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4/23/2024
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Course 161001- Sarbanes-Oxley Act of 2002
  Final Exam
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161001v - Sarbanes-Oxley Act of 2002

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Auditing
8 CPE Credit Hours
4/23/2024
Final Exam
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Read 'Chapter 1: Title I - Public Company Accounting Oversight Board' & answer the following question(s):
1. The Public Accounting Oversight Board will consist of two members who must be or have been certified public accountants.
2. The Board members will serve on a part time basis.
3. The Board shall establish, or adopt, by rule, "auditing, quality control, ethics, independence, and other standards relating to the preparation of audit reports for issuers;"
4. Annual quality reviews must be conducted for firms that regularly provide audit reports for more than 100 issuers. Other accounting firms must be reviewed not less than every three years.
5. The Board shall also establish by rule a reasonable "annual accounting support fee" as may be necessary or appropriate to maintain the Board. This fee will be assessed on issuers only.
Read 'Chapter 2: Title II - Auditor Independence' & answer the following question(s):
6. Bookkeeping or other services related to the accounting records or financial statements of an audit client are not considered prohibited activities for auditing firms.
7. Internal audit outsourcing services are considered prohibited activities for auditing firms to perform for an issuer for whom the audit firm is contemporaneously performing an audit.
8. Financial information systems design and implementation are considered prohibited activities for auditing firms to perform for an issuer for whom the audit firm is contemporaneously performing an audit.
9. An auditor may engage in non-audit services for an issuer if the activity is approved in advance by the audit committee of the issuer.
10. The pre-approval requirement for non-audit services may be waived if the aggregate amount of all non-audit services provided constitutes not more than 10% of the total amount of revenues paid by the issuer to the auditor during the fiscal year in which the non-audit services are provided.
11. The Act requires the lead (or coordinating) audit partner to rotate off the audit every three years.
12. The accounting firm must report to the audit committee all "critical accounting policies and practices to be used…all alternative treatments of financial information within [GAAP] that have been discussed with management…ramifications of the use of such alternative disclosures and treatments, and the treatment preferred" by the firm.
13. The CEO, Controller, CFO, Chief Accounting Officer or person in an equivalent position for the issuer cannot have been employed by the company's audit firm during the 1-year period preceding the audit.
14. The Act requires the mandatory rotation of public accounting firms.
15. The Act requires the GAO to conduct a study and review of the potential effects of requiring the mandatory rotation of registered public accounting firms.
Read 'Chapter 3: Title III - Corporate Responsibility' & answer the following question(s):
16. The Act requires each member of the audit committee to be a member of the board of directors of the issuer, and to be otherwise independent.
17. The Act suggests that each member of the audit committee be a member of the board of directors of the issuer.
18. The audit committee shall establish procedures for the "receipt, retention, and treatment of complaints" received by the issuer regarding accounting, internal controls, and auditing.
19. "Independent" as defined for audit committee members is not receiving, other than for service on the board, any consulting, advisory, or other compensatory fee from the issuer, and not being an affiliated person of the issuer, or any subsidiary thereof.
20. Per Sec. 302, the signing officers are responsible for establishing and maintaining internal controls.
21. The CEO and CFO of the issuer of annual and quarterly reports must certify that they have reviewed the report and that said report does not contain any material misstatements (or omission of statements), and that the financial statements and information present in all material respects the financial condition and results of operation of the issuer for the period.
22. The CEO and CFO shall forfeit certain bonuses and profits if the issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer as a result of misconduct.
Read 'Chapter 4: Title IV - Enhanced Financial Disclosures' & answer the following question(s):
23. the SEC shall perform a study and report on the filings and disclosures of issuers to determine the extent of off-balance sheet transactions (including assets, liabilities, leases, losses and the use of special purpose entities); and to determine whether generally accepted accounting rules result in financial statements of issuers reflecting the economics of such off-balance sheet transactions to investors in a transparent fashion.
24. The SEC shall issue rules providing that pro forma financial information must be presented so as not to "contain an untrue statement" or omit to state a material fact necessary in order to make the pro forma financial information not misleading.
25. Consumer credit companies may make home improvement and consumer credit loans and issue credit cards to its directors and executive officers if it is done in the ordinary course of business on the same terms and conditions made to the general public.
26. Generally, it will be lawful for an issuer to extend credit to any director or executive officer.
27. Sec. 404 gives an option to each issuer to include an internal control report with each annual report.
28. Sec. 404 requires the annual report of each issuer to contain an internal control report.
Read 'Chapter 5: Title V - Analyst Conflicts of Interest' & answer the following question(s):
Read 'Chapter 6: Title VI - Commission Resources and Authority' & answer the following question(s):
Read 'Chapter 7: Title VII - Studies and Reports' & answer the following question(s):
29. The GAO shall conduct a study of the increasing consolidation of public accounting firms since 1989.
Read 'Chapter 8: Title VIII - Corporate and Criminal Fraud Accountability' & answer the following question(s):
30. An accountant shall maintain all audit or review workpapers for a period of 10 years from the end of the fiscal period in which the audit or review was concluded.
31. An accountant shall maintain all audit or review workpapers for a period of 5 years from the end of the fiscal period in which the audit or review was concluded.
32. The statute of limitations for securities fraud was extended to the earlier of five years from the fraud, or two years from the discovery of the fraud.
33. The Act extends the statute of limitations for securities fraud to the earlier of three years from the fraud, or one year from the discovery of the fraud.
34. The Act extends "whistleblower protection" to employees of issuers and accounting firms that would prohibit the employer from taking certain actions against employees who lawfully disclose private employer information to parties in a judicial proceeding involving fraud.
36. "Whistle blower" relief includes reinstatement to the same seniority status, back pay with interest, and compensation for special damages including attorney fees.
Read 'Chapter 9: Title IX - White-Collar Crime Penalty Enhancement' & answer the following question(s):
35. The maximum penalty for wire fraud increased to 20 years.
37. The maximum penalty for wire fraud increased to 5 years.
38. The maximum penalty for violations of the Employee Retirement Income Security Act of 1974 increased to a fine not more than $100,000 or imprisonment not more than ten years, or both; except that in the case of such violation by an organization other than an individual (i.e. violation by a corporation, partnership, joint venture) the fine imposed upon such person shall be a fine not exceeding $500,000
39. Financial Statements filed with the SEC must be certified by the CEO and CFO. The certification must state that the financial statements and disclosures fully comply with provisions of the Securities Exchange Act and that they fairly present, in all material respects, the operations and financial condition of the issuer. Maximum penalties for willful and knowing violations of this section are a fine of not more than $5,000,000 and/or imprisonment of up to 20
Read 'Chapter 10: Title X - Corporate Tax Returns' & answer the following question(s):
Read 'Chapter 11: Title XI - Corporate Fraud and Accountability' & answer the following question(s):
40. During the course of a lawful investigation, the SEC may petition a Federal district court for a temporary order requiring an issuer to escrow extraordinary payments to directors, officers, partners, controlling persons, agents, or employees in an interest bearing account for 45 days.
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