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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. Remittance Advice
proxy
A control for cash recevied throught the mail
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
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

2. 4 elements that must be proven to show usurping of corporate opportunity:

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3. A distribution of profits of the corporation to shareholders
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
dividend
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud
duty of loyalty

4. 'The employee's claim of shareholder fraud does not have to be correct.'
inside director
A control for cash recevied throught the mail
derivative lawsuit
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud

5. 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
Sarbanes-Oxley Act
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
shareholder voting agreement
They are not protected

6. Voucher
supramajority voting requirement
20
A control for cash recevied throught the mail
Any document that serves as proof of authority to pay cash or issue an electronic funds transfer.

7. Why did Congress pass SOX?
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud
SEC - PCAOB - FASB - IASB - AICPA - CPA - IFRS - GAAP - GAO - CRARA - PSLRA - FINRA - FCPA - OSHA - ERISA - FSG
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
all employees who work for public companies as long as they qualify as a whistleblower

8. A date specified in corporate bylaws that determines whether a shareholder may vote at a shareholders' meeting
They can have their stocks delisted by the national securities exchange and associations
record date
proxy
duty of obedience

9. A panel of decision makers who are elected by the shareholders
30
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
board of directors
negligence

10. The Board can either adopt the judge's decision as its own or __ the case itself
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders
proxy
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.
review

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

12. The duties of obedience - care - and loyalty owed by directors and officers to their corporation and its shareholders
fiduciary duties
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
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
The employee only needed to show that he or she had a reasonable belief that the conduct constituted fraud

13. The number of directors necessary to hold a board meeting or transact business of the board
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)
20
quorum
shareholder voting agreement

14. Types of proceedings protected under SOX?
Any officer - contractor - subcontractor - agent - or employee of a company
right of first refusal
Investigations - Legal proceedings
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. 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
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)
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

16. Objectives of Internal Control
Assets are Safeguarded and used for business purposes - Business information is Accurate - Employees comply with Laws and Regulations
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
officer
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

17. The criminal provision of SOX
The employee can file a lawsuit in federal district court
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
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
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)

18. If a hearing is requested - it will be held before an __ who will issue a __ and __.
administrative law judge - decision - order
special shareholders' meetings
stock dividend
petition - Administrative Review Board - 10

19. A lawsuit a shareholder brings against an offending party on behalf of a corporation when the corporation fails to bring the lawsuit
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.
public companies
annual report
derivative lawsuit

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

21. Audit committee

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22. Company representative
Any officer - contractor - subcontractor - agent - or employee of a company
public companies
dividend
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed

23. Failure of a corporate director or officer to exercise the duty of care while conducting the corporation's business
negligence
piercing the corporate veil
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
Providing information about conduct he or she reasonably believes violates the federal laws - SEC regulations - or federal laws against shareholder fraud

24. 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
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)
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
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

25. What new employee right was created by SOX?
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
annual shareholders' meeting
stock dividend

26. To be protected by sox an employee must do one of what activities?
administrative law judge - decision - order
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct
Any document that serves as proof of authority to pay cash or issue an electronic funds transfer.
supramajority voting requirement

27. The criminal provision could apply to anyone who ____________ - whether or not the perpetrator works for or has any association with a public company
officer
Sarbanes-Oxley Act
retaliates against a whistleblower
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.

28. A requirement that a greater than majority of shares constitutes a quorum of the vote of the shareholders
piercing the corporate veil
supramajority voting requirement
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.

29. 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
piercing the corporate veil
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
Help control cash by reduicng the amount of cash on hand and facilitating the transfer of cash between businesses and locations

30. Voucher System
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.
negligence
supramajority voting requirement
review

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

32. Personal liability provision
right of first refusal
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 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
quorum

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

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34. The company or person must present evidence within __ days after receiving notice of the complaint.
cumulative voting
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct
all employees who work for public companies as long as they qualify as a whistleblower
20

35. 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
proxy
review
inside director

36. What procedures must the audit committee of a public company establish?
quorum
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
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
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

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

38. Who signs Report for internal contro?
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.
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.
Sarbanes-Oxley

39. SOX states that __ - __ - __ - __ and __ all constitute retaliation.
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)
termination - demotion - suspension - threats - harassment
In the wake of corporate scandals involving WorldCom - Enron - and other large companies accused of defrauding shareholders

40. 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
30
straight voting
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)
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct

41. What employees are protected under SOX?
The person or company must present it's evidence within 20 days after it receives the complaint
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
all employees who work for public companies as long as they qualify as a whistleblower
Any company that has a class of securities registered with the Securities and Exchange Commission (SEC) under 15 U.S.C.

42. Examples of complaints found not to be covered under SOX
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.
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)
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
Make a complaint to specific groups or people about certain types of misconduct - Participate in certain types of proceedings relating to shareholding misconduct

43. SOX generally only applies to __ - however - it's whistleblower provision also applies to company representatives.
public companies
Control environment - Risk assessment - Control procedures - Monitoring - Information and communication
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
derivative lawsuit

44. Bank reconcilation
SEC - PCAOB - FASB - IASB - AICPA - CPA - IFRS - GAAP - GAO - CRARA - PSLRA - FINRA - FCPA - OSHA - ERISA - FSG
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.
termination - demotion - suspension - threats - harassment
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

45. The employee must file a notice with the administrative law judge assigned to the original complaint __ days before filing the lawsuit.
15
The employee can file a lawsuit in federal district court
Sarbanes-Oxley
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed

46. A rule that says directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment
business judgment rule
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
all employees who work for public companies as long as they qualify as a whistleblower
administrative law judge - decision - order

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
piercing the corporate veil
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
dividend
Set of procedures for authorizing and recording liabilities and cash payments. It may be either manual or computerized.

48. 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
inside director
proxy
Any document that serves as proof of authority to pay cash or issue an electronic funds transfer.
outside director

49. Public company
The employee can file a lawsuit in federal district court
Petty Cash Fund or travel funds are used by businesses to meet specific needs. Cashing a check for the amount of cash needed
interference with employment or livelihood of the informant
Any company that has a class of securities registered with the Securities and Exchange Commission (SEC) under 15 U.S.C.

50. SOX creates __ for company representatives.
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
proxy
personal liability
terms - conditions

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Sarbanes Oxley Act: SOX Corporate Governance

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