. Bank accounts
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
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations
public companies
voting trust


41. An agreement between two or more shareholders that stipulates how they will vote their shares
Sarbanes-Oxley
shareholder voting agreement
review
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


42. 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
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations
15
terms - conditions


43. If a hearing is requested - it will be held before an __ who will issue a __ and __.
preemptive rights
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
outside director
administrative law judge - decision - order


44. SOC record keeping requirements
piercing the corporate veil
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
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
preemptive rights


45. 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
officer
Any document that serves as proof of authority to pay cash or issue an electronic funds transfer.
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
piercing the corporate veil


46. Objectives of Internal Control
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
fiduciary duties
They can have their stocks delisted by the national securities exchange and associations
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


47. 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
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
shareholder voting agreement
duty of obedience
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48. Types of proceedings protected under SOX?
annual shareholders' meeting
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
board of directors
Investigations - Legal proceedings


49. What provision is enforced by the SEC only?

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50. What is the stated purpose of SOX?
proxy
The employee can file a lawsuit in federal district court
They can have their stocks delisted by the national securities exchange and associations
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