SOX and Corp Design

Question 1

Which Internal control model is the most widely accepted?

Answer 1

COSO

Question 2

What is the COSO definition of internal Controls?

Answer 2

Process affected by the Board of Directors,management, ad other personnel to provide reasonable assurance regarding the achievements of objectives.

Question 3

What are the classes of objectives of Internal controls?

Answer 3

Operations, reporting, and compliance (ORC)

Question 4

Name some operation objectives.

Answer 4

Improving Financial performance, productivity, quality,, innovation, and customer satisfaction Asset management.

Question 5

Name some reporting objectives

Answer 5

financial and non financial reporting. Internal and external.

Question 6

Name some Compliance Objectives

Answer 6

Tax compliance, employee relations, and environmental concerns

Question 7

What are some inherent limitations to internal controls?

Answer 7

Human judgement is faulty; failure due to breakdowns; management override; circumvented by collusion; external events

Question 8

What are the components of internal controls of the COSO environments?

Answer 8

(Controls Stop Crime) Control Environment, Risk Assessment, Control Activities, Communication, and monitoring.

Question 9

SOX Section 802 states:

Answer 9

Criminal penalties - fines , imprisonment, or both for destroying evidence with the intent to impede and federal investigation.

Question 10

What are the SOX requirements of the audit committee?

Answer 10

Composed of independent board of directors. one must be a finanical expert.They must appoint, compensate and oversee the independent auditor.

Question 11

SOX created a new oversight board called PCAOB

Answer 11

Public company accounting oversight board

Question 12

What is the PCAOB’s purpose?

Answer 12

Issues auditing standards, inspects/investigates accounting firms, enforces compliance, accounting firms must register to perform audits.

Question 13

What does SOX Section 302 require for reporting?

Answer 13

In every annual/quarterly SEC filings the CEO and CFO must certify that the financial statements are free from material misstatements; take responsibility for internal control; have reported all significant control defeciencies and frauds.

Question 14

What does SOX section 404 require in the annual report?

Answer 14

Annual report must contain a statement from the CEO or CFO: managements responsibility for internal controls over financial reports, the internal control framework used, assessment of effective functioning internal controls, registered CPA firm has also assessed the system

Question 15

What does SOX section 407 require regardng the audit committee?

Answer 15

Issuer must disclose if the audit committee has a financial expert. If not reasons must be disclosed.

Question 16

What type of information is included in the articles of incorporation?

Answer 16

Corporation’s name, number of shares of stock, address, agent’s name, owner’s names and addresses

Question 17

What type of information is included in the articles of incorporation?

Answer 17

any provision for managing the corporation and regulating affairs

Question 18

What does the board of directors do?

Answer 18

selects,removes officers; makes decisions about corporate structure; adds, repeals, ammends bylaws; initates fundamental changes; makes decisions to declare/distribute dividends; sets management compensation; Coordinates audit activities; Evaluates/manages risks.

Question 19

What are the objectives of enterprise risk managmenet (ERM)?

Answer 19

Strategies, organizational, Reporting, Compliance

Question 20

What are the components of Enterprise risk management?

Answer 20

internal environment; objective setting; event identification; risk assessment; risk response; control activities; information and communication, monitoring

Question 21

What are the limitation of Enterprise Risk Management?

Answer 21

collusion; faulty human error; cost benefit considerations; simple errors and mistakes; management override