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1.
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Prior to the SOX ACT of 2002, the CFO was keen on
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  Improving his or her objectivity and independence
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Using aggressive accounting and reporting practices
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Fully disclosing all accounting irregularities
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Limiting the use of special-purpose entities
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2.
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The accounting technique made infamous by Enron (and the main reason for its downfall) was its use of ____________________ to move debt off the balance sheet.
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Special-purpose entities
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Revenue accounting
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Expense accounting
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Channel stuffing
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3.
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The “big five” accounting firm that destroyed documents to cover up their irregular accounting practices was
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Ernest & Young
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Price-Waterhouse Coopers
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Arthur Anderson
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KPMG
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4.
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Which of the following is NOT an inappropriate earnings management technique?
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Deliberately overstating one-time restructuring charges
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Improper write-offs
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Restating financial statements
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Over-accruing charges for items such as sales returns
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5.
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____________________ is NOT one of the leading causes for financial restatements.
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Revenue recognition
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A switch in inventory valuation
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Equity accounting
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Reserves, accruals, and contingencies
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6.
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_________________________ is NOT one of the premises behind expensing options. .
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Keep the companies' profits and stock prices as high as possible.
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Make the company's real costs and earnings more apparent
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Clarify the company's accounting
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Boost the investor's confidence
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7.
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FASB No. 123R requires that the cost resulting from all share-based payment transactions be recognized in the financial statements using the ___________________ as the measurement of cost.
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Grant-date fair value
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Exercise date book value
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Adoption date fair value
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Measurement date intrinsic value
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8.
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FASB No. 123R (ASC 718-10-05) provides that fair value be measured based on a (an)
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Intrinsic value
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Book value
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Observable value
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Market value
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9.
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FASB No. 123R eliminates FASB No. 123’s use of the _________________ for valuing equity awards that was permitted under FASB No. 123.
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Fair value method
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Intrinsic value method
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Current value method
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Discount cash flow method
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10.
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FASB No. 123R
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Prefers use of any one of three particular methods as the valuation techniques of choice
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Does not specify a preference for a particular valuation technique or model in estimating the fair value of employee share options and similar instruments
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Requires an entity to use the expected cash flows method as defined by Concept Statement No. 7
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Is an option valuation principle
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11.
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In anticipation of the FASB’s statement (FASB 123R), many companies had already started using other forms of compensation, such as
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Restricted stock
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Dividend repurchase plan
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Futures
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Derivatives
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12.
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Which of the following statements is FALSE with restricted stock?
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Employee cannot sell stock for a specified period of time
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Employee will receive compensation in cash, stock, or a combination of cash and stock at some future date
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Employee may forfeit the shares if they leave employer
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Awards may be linked to financial goals
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13.
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The grant date is the date at which
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Share options are exercisable
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An employer and an employee reach a mutual understanding of the key terms and conditions of a share-based payment award
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An employer receives a federal government grant for funding of a stock option program
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Share options are to expire
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14.
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Which of the following is FALSE regarding restrictive stock?
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Employee cannot sell stock for a specified period of time
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It creates much of an impact on earnings have replaced stock options
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Employee may forfeit the shares if they leave employer
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Awards may be linked to financial goals. Some firms grant key employees stock appreciation rights instead of stock options
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15.
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The new rules by NYSE for corporate governance would
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Give management stronger governance standards
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Not require investor approval on any equity-based pay plans
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Weaken the control management currently employs
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Allow brokers to vote on equity-based pay plans without client approval
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16.
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The rule change that will prohibit research analysts from being supervised by the investment banking is:
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Promises of favorable research
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Limitations on relationships and communication
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Analyst compensation
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Firm compensation
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17.
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The Securities Exchange Commission (SEC) rule requires company insiders to report the details of their stock trades more quickly for all the following EXCEPT:
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High ranking executives
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Outside staff attorneys
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Directors
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Major shareholders
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18.
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Which of the following statements is false? Detailed quarterly and annual statements have to be filed more quickly with SEC because it
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Reduce the risk that companies will issue rosy news releases about their earnings
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Reduce creative accounting
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Report details of their stock trades
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Reveal problems important to investors
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19.
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Which of the following is NOT a proposal made by the Association for Investment Management and Research (AIMR)?
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Corporations refrain from making accusations against research analysts in the media
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Fund managers be prohibited from threatening to reduce their business with a brokerage to secure a more favorable rating
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Corporations are allowed to make accusations against research analysts in the media.
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News media should establish policies for disclosure of conflict of interest.
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20.
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Strong governance in compliance with the SOX Act will
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Give better tools to empower ethical behavior
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Increase the control that management enjoyed at many companies prior to 2002
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Strengthen the dependent affiliations of the board members with management and outsiders
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Require that all equity-based pay plans be approved by the CEO and CFO.
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21.
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Which of the following is NOT one of the provisions of the Sarbanes-Oxley Act of 2002?
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The penalties (i.e., prison time and fines) for corporate fraud were increased.
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At least one audit committee member should be a financial expert.
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The company's auditors assume responsibility for the financial statements.
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The CEO and CFO must certify that the financial statements fairly present the company's operations and financial condition.
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22.
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Under the Sarbanes-Oxley Act any public appearances by analysts on television or radio interviews must be
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Limited to topics of their firms stock position
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Disclosed to better inform investors
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Compensated by the TV or radio station
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Approved by the Federal Communication Agency
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23.
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______________________ is NOT an objective of the Sarbanes-Oxley Act.
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Closing brokerages engaging in unethical practices
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Quality and transparency of financial reporting
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Independent audit
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Accounting services for public companies
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24.
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The provisions of the Sarbanes-Oxley Act apply to which of the following?
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All companies in the United States
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Public companies only
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Private companies only
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Private and public partnerships only
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25.
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The Sarbanes-Oxley Act of 2002 requires
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All public companies to issue an internal control report
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All public companies to define adequate internal controls
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The auditor of public companies to design effective internal controls over financial reporting
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Provides for all three of the above.
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26.
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Technologies that can assist with corporate governance and compliance include
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Business intelligence
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Location based services
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Financial and accounting software
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Enterprise resource planning
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27.
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The most obvious solution to the corporate governance and compliance problem can be facilitated by
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Establishing financial constraints
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Increase the number of trained analysts
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Implementing proper technology, planning and monitoring
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Establishing global corporations
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28.
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The main problem for companies to implement SOX is the documentation and
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Securing safe storage areas
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Internal control and retention of documents
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Managerial assessment
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Real time disclosure
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29.
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Sarbanes-Oxley requires auditors of a public company to attest to management’s report on the effectiveness of internal control over financial reporting. Which of the following reports options is available to the auditor?
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The auditor must issue two separate reports
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The auditor must issue a combined report
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The auditor may issue either two separate reports or may issue a combined report
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There is no guidance on what type of report to issue in this instance
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30.
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The Auditing Standard No. 5 highlights the concept of a _____________ deficiency in internal control over financial reporting
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Statistical
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Material
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Significant
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Conservative
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31.
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Which of the following statements is TRUE of a public company’s financial statements?
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Sarbanes-Oxley requires the CEO only to certify the financial statements
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Sarbanes-Oxley requires the CFO only to certify the financial statements
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Sarbanes-Oxley requires the CEO and CFO to certify the financial statements
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Sarbanes-Oxley neither requires the CEO nor the CFO to certify the financial statements
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32.
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Which of the following is NOT true regarding good governance?
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To avoid conflicts of interest, a company's board of directors should include a substantial majority of independent directors--ôindependentö meaning that directors do not have financial or close personal ties to the company or its executives.
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Companies should base executive compensation plans on pay for performance and do not have to provide full disclosure of these plans.
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A company's audit, nominating, and compensation committees should consist entirely of independent directors.
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A board should obtain shareholder approval for any actions that could significantly affect the relationship between the board and shareholders, including the adoption of anti-takeover measures such as ôpoison pills.ö
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33.
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Basic indicators used to measure corporate social responsibility according to Business in the Community do NOT include
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Workforce profiles by gender, race, disability, and age
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Energy consumption, water usage, solid waste produced, co/greenhouse gas
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Business intelligence, document and e-mail management, business process management
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Customer complaints, advertising complaints, upheld cases of anti-competitive behavior.
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34.
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Corporate social responsibility that is positive includes
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Associating with suppliers and contractors that don't share your ethical values
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Incurring immediate costs to the entity.
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Working in isolation
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Avoiding public interest groups
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35.
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Financial managers/management accountants are obligated to maintain the highest standards of ethical conduct. Accordingly, the IMA Code of Ethics explicitly requires that they
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Obtain sufficient competent evidence when expressing an opinion
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Do not condone violations by others
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Comply with generally accepted auditing standards
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Adhere to generally accepted accounting principles
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36.
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In accordance with Statements on Management Accounting Number 1C, Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management, a management accountant who fails to perform professional duties in accordance with relevant standards is acting contrary to which one of the following standards?
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Competency
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Confidentiality
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Integrity
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Objectivity
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37.
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The IMA Code of Ethics includes a competence standard, which requires the financial manager/ management accountant to
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Report information, whether favorable or unfavorable
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Develop his/her professional proficiency on a continual basis
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Discuss ethical conflicts and possible courses of action with an unbiased counselor
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Discuss, with subordinates, their responsibilities regarding the disclosure of information about the firm
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38.
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The IMA Code of Ethics requires a financial manager/management accountant to follow the established policies of the organization when faced with an ethical conflict. If these policies do not resolve the conflict, the financial manager/management accountant should
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Consult the board of directors immediately
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Discuss the problem with the immediate superior if (s)he is involved in the conflict
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Communicate the problem to authorities outside the organization
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Contact the next higher managerial level if initial presentation to the immediate superior does not resolve the conflict
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39.
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Sarbanes-Oxley requires auditors of public companies to maintain audit working papers for what period of time?
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Not less than 7 years
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Not less than 3 years
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Not less than 5 years
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No more than 5 years
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40.
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Quality control standard shall NOT include
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Monitoring professional ethics
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Six sigma principles
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Consultation on accounting and auditing questions
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Supervision of audit work
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41.
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Foreign public accounting firms that furnish audit reports are
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Not subject to the SOX Act requirements
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Subject to the jurisdiction of Federal and State courts without an additional provisions
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Subject to the SOX Act the same as U.S. Public Accounting Firms with additional provisions
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Subject to AICPA
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42.
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Which of the following statements is correct?
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Non-audit services that are not prohibited by Sarbanes-Oxley or the SEC rules must be approved by management of the client
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Non-audit services that are not prohibited by Sarbanes-Oxley or the SEC rules must be approved by the company's audit committee
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Non-audit services that are not prohibited by Sarbanes-Oxley or the SEC rules must be approved by staff of the PCAOB
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Non-audit services that are not prohibited by Sarbanes-Oxley or the SEC rules must be approved by staff of the PCAOB and the SEC
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43.
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The CEO, controller, CFO, chief accounting officer or person in an equivalent position cannot have been employed by the company’s audit firm during
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The 4th month period preceding the audit
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The 6th month period preceding the audit
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The 9th month period preceding the audit
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The 12th month period preceding the audit
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44.
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Public company audit committees are NOT responsible for
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Prohibiting the listing of any security of an issuer not in compliance with SOX
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Certifying financial statements.
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Providing for an opportunity to cure any defects
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The appointment, compensation, and oversight of the work of any registered public accounting firm
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45.
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__________________ addresses “Corporate Responsibility for Financial Reports.”
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Section 906
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Section 404
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Section 302
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Section 101
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46.
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Inside traders during pension fund blackouts prohibit all the following EXCEPT
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The executive officers from purchasing any security of the issuer
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The director from purchasing or selling any security that is exempt
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The executive officers to sell or trade any security of the issuer
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Any profits resulting from sales in violation of Section 306 shall inure to and be recoverable by the issuerö
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47.
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Disclosures of transactions are limited to and required by
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Financial analysts of the company
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Minority stockholders
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Officers, principal stockholders, and directors
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Corporate attorneys
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48.
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The SOX Act requires each annual report of an issuer to contain a(n)
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Market value report
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Internal control report
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Cost report
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Conference call report
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49.
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Tampering with a record or otherwise impeding an official proceeding by altering, destroying, mutilating, or concealing records is subject to
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Up to 20 years in prison and a fine
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Imprisonment of 15 years
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Fine and imprisonment of 18 years
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Up to 10 years in prison and a fine
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50.
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Brokers and dealers are NOT barred from association with an entity that engages in
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Insurance activities
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Enrolled agents
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Banking and savings association activities
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Credit union activities
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51.
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The Comptroller General of the United States is NOT empowered to conduct studies to
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Determine solutions to increase competition and the number of firms capable of providing audit services
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Determine the problems that have resulted in limiting competition among public accounting firms
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Submit a report to the SEC
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Determine to what extent federal or state regulations encourages competition among public accounting firms
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52.
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Criminal penalties have been added by amendment for all the following EXCEPT
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Destruction of corporate audit records
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Diminish or relieve any person of their duty or obligation imposed by federal or state law
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Alteration or mutilation of documents or records
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Falsifying or concealing any document or record with intent to impede and obstruct an investigation
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53.
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Offenses relating to the obstruction of justice do NOT apply to
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Destroying or altering physical evidence
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Number of victims adversely involved is less than 10
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Abuse of a position of trust
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Abuse of special skills
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54.
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An employee discharged for whistle blowing is entitled to compensation damages. This does NOT include
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Reinstatement with the same seniority status
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Punitive and defamation damages
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Backup pay with interest
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Compensation for litigation, attorney fees, and expert witness fees
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55.
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Criminal penalties for mail and wire fraud have been increased by amendment from five (5) years to
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20 years
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10 years
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15 years
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25 years
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