Question 1

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

Accepted Answer

This is a requirement outlined in the Securities Exchange Act of 1934.

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.

Accepted Answer

Reducing the deadline would likely increase the pressure on companies to rush through the reporting process, potentially leading to errors and inaccuracies. A longer deadline allows companies more time to thoroughly review their financial information and identify any mistakes or discrepancies.

Question 3

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

Accepted Answer

Sarbanes-Oxley prohibits auditing firms from also providing consulting services to the same firm, in order to avoid conflicts of interest.

Question 4

Which government entity oversees the Public Company Accounting Oversight Board?

Accepted Answer

The Securities Exchange Commission (SEC) oversees the Public Company Accounting Oversight Board (PCAOB), which was created by the Sarbanes-Oxley Act of 2002 to regulate the auditing profession.

Question 5

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

Accepted Answer

The correct name for the division that would fit this description is the Division of Investment Management, which is responsible for regulating investment companies and investment advisers. The Division of Securities Regulation does not exist within the SEC.

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.

Accepted Answer

Since March 2004, the SEC requires 8-Ks to be filed within 4 business days after the triggering event, as stated in the sentence.

Question 7

All of these are characteristics of the NYSE except:

Accepted Answer

All the options listed (A, B, C) are indeed characteristics of the New York Stock Exchange (NYSE) governance requirements for listed companies. These requirements are part of the NYSE's efforts to ensure transparency, independence, and accountability in the companies it lists.

Question 8

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

Accepted Answer

Market Efficiency is not a problem area of the SEC. The SEC's mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Market efficiency is a goal of the SEC, not a problem area.

Question 9

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

Accepted Answer

The penalties for committing a white-collar crime were indeed generally increased from a maximum of 5 years imprisonment to 20 years under the Sarbanes-Oxley Act of 2002.

Question 10

The SEC can file criminal charges.

Accepted Answer

The SEC (Securities and Exchange Commission) is a regulatory agency that enforces securities laws and regulations. While they can bring civil charges against those who violate these laws, the SEC cannot file criminal charges. This is the responsibility of law enforcement agencies, such as the FBI or local police departments.

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?

Accepted Answer

All of the options listed illustrate how difficult it is to determine the level of success of the Sarbanes-Oxley Act. It is hard to know how much fraud would have occurred without the Act, whether investor confidence has increased directly due to the Act, or how much the Act has contributed to any increase in firm value. Therefore, none of these factors alone can adequately determine the Act's success or failure.

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.

Accepted Answer

When a company is fined by the SEC, the amount of the fine is typically deducted from the company's profits, which reduces the amount of money available for distribution to shareholders. As a result, shareholders indirectly bear the cost of the fine.

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.

Accepted Answer

The Sarbanes-Oxley Act actually increased punishments for corporate white-collar crime, including longer prison sentences and larger fines. It also created the Public Company Accounting Oversight Board (PCAOB) to oversee and regulate auditors.

Question 14

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

Accepted Answer

The SEC does not prosecute between 4,000 and 5,000 individuals and companies each year; the actual number of enforcement actions is significantly lower.

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