Deck 9: The Securities and Exchange Commission and Sarbanes-Oxley

Question 1

SEC commissioners must be appointed by the President and confirmed by the Senate.

Answer 1

True

Question 2

A reduction of the deadline after close of the fiscal year for the filing of annual reports might increase the accuracy with which companies compile reports.

Answer 2

False

Question 3

Sarbanes-Oxley encourages a firm to provide both auditing and consulting activities for the same firm.

Answer 3

False

Question 4

Which government entity oversees the Public Company Accounting Oversight Board?

A)Federal Trade Commission FTC)
B)Department of Treasury
C)Securities Exchange Commission SEC)
D)Federal Reserve Bank
E)None of the above.

Question 5

Which of the following is not one of the four divisions of the SEC?

A)Division of Corporation Finance
B)Division of Securities Regulation
C)Division of Enforcement
D)Division of Trading and Markets
E)Division of Investment Management

Question 6

Since March 2004, the SEC requires 8-Ks to be filed within 4, instead of the previous 5 to 15, business days after the triggering event.

Question 7

All of these are characteristics of the NYSE except:

A)Companies have a majority of independent directors.
B)Nominating committee of the board must be composed entirely of independent directors.
C)Committee will have an increased authority and responsibility to hire and fire the auditing firm.
D)All are characteristics of the NYSE.
E)None are characteristics of the NYSE.

Question 8

Which of the following is not a problem area of the SEC?

A)Reporting
B)Employee Turnover
C)Punishment
D)Market Efficiency
E)Resources

Question 9

The penalties for committing a white-collar crime were generally increased from a maximum of 5 years imprisonment to 20 years.

Question 10

The SEC can file criminal charges.

Question 11

Is the Sarbanes-Oxley Act a success or a failure? Which of the following answers illustrate how difficult it is to determine the Act's level of success?

A)We don't know how much fraud would have been committed had the Act not been passed.
B)We can't easily attribute any increase in investor confidence directly to the Act.
C)We can't reliably associate any increase in the firm's value as a result of the Act.
D)All of the above.
E)None of the above.

Question 12

As it is often the company that gets fined by the SEC, ultimately those fines are paid by the shareholders because it comes out of the companies profits.

Question 13

The Sarbanes-Oxley Act created a new oversight body to regulate auditors, and reduced punishments for corporate white-collar crime which in the end innocent shareholders would have to pay for.

Question 14

The following is true about the Division of Enforcement, EXCEPT:

A)Each year the SEC prosecutes between 4,000 and 5,000 individuals and companies.
B)Most prosecutions are settled out of court.
C)Violations mainly involve accounting fraud, insider trading, and deception regarding securities.
D)All of the above are true.
E)Both b and c are not true.