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Test answers for Sarbanes-Oxley 2016

(78) Last updated: February 12
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78 Answered Test Questions:

1. What does SOX represent?

Answers:

• Sarbanes Online Act of 2002

• Sarbanes Overseas Act of 2002

• Sarbanes Oxley Act of 2002

• Serial Online Audit

2. Which agency provides many of the details of SOX regulation?

Answers:

• U.S. Securities and Exchange Commission

• Financial Accounting Standards Board

• U.S. Justice Department

• The Auditing Standards Board

3. Which Act was passed to cut back on multiple regulatory requirements and coincided with the tenth anniversary of SOX?

Answers:

• 1099 Tax Payer Protection Act

• Jumpstart Our Business Startups Act

• National Defense Authorization Act

• Universal Accreditation Act

4. How many public accountants can there be on the PCAOB Board?

Answers:

• Three Only

• Any number

• Two only

• At least Five

5. Which of the following are not relevant for the success of Section 404 Projects?

Answers:

• Overseen by Chief Risk Officer

• Overseen by Global Controller

• Supported by Banks and Lending Institutions

• Supported by Audit Committee

6. Which Sarbanes-Oxley Act section mandates that a corporation’s registered accounting firm must attest to the effectiveness of the internal control structure and procedures for financial reporting?

Answers:

• Section 404

• Section 401

• Section 409

• Section 302

7. The Dodd-Frank financial reform bill permanently exempts small-companies from which key provision of section 404 of the Sarbanes-Oxley act?

Answers:

• Annual financial reporting

• Monthly financial reporting

• Monthly outside audits

• Annual outside audits

8. Which section of the Sarbanes-Oxley Act requires corporations to publish information concerning the scope and adequacy of their internal control structure and their procedures for financial reporting?

Answers:

• Section 302

• Section 409

• Section 404

• Section 401

9. Which group is responsible for reviewing logs in financial systems?

Answers:

• Users of the financial systems

• Configurators of the financial systems

• Auditors who advised in financial system design

• System Administrator or Auditor with no interest in the system

10. How many SOX titles (sections) have been ammended?

Answers:

• Six

• Eight

• Twenty One

• Four

11. For how many years can a public accounting firm audit the same client?

Answers:

• No Limit

• Five years

• Three Years

• Every Alternate Year

12. Which of the following tools has been largely adopted as part of Sarbanes Oxley IT Compliance?

Answers:

• COBIT

• ITIL

• Six Sigma

• ISO 2000

13. Along with the IT department who else in a company is responsible for creating a Sarbanes-Oxley compliant system?

Answers:

• Outside auditing firm

• Accounting department

• Credit department

• Senior management

14. Under Sarbanes-Oxley’s corporate responsibility provision, the Chief Executive Officer and Chief Financial Officer must certify and approve:

Answers:

• the integrity of their company's financial reports monthly

• the integrity of their company's financial reports semi-annually

• the integrity of their company's financial reports quarterly

• the integrity of their company's financial reports annually

15. Which of the Management representations is not part of Financial Statement Assertions?

Answers:

• Definition

• Completeness

• Valuation

• Existence

16. Which of the following was established by the Sarbanes-Oxley Act?

Answers:

• Federal Financial Institutions Examination Council

• Federal Accounting Standards Advisory Board

• Consumer Financial Protection Bureau

• Public Company Accounting Oversight Board

17. In general, Sarbanes-Oxley raised financial standards in which three main areas?

Answers:

• Initial public stock offerings, securities analysis, and the performance of CFOs

• Corporate governance, securities issuance, and the performance of audit work.

• Corporate governance, financial oversight, and the performance of audit work.

• Initial public stock offerings, securities analysis, and the performance of CEOs

18. How did title IV of the Sarbanes-Oxley Act enhance the reporting requirements for financial transactions?

Answers:

• Net Profit margin disclosure

• Off-balance-sheet transactions must be disclosed

• Institutional stock ownership must be disclosed

• Debt/Equity ratio disclosure

19. The high cost of implementing the Sarbanes-Oxley Act has motivated some companies to do which of the following?

Answers:

• Sell their products in foreign markets only

• Setup offshore banking accounts

• Delist their shares from the major exchanges

• Out-source their financial operations overseas

20. SOX's audit committee provision requires publicly traded corporations to establish procedures for:

Answers:

• employees filing internal whistleblower complaints

• bondholders filing internal whistleblower complaints

• nonemployees filing internal whistleblower complaints

• shareholders filing internal whistleblower complaints

21. Which accounting firms are subject to PCAOB annual inspections?

Answers:

• With audits of more than 10 public companies

• With audits of more than 100 public companies

• With audits totaling to 50 or more

• With at least one audit of public company

22. When does risk assessment lead to more robust testing of all relevant assertions for significant accounts?

Answers:

• Low Risk Cycles

• Medium Risk Cycles

• Moderate Risk Cycles

• Higher Risk Cycles

23. The Sarbanes-Oxley Act (SOX) mandated strict reforms to improve financial disclosures from corporations and prevent what type of fraud?

Answers:

• Accounting

• Shareholder

• Investing

• Consumer

24. Why is the Sarbanes-Oxley Act widely considered as the most important securities legislation since the original federal securities laws of the 1930s?

Answers:

• It re-established governmental agencies' confidence in the integrity of Chief Executive Officers in their ability manages their corporations.

• It re-established investor confidence in the integrity of corporate disclosures and financial reporting.

• It re-established consumers' confidence in the integrity of products and services offered for sell by corporations.

• It re-established employee confidence in the integrity of their corporate employer’s products and services.

25. What is the primary function of SAG (Standing Advisory Group)?

Answers:

• Liaise between Companies and Shareholders in the event of disputes

• To advise PCAOB on establishment of auditing and related professional practice standards

• To advise formulation of International Financial Reporting Standards

• To maintain back up of all important documents for all public companies listed on NYSE

26. Which of the following was established by Congress to oversee the audits of public companies?

Answers:

• Institute of Management Accountants

• Center for Audit Quality

• Public Company Accounting Oversight Board

• American Institute of CPAs

27. Which agency enforces every aspect of SOX, including the various whistleblower-related provisions?

Answers:

• Commodity Futures Trading Commission

• Department of Labor

• Securities and Exchange Commission

• Federal Bureau of Investigation

28. What was the Sarbanes Oxley Act also known as?

Answers:

• International Accounting Standards

• Public Company Accounting Reform and Investor Protection Act

• International Financial Reporting Standards

• Internal Controls and Integrated Framework Act

29. What companies need to comply with Sarbanes-Oxley?

Answers:

• All publicly-traded companies in the United States and Canada

• All publicly-traded companies in the United States

• All publicly-traded companies in the United States and Asia

• All publicly-traded companies in the United States and Europe

30. Who would be affected by Section 306 of the Sarbanes-Oxley Act, which prohibits purchasing or selling any equity security during a pension plan blackout period?

Answers:

• The director or executive officer of a privately-held company

• The sole perpetrator of a privately-held company

• The director or executive officer of a public company

• The rank-and-file employees of a public company

31. Which of the following activities is performed during the Scoping Phase of a SOX project?

Answers:

• Determining Key Controls

• Identify significant accounts, business processes and locations

• Management informs Stakeholders of the Project timelines

• Develop Control Documentation

32. What is the purpose of the SOX Act?

Answers:

• To maintain integrity in investment and trading markets so that investors are protected

• To provide superior accounting disclosure system for organizations

• To penalize companies for generating lower returns

• To protect investors by improving the accuracy and reliability of corporate disclosures

33. Which of the following is a specific requirement of the Sarbanes-Oxley Act?

Answers:

• Publicly traded corporations must create internal and independent shareholder investment committees

• Publicly traded corporations must create internal and independent occupational safety committees

• Publicly traded corporations must create internal and independent audit committees.

• Publicly traded corporations must create internal and independent sexual harassment committees

34. How can we identify the existence of Internal Control Deficiency?

Answers:

• When duplicate postings are rejected by the system

• When the confidentiality of data is ensured

• When the operation of a control does not detect misstatements

• When transactions relevant to the business are authorized

35. The Sarbanes-Oxley Act was enacted in response to the accounting scandals conducted by which of the following companies?

Answers:

• ExxonMobil, Chevron, & Cisco Systems

• Epson, Hewlett-Packard, & Dow Chemical

• Enron, Tyco, & WorldCom

• Electrolux, Delta Airlines, & Halliburton

36. Which statement is true regarding a company that is out of compliance with the Sarbanes-Oxley Act?

Answers:

• It depends on which section of the act they’re out of compliance with

• It depends on the size and capitalization of the company

• It depends on the size and the industry the company is in

37. The Sarbanes-Oxley Act of 2002 is a piece of legislation created for the purpose of protecting investors from accounting fraud, specifically:

Answers:

• Disclosures related to number of shares outstanding

• Disclosures related to senior management compensation

• Disclosures related to earnings and profitability

• Disclosures related to senior management conflicts of interest

38. Which problem was The Sarbanes-Oxley Act primarily focused on fixing?

Answers:

• Fraudulent securitization of subprime mortgages

• The collapse of the subprime mortgage market

• Fraudulent reporting of selected financial transactions

• The unregulated growth of collateralized debt obligations

39. Who is responsible for appointing the Chair and members of PCAOB?

Answers:

• Financial Accounting Standards Board

• Investor Advisory Group

• Securities and Exchange Commission

• American Institute of Certified Public Accountants

40. Employees who prevail in a SOX whistle-blowing action are entitled to which of the following?

Answers:

• Job promotion

• Employment reinstatement

• Life-time employment

• Free health benefits

41. Under the Sarbanes-Oxley Act, how long must commercial firms keep their business records (including electronic records and electronic messages)?

Answers:

• 5 years

• 2 Years

• 3 Years

• 4 Years

42. Under section 404 of Sarbanes Oxley, a registered auditor's report must verify that a company:

Answers:

• has internal shareholders grievance procedures in place

• has internal accounting controls in place

• has internal whistleblower protection procedures in place

• has internal executive compensation committee in place

43. The Sarbanes-Oxley Act was passed by Congress to restore investor confidence in which aspects of a publically traded company’s operations?

Answers:

• Stock market listing

• Foreign exchange transactions

• Retirement plan implementation

• Financial statements

44. Which is the primary function of the IT departments of Sarbanes-Oxley?

Answers:

• Storage of electronic tread secret records

• Storage of electronic financial records

• Storage of electronic litigation records

• Storage of electronic employment records

45. Who exposes misconduct either internally or externally in an organization called?

Answers:

• Rigger

• Auditor

• Safekeeper

• Whistleblower

46. How does the enforcement of the Sarbanes-Oxley Act help protect ordinary securities investors?

Answers:

• Requires notification of insider trading transactions

• Requires notification of new product or service introduction

• Requires notification of change in senior management

• Requires notification of change of stock and/or bond prices

47. A company that violates Sarbanes-Oxley Act compliance is subject to which of the following sanctions?

Answers:

• Forced bankruptcy

• Forced liquidation

• They cannot conduct business

• Significant fines

48. Which of the following is NOT part of the 11 sections of the SOX Act?

Answers:

• Income Tax Returns

• Auditor Independence

• Studies and Reports

• Corporate Responsibility

49. What is a Sarbanes-Oxley auditor required to review during a Section 404 audit?

Answers:

• Board of Directors qualifications

• Internal controls, policies, and procedures

• External controls, policies, and procedures

• Senior management compensation

50. Which is the official acronym for the Sarbanes-Oxley Act of 2002?

Answers:

• Sbox

• SO

• SX

• SOX

51. Under SOX, E-mail is considered a business record and must be:

Answers:

• Read-only and delete-able

• Encrypted and password protected

• Read-only and cannot be audited

• Encrypted and cannot be audited

52. The American Competitiveness and Corporate Accountability Act of 2002, is commonly known as:

Answers:

• The Commodity Futures Trading Commission Act

• The Dodd–Frank Wall Street Reform and Consumer Protection Act

• The Sarbanes-Oxley Act

• The Federal Trade Commission Act

53. Under Sarbanes-Oxley, the board of directors of most public companies must appoint which of the following committees?

Answers:

• Marketing

• Pension

• Audit

• Compensation

54. Auditors were not the only targets of Sarbanes-Oxley. The act also includes a broad range of provisions dealing with:

Answers:

• Corporate profits

• Corporate bond issuance

• Corporate stock issuance

• Corporate governance

55. Which services can a Public Accounting Audit Firm perform for the same client?

Answers:

• Report to Board of Directors on behalf of Management

• Design client's financial management system

• Establish or maintain Internal Controls

• Evaluating and understanding the Internal Control System

56. Which of the following is to be avoided in documenting flowchart in business processes?

Answers:

• Meaningful information

• Detailed process description

• Overview of the process

• Breakdown into sub activities

57. What are Internal Controls within business entities also known as?

Answers:

• Strategic Controls

• Financial Controls

• Authoritative Controls

• Operational Controls

58. As per the SEC, who is qualified to certify each quarterly or annual report of the public companies per Section 302?

Answers:

• CEO and CFO

• Auditor

• Lending Banks

• Creditors

59. Under Sarbanes-Oxley, what is the CEO's responsibility in regards to corporate taxes?

Answers:

• The CEO must pay the company’s federal taxes

• The CEO must pay the company’s state taxes

• The CEO must sign the company’s tax return

• The CEO must have the CFO sign the company’s tax return

60. Which of the following is a feature of Automated Control?

Answers:

• Documentation of Controls

• Frequency of operation of the control

• Edit Check activated during data entry

• Reperformance of the process

61. Which type of evidence cannot be used by Auditors to reduce the extent of their testing?

Answers:

• Board approved policies that address control practices

• Evidence of Risk Management and Assessment

• Assignment of Authority and Responsibility

• Evidence is furnished by the person who performs that control

62. Who would be affected by Section 307's standards for professional conduct?

Answers:

• Attorneys appearing and practicing before the SEC

• Attorneys appearing and practicing before individual State Attorneys General

• Attorneys appearing and practicing before the IRS

• Attorneys appearing and practicing before the Interstate Commerce Commission

63. For how many years do registered accounting firms have to maintain audit work papers?

Answers:

• Three Years

• Seven Years

• Nine Years

• Five Years

64. What is the main requirement of SOX Section 404(a)?

Answers:

• Auditors are required to attest the effectiveness of the company's internal controls over financial reporting

• Management must implement civil and Criminal Disclosure Controls

• CEOs are required to produce Certification of Periodic Financial Reports

• Management is required to report on the effectiveness of the company's internal controls over financial reporting

65. Which of the following is NOT a Form of Certification as per SEC?

Answers:

• Form 10-Q

• Form 30-K

• Form 10-K

• Form 20-F

66. Besides the management of a company, who else would be held responsible for non-compliance with the Sarbanes-Oxley's business record keeping provision?

Answers:

• The Human resources department

• The Public relations department

• The Accounting department

• The IT department

67. Which of the following companies does NOT have to comply with the all of The Sarbanes Oxley Act's regulatory mandates?

Answers:

• Bank of America

• Koch Industries

• ExxonMobil

• General Electric

68. Which organization is responsible for the Internal Control Framework as required by SOX?

Answers:

• The Financial Accounting Standards Board

• The International Accounting Standards Board

• The International Financial Reporting Standards

• The Committee of Sponsoring Organizations

69. Identify the sub process of a Receivables Business Process.

Answers:

• Depreciation

• Pricing

• Valuation

• Requisition

70. The Sarbanes-Oxley criminalizes retaliation against whistleblowers that provide “truthful information” to a “law enforcement officer” about the “commission or possible commission of any Federal offense,”.   Who does this provision apply to?

Answers:

• Non-publicly traded corporations only

• Small businesses only

• Publicly traded corporations only

• Every employer nationwide

71. The Sarbanes-Oxley Act applies to which non US companies?

Answers:

• Registered equity or debt securities with the NY Stock Exchange and the accounting firms that provide auditing services to them

• Registered equity or debt securities with the SEC and the accounting firms that provide auditing services to them

• Registered equity or debt securities with the CFTC and the accounting firms that provide auditing services to them

• Registered equity or debt securities with the NASDAQ stock exchange and the accounting firms that provide auditing services to them

• (None of these)

72. Which organization created COBIT as a framework for IT Management and Governance?

Answers:

• PCAOB

• AICPA

• SEC

• ISACA

73. Which section of the Sarbanes-Oxley Act requires senior management to certify the accuracy of data reported in their company’s financial statement?

Answers:

• Section 302

• Section 409

• Section 401

• Section 404

74. Who can be a chairperson of PCAOB?

Answers:

• A former SEC Counsel General

• A CPA with at least 5 years experience in Auditing

• Any Auditor of Public Company

• A CPA who has not been a practicing for at least five years prior to being appointed to the board

75. Which of the following is a Material Weakness leading to Audit Failure?

Answers:

• Detection of fraud by external auditors and not internal auditors

• Lack of physical inventory system

• Design of system does not allow detection of misstatements

• Lack of timeliness in account reconciliations

76. In order to determine significant accounts, Management must consider the concept of Materiality. Which of the following is a Quantitative consideration of Materiality?

Answers:

• Product Revenues

• Composition of the Account

• Susceptibility to loss

• Nature of Account

77. Within Sarbanes-Oxley, who is tasked with registering auditors, and defining the specific procedures for compliance audits?

Answers:

• Federal Accounting Standards Advisory Board

• Internal Revenue Service

• Public Company Accounting Oversight Board

• Commodity Futures Trading Commission

78. Under the Sarbanes-Oxley Act, if a public company makes a “required” accounting restatement due to “misconduct,” what could happen to that company’s CEO and CFO?

Answers:

• Forced to payback any monetary gains received through accounting misstatements

• Forced to forfeit any bonuses or profits gained from selling company stock

• Forced to resign from the company

• Forced to give up pensions and company stock ownership