Deck 6: Legal, Regulatory, and Professional Environment

Question 1

The First Amendment provides that a person cannot be compelled to provide incriminating information against himself in a criminal case.

Answer 1

False

Question 2

The Sarbanes-Oxley Act mandates that each member of a company's audit committee must be a member of its board of directors and must otherwise be independent.

Answer 2

True

Question 3

If the victims or others with a stake in the outcome of a fraud trial are not satisfied with the results of the criminal justice system, they may pursue their claim through the civil justice system.

Answer 3

True

Question 4

As long as a nonpublic entity is conducting the interview, an employee does not have the right to have a lawyer present during the interview.

Question 5

The Fourth Amendment prohibits unreasonable searches and seizures.

Question 6

The ______ Amendment provides that a person cannot be compelled to provide incriminating information against himself or herself in a criminal case.

A) Fifth
B) Fourth
C) Sixth
D) Fourteenth

Question 7

In addition to the criminal and civil justice systems, regulatory agencies also play an important role in monitoring illegal activities and pursuing those responsible.

Question 8

Probable cause is the standard by which law enforcement may make an arrest, conduct a personal or property search, or obtain a warrant.

Question 9

Subsequent to the passage of the Sarbanes-Oxley Act of 2002, the auditing of public companies became the responsibility of the newly created American Institute of CPAs AICPA.

Question 10

Because employers do not have the right to place employees in a custodial setting, an employee has limited Fifth Amendment rights.

Question 11

Section 404 of SOX recommends, but does not require, the company's external auditors to attest to and issue a report on management's assessment of internal control.

Question 12

The Sarbanes-Oxley Act of 2002 was signed into law on July 30, 2002 to address corporate governance and accountability as well as public accounting responsibilities in improving the quality, reliability, integrity, and transparency of financial reports.

Question 13

SOX also makes it unlawful for any officer or director of a public company to take any action to fraudulently influence, coerce, manipulate, or mislead an auditor in the performance of an audit of the company's financial statements.

Question 14

The ________ Amendment prohibits unreasonable searches and seizures.

A) Fifth
B) Fourth
C) Sixth
D) Fourteenth

Question 15

The PCAOB is charged with overseeing public company audits, setting audit standards, and investigating acts of noncompliance by auditors or audit firms.

Question 16

Anyone in a public park, parking lot, or mall may be videotaped without violating any laws as long as no audio of the target is recorded.

Question 17

Generally, evidence is admissible in court if it is relevant, its probative value outweighs any prejudicial effects, and it is trustworthy.

Question 18

In the criminal justice system, individuals can be named as defendants, but businesses and other organizations may not be prosecuted.

Question 19

Fraud may only be prosecuted criminally.

Question 20

The Twentieth Amendment entitles a person to due process of law and equal protections under the Law.

Question 21

Which of the following is not a responsibility of the PCAOB?

A) Registering public accounting firms that audit publicly traded companies.
B) Inspecting registered public accounting firms.
C) Converging GAAP standards with IFRS standards.
D) Enforcing compliance with the Sarbanes-Oxley Act.

Question 22

Legal privileges are protections against certain types of testimony. Which of the following is not a legal privilege?

A) Attorney-client privilege
B) Librarian-patron privilege
C) Attorney work-product privilege
D) Physician-patient privilege

Question 23

Which of the following is not a major form of negotiated settlements in a civil trial?

A) out-of-court settlements
B) majority jury vote
C) arbitration
D) mediation

Question 24

PCAOB Auditing Standard No. 3 AS3, Audit Documentation, requires that audit engagement documentation should include a list of all EXCEPT:

A)significant fraud risk factors.
B)the auditor’s response.
C)the results of the auditor’s related procedures.
D)List of the internal controls.

Question 25

The Miranda warnings consist of everything but the following:

A) The interviewee has a right to remain silent.
B) The interviewee has a right to an attorney.
C) The interviewee's answers may NOT be used against him.
D) If the interviewee cannot afford an attorney, one will be provided at no cost.

Question 26

Members of the PCAOB are appointed by the:

A) AICPA
B) SEC
C) FASB
D) IASB

Question 27

In September 2004, the Committee of Sponsoring Organizations COSO of the Treadway Commission released their _______ framework, recognized by the SEC as the critical methodology for Sarbanes-Oxley.

A) ERM
B) IFRS
C) XBRL
D) XML

Question 28

Which of the following statements is not a major financial statement?

A) Income Statement
B) Balance Sheet
C) Statement of Cash Flows
D) Sales Budget

Question 29

The AICPA has the authority to set standards and make rules in all the following areas EXCEPT:

A) Auditing standards for nonpublic companies.
B) Auditing standards for public companies.
C) Code of professional conduct.
D) Compilation and review standards.

Question 30

Generally, investigators can obtain documentary evidence using all approaches EXCEPT:

A) theft.
B) voluntary consent.
C) subpoena.
D) search warrant.

Question 31

Which of the following is not a major provision in the Sarbanes-Oxley Act of 2002?

A) Creating an independent regulatory framework for the accounting profession.
B) Enhancing the quality and transparency of financial reports.
C) Revising the process of establishing new financial accounting standards.
D) Establishing new protections for corporate whistleblowers.

Question 32

What common law protections do individuals have during interviews?

Question 33

The purview of auditing of nonpublic companies falls under the guidelines of the:

A) FASB
B) PCAOB
C) AICPA
D) GAO

Question 34

The basic accounting flow consists of the following events in what sequence?
1) Post to general ledger
2) Business transactions occur
3) Financial statements are prepared
4) Journal entries are recorded

A) 2, 4, 1, 3
B) 2, 4, 3, 1
C) 4, 2, 3, 1
D) 4, 3, 1, 2

Question 35

The normal order of discovery includes the following steps in what sequence?
1) Interrogatories
2) Attorneys take depositions
3) Request to produce documents
4) Requests for admission

A) 1, 3, 2, 4
B) 2, 1, 4, 3
C) 4, 3, 2, 1
D) 1, 2, 3, 4

Question 36

The ________ Amendment entitles a person to due process of law and equal protections under the Law.

A) Fifth
B) Fourth
C) Sixth
D) Fourteenth

Question 37

The lead audit or coordinating partner and reviewing partner of the registered accounting firm must rotate off of the audit every ________ years.

A) Five
B) Ten
C) Two
D) When the PCAOB mandates it.

Question 38

Targets may enter the criminal justice system from all of the routes below except for:

A)a warrantless arrest by the police based upon probable cause.
B)a grand jury proceeding that leads to an indictment and a subsequent arrest warrant issued by a judge.
C)an investigation that leads to the filing of an Information.
D)a citizen’s arrest.

Question 39

The ______ Amendment provides that an individual has the right to an attorney to defend himself and the right to confront witnesses against him.

A) Fifth
B) Fourth
C) Sixth
D) Fourteenth

Question 40

It is advisable that employers document good cause for any termination in the employee's personnel file. Good cause might include the following EXCEPT:

A) The employee's conduct was against written policy.
B) The investigation was fair, objective, and evidence suggested the elimination of alternative suspects.
C) The punishment fits the crime, meaning that the punishment is reasonable given the nature of the offense.
D) The termination was discriminatory, meaning that not all persons committing such an act were or would be terminated.

Question 41

In the criminal justice system, how is probation different from parole?

Question 42

How did the Sarbanes-Oxley Act address corporate governance and public accounting responsibilities?

Question 43

What is meant by demonstrative evidence? Give examples.

Question 44

What remedies are available through the civil and criminal justice systems?

Question 45

What is the discovery process and how does it work?

Question 46

What approaches are used by investigators to obtain documents?

Question 47

What are the three major types of negotiated remedies and how do they differ?

Question 48

What are the factors that affect the decision to prosecute an entity?

Question 49

What constitutes "good cause" in the discharge of an employee?

Question 50

Under what circumstances would a Miranda warning be required?

Question 51

A scientist has two buckets, one holds four gallons and the other holds five gallons. In addition, the scientist also has an unlimited water supply. By using nothing but the buckets and water, how can the scientist accurately measure three gallons of water?

Question 52

Discuss the considerations that must be given in respect to documentary evidence.