Question 1

Which board of directors committee is charged with overseeing the financial

reporting process?
The audit committee
The compensation committee
The financial committee
The governance committee
You Answered Correctly!
This is correct. The audit committee is charged with overseeing the financial
reporting process.
Question 2
Which of the following correctly describes the Sarbanes-Oxley Act requirements
with respect to auditor rotation?
The audit firm must rotate the lead audit partner every five years.
The company being audited must rotate the audit firm every five years.
The audit firm must rotate the audit staff every five years.
The company being audited must rotate the audit committee every five
years.
This Answer is Correct
This is correct. This requirement is described in Section 201 of the Sarbanes-Oxley
Act.
Question 3
Which of the following are provisions of the Sarbanes-Oxley Act?
I. The board of directors of an issuer must appoint an audit committee.
II. Management must certify financial statements.
III. Management must provide a written report on the effectiveness of internal
control procedures within 90 days of the publication of the annual report.
IV. A public accounting firm may not audit the books of an issuer of public
securities if any officer or director of the issuer was employed by the public
accounting firm and participated in any audit activity with the issuer within one
year.
V. I, II, and IV only.
I, II, III, and IV.
II and IV only.
IV only.
This Answer is Correct
All of the listed requirements are provisions of the Sarbanes-Oxley Act.
Question 4
How entities are systematically directed and controlled refers to which of the
following?
Corporate governance
Sustainability
Agents
Internal controls

This is correct. Corporate governance refers to how entities are systematically

directed and controlled, including the oversight and obligations of the board of
directors, management, and the audit committee.
Question 5
The Sarbanes-Oxley Act has multiple sections that outline management's
responsibility regarding:
required education for chief financial officers.
 internal controls and external reporting.
long-term strategic planning.
the purchase of securities.
This Answer is Correct
The Sarbanes-Oxley Act concentrates on management's responsibility in
maintaining internal controls so that external reports become more reliable.
Question 6
Which of the following are responsibilities of the audit committee?
I. Aid in the choice of accounting methods and policies.
II. Document internal control procedures.
III. Sign quarterly and annual financial reports.
IV. Choose the auditor and approve auditor compensation.
V. Review the auditor's suggestions for improved internal control.
I, III, IV, and V only.
I, II, III, IV, and V.
I, II, and III only.
I, IV, and V only.
This Answer is Correct
The audit committee performs the following tasks:
• Reviews the company's internal control structure
• Aids in the choice of accounting methods and policies
• Reviews quarterly reports
• Chooses the auditor and approves auditor compensation
• Reviews the audit plan
• Reviews the auditor's suggestions for improved internal control
• Reviews the audit report and the audited annual report.
Question 7
The Sarbanes-Oxley Act disallows each of the following services for auditors of a
publicly traded company except for:
Human resource services.
Financial information systems design.
Tax preparation services.
Actuarial services.
This Answer is Correct
This is correct. Tax preparation services are not prohibited under the services that
the Sarbanes-Oxley Act disallows to be provided to an audit client.
Question 8
Under the Sarbanes-Oxley Act of 2002, companies are now required to
implement anti-fraud programs and controls that they evaluate on an annual
basis as part of their integrated audit. A common component of such anti-fraud
programs and controls is the effective design and implementation of codes of
ethics and conduct. Which one of the following is not a characteristic of the
operating effectiveness of a code of conduct?
The existence of a plan to communicate the code of conduct to all (or
covered) employees of the company.
Audit committee involvement and oversight of non-compliance with the
company's code of conduct.
Lack of employee training in the company's code of conduct upon hiring
and periodically thereafter.
The existence of an appropriate "hot-line" or whistle blowing line to report
any violations with the company's code of conduct.
This Answer is Correct
Lack of employee training in the company's code of conduct upon hiring and
periodically thereafter is not a characteristic of operating effectiveness of a code
of conduct.
Question 9
The CEO of American Foods has made a variety of significant investments that
have changed the firm's focus and diminished share value. One of American
Foods’ shareholders has aggressively been acquiring shares and now owns 10%
of the company. The shareholder has nominated Erik Sorenson to the board of
directors in an attempt to oversee manager actions. Although Sorenson could
ask for the manager's resignation, he prefers that the manager make choices
that enhance firm value. This type of motivation is known as:
Performance shares.
Executive stock options.
Direct intervention.
The threat of firing.
This Answer is Correct
This is correct. Sorenson can fire the manager. If shareholders are unsatisfied with
the results, they can replace board members and have an influence on who holds
manager positions.
Question 10
Which of the following is not an attribute required by the Sarbanes Oxley Act for
the financial expert who serves on the board of directors and the board's audit
committee?
An understanding of internal controls
The individual must be a CPA or CFA
An understanding of audit committee functions
The ability to assess the accounting for accruals, estimates, and reserves
This Answer is Correct
This is correct. There is no requirement that an individual who is the financial
expert is either a CPA or CFA.
Question 11
Which of the following is true regarding the board of directors?
The board of directors must act in the best interest of management.
The board of directors must establish an audit committee to oversee all
internal controls.
The board of directors must act in the best interest of the employees.
The board of directors must act in the best interest of the shareholders.
This Answer is Correct
The board of directors' primary responsibility is to act in the best interest of the
shareholders. It is not required to establish an audit committee.
Question 12
Which of the following does not have to be certified by the management of a
public company according to the Sarbanes-Oxley Act (SOX)?
Management's responsibility for the internal control system.
The financial reports have been reviewed by management.
Management has certified that the auditor has reviewed the internal
control system.
Management has had discussions with the external audit firm and the audit
committee with respect to any material internal control weaknesses.
This Answer is Correct
This is correct. Management is not responsible for certifying that the auditor has
reviewed the internal control system; the external auditor is responsible for this.
Question 13
Which of the following are responsibilities of management?
I. Aid in the choice of accounting methods and policies.
II. Document internal control procedures.
III. Sign quarterly and annual financial reports.
IV. Choose the auditor and approve auditor compensation.
V. Review the auditor's suggestions for improved internal controls.
I, II, III, and V only.
I, III, IV, and V only.
I, II, III, IV, and V.
I and IV only.
You Answered Correctly!
Management must document internal control procedures and provide a written
assessment within 90 days prior to the publication of annual reports on the
effectiveness of the internal control structure and procedures. In addition,
management must sign quarterly and annual financial reports, and the chief
executive officer must sign tax returns. The audit committee of the board of
directors, not management, chooses the auditor and approves auditor
compensation.
Question 14
The Sarbanes-Oxley Act of 2002 increased management's responsibility for
accurate financial reporting. Which of the following is not a requirement of
Section 404 of the Sarbanes-Oxley Act?
Document management's assessment of the effectiveness of the internal
control structure and procedures.
Document management's responsibility for establishing adequate internal
control policies.
Document management's responsibility to refuse to accept contracts or
business through the payment of bribes.
 Document management's responsibility for maintaining adequate internal
control policies.
You Answered Correctly!
The 1977 Foreign Corrupt Practices Act forbids companies from accepting
contracts or business through the payment of bribes to foreign governments. The
other answers are all requirements of SOX Section 404.