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. A panel of decision makers who are elected by the shareholders
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
cumulative voting
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
board of directors


2. What is the stated purpose of SOX?
SEC - PCAOB - FASB - IASB - AICPA - CPA - IFRS - GAAP - GAO - CRARA - PSLRA - FINRA - FCPA - OSHA - ERISA - FSG
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
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


3. Bank accounts
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations
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)
outside director


4. A member of the board of directors who is also an officer of the corporation
The person or company must present it's evidence within 20 days after it receives the complaint
interference with employment or livelihood of the informant
20
inside director


5. A requirement that a greater than majority of shares constitutes a quorum of the vote of the shareholders
derivative lawsuit
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations
supramajority voting requirement
60


6. How does this Act define 'harm'?
outside director
interference with employment or livelihood of the informant
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
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


7. What provision is enforced by the SEC only?

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8. Rights that give existing shareholders the option of subscribing to new share being issued in proportion to their current ownership interests
record date
retaliates against a whistleblower
preemptive rights
Allows a business to reconcile the cash transactions recorded


9. The company or person must present evidence within __ days after receiving notice of the complaint.
supramajority voting requirement
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
SEC - PCAOB - FASB - IASB - AICPA - CPA - IFRS - GAAP - GAO - CRARA - PSLRA - FINRA - FCPA - OSHA - ERISA - FSG
20


10. Usurping of corporate opportunity

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11. What procedures must the audit committee of a public company establish?
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
duty of obedience
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.
buy-and-sell agreement


12. 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
straight voting
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


13. SOX deadlines

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14. Special-purpose cash funds
Any company that has a class of securities registered with the Securities and Exchange Commission (SEC) under 15 U.S.C.
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed
A control for cash recevied throught the mail
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.


15. What is one of the most important controls to protect cash received in over-the-counter sales?
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)
right of first refusal
20
Cash Register


16. A date specified in corporate bylaws that determines whether a shareholder may vote at a shareholders' meeting
derivative lawsuit
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.
record date
The person or company must present it's evidence within 20 days after it receives the complaint


17. SOX generally only applies to __ - however - it's whistleblower provision also applies to company representatives.
negligence
buy-and-sell agreement
The employee can file a lawsuit in federal district court
public companies


18. Examples of complaints found not to be covered under SOX
straight voting
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
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)
The employee can file a lawsuit in federal district court


19. 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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20. The criminal provision of SOX
termination - demotion - suspension - threats - harassment
petition - Administrative Review Board - 10
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
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


21. The number of directors necessary to hold a board meeting or transact business of the board
personal liability
special shareholders' meetings
quorum
outside director


22. Employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation
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
officer
The person or company must present it's evidence within 20 days after it receives the complaint
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud


23. The employee must file a notice with the administrative law judge assigned to the original complaint __ days before filing the lawsuit.
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
board of directors
15


24. Company representative
administrative law judge - decision - order
Any officer - contractor - subcontractor - agent - or employee of a company
They can have their stocks delisted by the national securities exchange and associations
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


25. 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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26. 4 elements that must be proven to show usurping of corporate opportunity:

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27. The penalties that may be imposed under 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)
public companies
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
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.


28. A rule that says directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment
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
petition - Administrative Review Board - 10
business judgment rule
preemptive rights


29. 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
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
cumulative voting
20


30. A member of a board of directors who is not an officer of the corporation
outside director
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
administrative law judge - decision - order
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.


31. What about an employee whose complaint is based on a feeling or hunch - in the absence of any evidence?
buy-and-sell agreement
They are not protected
retaliates against a whistleblower
Sarbanes-Oxley Act


32. Under what conditions may an employee claim protection of SOX?
interference with employment or livelihood of the informant
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.
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
straight voting


33. An arrangement in which the shareholders transfer their stock certificates to a trustee who is empowered to vote the shares
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
voting trust
quorum
inside director


34. 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
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
straight voting
all employees who work for public companies as long as they qualify as a whistleblower
piercing the corporate veil


35. 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
derivative lawsuit
cumulative voting
Cash Register
shareholder voting agreement


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


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

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38. 'The employee's claim of shareholder fraud does not have to be correct.'
buy-and-sell agreement
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations


39. 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
special shareholders' meetings
annual report
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations


40. Audit committee

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41. A duty of corporate directors and officers to use care and diligence when acting on behalf of the corporation
duty of care
Investigations - Legal proceedings
dividend
inside director


42. SOX (or SARBOX)
Sarbanes-Oxley
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
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
buy-and-sell agreement


43. 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
Allows a business to reconcile the cash transactions recorded
business judgment rule
duty of obedience
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


44. An agreement between two or more shareholders that stipulates how they will vote their shares
shareholder voting agreement
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
piercing the corporate veil
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)


45. 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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46. The Board can either adopt the judge's decision as its own or __ the case itself
duty of care
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.
review
supramajority voting requirement


47. Objectives of Internal Control
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
20
The employee can file a lawsuit in federal district court
quorum


48. A distribution of profits of the corporation to shareholders
Cash Register
voting trust
dividend
review


49. Internal Complaint Procedures
60
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
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


50. Why did Congress pass SOX?
preemptive rights
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 loyalty
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders