US Securities And Exchange Commission

Question 1

What purpose does the Accounting and Auditing Enforcement Releases (AAER) serve?

Answer 1

Report the enforcement actions taken against accountants.

Question 2

When the SEC finds an accounting irregularity, what happens?

Answer 2

The SEC sends a “deficiency” letter to a registrant when an accounting irregularity is found.

Question 3

Does the SEC have legal authority to prescribe accounting standards to public companies?

Answer 3

Yes, it has the authority.

Question 4

What does the SEC strive to do?

Answer 4

Ensure that there is adequate information in the public domain before a company issues or trades securities.

Question 5

How many divisions does the SEC have?

Answer 5

Four:

(1) The Division of Corporation Finance
(2) The Division of Enforcement
(3) The Division of Trading and Markets
(4) The Division of Investment Management

Question 6

Does the SEC have the authority to penalize firms when financial statements are not in accordance with GAAP?

Answer 6

Yes, they may penalize firms.

Question 7

Define “Staff Accounting Bulletins” (SAB).

Answer 7

Bulletins that provide the SEC’s current position on technical issues.

Question 8

Define “Financial Reporting Releases” (FRR).

Answer 8

Formal pronouncements that rank the highest in authority for public companies.

Question 9

How many days after the fiscal year end of a large accelerated filer does a 10-K need to be filed?

Answer 9

Sixty days.

Question 10

What information does Management Discussion & Analysis (MD&A) provide?

Answer 10

A discussion of important aspects of the firm from the viewpoint of management.

Question 11

What does registration with the SEC require?

Answer 11

Extensive disclosures about the company, management, and the intended use of the proceeds from the issue.

Question 12

What law prohibits the bribing of foreign officials?

Answer 12

The Foreign Corrupt Practices Act of 1977.

Question 13

What does the Securities Act of 1934 do?

Answer 13

Regulates the trading of securities after they are issued and requires periodic reporting.

Question 14

How many years of balance sheet data are required by the SEC?

Answer 14

Two years are required.

Question 15

Where are the SEC formal rules found?

Answer 15

The Code of Federal Regulations.

Question 16

How many years of income statement data are required by the SEC?

Answer 16

Three years are required.

Question 17

How many years of cash flow data are required by the SEC?

Answer 17

Three years are required.

Question 18

How many years of selected financial data are required by the SEC?

Answer 18

Five years are required.

Question 19

Does the Sarbanes-Oxley Act allow auditors to complete non-audit services for clients?

Answer 19

No, the Sarbanes-Oxley Act does not allow this.

Question 20

What information does the 8-K provide?

Answer 20

Significant events affecting the company.

Question 21

Within how many days after the end of the quarter does a company need to file the 10-Q?

Answer 21

Forty days for large accelerated filers and accelerated filers; forty-five days for non-accelerated filers.

Question 22

What are the steps in the offering process?

Answer 22

Issuer, underwriter, dealer, public.

Question 23

What information does MD&A cover?

Answer 23

The firm’s financial condition, changes in financial condition, results of operations, liquidity, capital resources and operations, and indications in trends, significant events, and uncertainties.