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. If a public company fails to adopt the complaint procedures mandated by SOX what may happen?
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
They can have their stocks delisted by the national securities exchange and associations
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
business judgment rule


2. 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
dividend
administrative law judge - decision - order
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


3. To be protected by sox an employee must do one of what activities?
duty of care
terms - conditions
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct
Any company that has a class of securities registered with the Securities and Exchange Commission (SEC) under 15 U.S.C.


4. 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
derivative lawsuit
Any officer - contractor - subcontractor - agent - or employee of a company
right of first refusal
officer


5. What is one of the most important controls to protect cash received in over-the-counter sales?
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
public companies
duty of loyalty
Cash Register


6. What provision is enforced by the SEC only?

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7. Additional shares of stock distributed as a dividend
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
stock dividend
60
review


8. If OSHA investigates - it will issue findings and a preliminary order within __ days after the complaint is filed.
60
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
retaliates against a whistleblower
annual shareholders' meeting


9. SOC record keeping requirements
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
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
proxy


10. 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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11. SOX (or SARBOX)
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
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
Sarbanes-Oxley
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)


12. A rule that says directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment
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)
straight voting
business judgment rule
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct


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

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14. 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
right of first refusal
fiduciary duties
The person or company must present it's evidence within 20 days after it receives the complaint


15. Sarbanes-Oxley Act of 2002
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
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
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct


16. The employee must also service the notice on whom?
business judgment rule
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)
60
They are not protected


17. An agreement between two or more shareholders that stipulates how they will vote their shares
Any officer - contractor - subcontractor - agent - or employee of a company
shareholder voting agreement
straight voting
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


18. A duty of corporate directors and officers to use care and diligence when acting on behalf of the corporation
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
supramajority voting requirement
duty of care
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)


19. Audit committee

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20. A distribution of profits of the corporation to shareholders
shareholder voting agreement
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
dividend
quorum


21. Rights that give existing shareholders the option of subscribing to new share being issued in proportion to their current ownership interests
record date
inside director
right of first refusal
preemptive rights


22. Who signs Report for internal contro?
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
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
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.
outside director


23. 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
terms - conditions
dividend
negligence
public companies


24. Types of proceedings protected under SOX?
Investigations - Legal proceedings
Any document that serves as proof of authority to pay cash or issue an electronic funds transfer.
board of directors
interference with employment or livelihood of the informant


25. The employee must file a notice with the administrative law judge assigned to the original complaint __ days before filing the lawsuit.
outside director
preemptive rights
duty of care
15


26. Bank reconcilation steps
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
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
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.
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.


27. An arrangement in which the shareholders transfer their stock certificates to a trustee who is empowered to vote the shares
voting trust
30
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.
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication


28. 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
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
interference with employment or livelihood of the informant
petition - Administrative Review Board - 10
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed


29. Under what conditions may an employee claim protection of SOX?
buy-and-sell agreement
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
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
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct


30. What procedures must the audit committee of a public company establish?
shareholder voting agreement
Any company that has a class of securities registered with the Securities and Exchange Commission (SEC) under 15 U.S.C.
supramajority voting requirement
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


31. Internal Complaint Procedures
shareholder voting agreement
straight voting
review
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


32. Objectives of Internal Control
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
supramajority voting requirement
voting trust
cumulative voting


33. The SEC regulations to not require companies to follow what?
preemptive rights
personal liability
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)
buy-and-sell agreement


34. 4 elements that must be proven to show usurping of corporate opportunity:

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


36. SOX states that __ - __ - __ - __ and __ all constitute retaliation.
negligence
termination - demotion - suspension - threats - harassment
supramajority voting requirement
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.


37. Special-purpose cash funds
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
derivative lawsuit
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)
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed


38. The number of directors necessary to hold a board meeting or transact business of the board
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
Any document that serves as proof of authority to pay cash or issue an electronic funds transfer.
60
quorum


39. Examples of complaints found not to be covered under SOX
supramajority voting requirement
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)
15


40. What about an employee whose complaint is based on a feeling or hunch - in the absence of any evidence?
They are not protected
terms - conditions
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)
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)


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
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed
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
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


42. 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
special shareholders' meetings
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
review


43. Remittance Advice
all employees who work for public companies as long as they qualify as a whistleblower
A control for cash recevied throught the mail
piercing the corporate veil
personal liability


44. A member of a board of directors who is not an officer of the corporation
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
outside director
annual report
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. 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
duty of loyalty
straight voting
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


46. Company representative
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
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
dividend
Any officer - contractor - subcontractor - agent - or employee of a company


47. 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
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct
Sarbanes-Oxley Act
They can have their stocks delisted by the national securities exchange and associations
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.


48. Sox important Organizations that you must know
They can have their stocks delisted by the national securities exchange and associations
Allows a business to reconcile the cash transactions recorded
board of directors
SEC - PCAOB - FASB - IASB - AICPA - CPA - IFRS - GAAP - GAO - CRARA - PSLRA - FINRA - FCPA - OSHA - ERISA - FSG


49. Either party may object to these findings and request a hearing within __ days after receiving the finding and order.
30
The person or company must present it's evidence within 20 days after it receives the complaint
fiduciary duties
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud


50. Employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation
officer
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
30
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.