The Sarbanes-Oxley Act (SOX) mandates which of the following?

A) Increased regulations related to auditor-client relations.

B) Increased regulations related to internal control.

C) Increased regulations related to corporate executive accountability.

D) All of the other answers represent mandates of the Sarbanes-Oxley Act.

Answer: All of the other answers represent mandates of the Sarbanes-Oxley Act.

Which of the following is NOT a design feature of effective internal controls?

A) Allow greater reliance by investors on reported financial statements.

B) Prevent fraudulent or errant financial reporting.

C) Ensure the company's price advantage over competitors.

D) Prevent misuse of company funds by employees.

Answer: Ensure the company's price advantage over competitors.

Which of the following best describes the goal of internal controls?

A) Ensuring the business is profitable.

B) Enhancing the health of employees.

C) Improving the accuracy and the reliability of financial information.

D) Ensuring the compliance with tax regulations.

Answer: Improving the accuracy and the reliability of financial information.

Under the provisions of the Sarbanes-Oxley Act, auditors must do which of the following?

A) Provide nonaudit services for their clients.

B) Audit public companies whose chief executives worked for the audit firm in the preceding year.

C) Be hired by company management.

D) Maintain working papers for at least seven years following an audit.

Answer: Maintain working papers for at least seven years following an audit.

Which of the following does not represent a major provision of the Sarbanes-Oxley Act?

A) Nonaudit services.

B) Quarterly financial statements.

C) Auditor rotation.

D) Corporate executive accountability.

Answer: Quarterly financial statements.

Under the provisions of the Sarbanes-Oxley Act, corporate executives:

A) Have limited responsibility for financial statements.

B) Must personally prepare the company's financial statements.

C) Must personally certify the company's financial statements.

D) Are not allowed to view the company's financial statements.

Answer: Must personally certify the company's financial statements.

What key piece of legislation was passed in response to corporate accounting scandals by Enron, WorldCom, and others?

A) Sarbanes-Oxley Act.

B) 1933 Securities Act.

C) 1934 Securities Exchange Act.

D) Regulation Fair Disclosure.

Answer: Sarbanes-Oxley Act.

Under the Sarbanes-Oxley Act, management is responsible for:

A) Analysts' having positive comments about the company's operations.

B) The reliability of financial statements.

C) Increasing the company's stock price.

D) All of the other answers represent management responsibilities under the Sarbanes-Oxley Act.

Answer: The reliability of financial statements.

The Sarbanes-Oxley Act requires that companies must:

A) Conduct customer surveys each year to ensure satisfaction with products and services.

B) Document internal controls and assess their effectiveness each year.

C) Pay taxes owed to the Internal Revenue Service by the tax filing date.

D) Devise a budget each year to ensure cash outflows are not greater than cash inflows.

Answer: Document internal controls and assess their effectiveness each year.