b2. corporate governance 3. cpa-06740 b1 page 6 · pdf filecpa-06663 newly released 2010 b1...

Copyright 2010. TAC Co., LTD. Through license from Becker CPA Review
CORPORATE GOVERNANCE PICKUP 1
B2. Corporate Governance 36
1. Corporate Governance
1. CPA-06663 Newly Released 2010 B1 Page 6
According to the Sarbanes-Oxley Act of 2002,
which of the following statements is correct
regarding an issuer's audit committee financial
expert?
a. The issuer's current outside CPA firm's
audit partner must be the audit committee
financial expert.
b. If an issuer does not have an audit
committee financial expert, the issuer
must disclose the reason why the role is
not filled.
c. The issuer must fill the role with an
individual who has experience in the
issuer's industry.
d. The audit committee financial expert must
be the issuer's audit committee
chairperson to enhance internal control.
2. CPA-06739 B1 Page 3
The Sarbanes Oxley Act of 2002 was enacted in
response to corporate scandals that largely
centered on the quality of corporate financial
disclosure and highlighted the inadequate
oversight of management, auditors and the Board
of Directors. The Sarbanes Oxley Act addresses
the problems related to inadequate board
oversight by requiring public companies to have
an:
a. Annual audit for all issuers.
b. Independent Board of Directors.
c. Audit committee.
d. Internal auditor.
3. CPA-06740 B1 Page 6
The Sarbanes Oxley Act of 2002 requires that one
or more members of the audit committee be a
financial expert and that the financial reports
disclose:
a. The name of the Board member(s)
serving as financial expert(s).
b. The existence of financial expert(s) on the
audit committee or the reasons why the
audit committee does not have a financial
expert.
c. Confirmation of the audit opinion by the
financial expert.
d. Certification of independence of the
financial expert.
4. CPA-06741 B1 Page 6
The primary benefit of having a financial expert on
a company's audit committee is:
a. The financial expert checks the auditor's
work and verifies the appropriateness of
the audit opinion.
b. The enhanced level of financial
sophistication of the financial expert can
serve as a resource for the audit
committee.
c. The expert designation conveys a higher
level of due diligence on the expert and
shields audit committee members and the
corporation from most liabilities.
d. The financial expert certifies compliance
with SEC requirements and thereby
reduces audit fees.

5. CPA-06742 B1 Page 6
Arnold Astor, CPA, is a local tax practitioner who
has been asked to sit on the Board of BigLarge
Corporation, a multinational issuer. Astor has
never had any involvement either as an employee
or as an auditor with publically traded companies
but does teach an accounting principles class at
the community college. Under the provisions of
Sarbanes Oxley Act of 2002:
a. Astor qualifies as a financial expert based
on achievement of a CPA certificate.
b. Astor must petition the SEC for a waiver
of prior experience requirements to be
considered a financial expert.
c. The Board of Directors would likely
evaluate Astor's qualifications to serve on
the audit committee and be designated as
a financial expert based on mix of
knowledge and experience.
d. The audit committee would immediately
certify Astor's qualifications as a financial
expert based on his CPA license and
academic experience with GAAP and
experience with internal control.
6. CPA-06743 B1 Page 5
The Sarbanes Oxley Act of 2002 requires that the
financial officers of a corporation be held
accountable to a code of ethics. According to the
Act, codifications of ethical standards should
include provisions except for:
a. Honest and ethical conduct.
b. Full, fair, accurate, and timely disclosure
in periodic financial statements.
c. Compliance with laws, rules and
regulations.
d. Prompt internal reporting of code
provisions and accountability for
adherence to the code.
7. CPA-06744 B1 Page 5
The Sarbanes Oxley Act of 2002 requires that the
management report on internal control include all
of the following, except:
a. A statement of management's
responsibilities for establishing and
maintaining adequate internal controls.
b. A conclusion about the effectiveness of
the company's internal controls.
c. A statement that there are no
disagreements between management
and the auditor as to the effectiveness of
internal controls.
d. A statement that the auditor has attested
and reporting on management's
evaluation of internal controls.
8. CPA-06745 B1 Page 4
The Sarbanes Oxley Act of 2002 seeks to improve
investor confidence by providing greater
transparency for all of the following issues, except:
a. Competency of audit committees.
b. Compliance of senior financial officers
with a code of ethics.
c. Adequacy of internal controls.
d. Means and methods for balancing risk
and growth.
9. CPA-06746 B1 Page 5
The Sarbanes Oxley Act of 2002 requires that all
of the following adhere to a code of ethics, except:
a. Chief Executive Officer.
b. Chief Financial Officer.
c. Controller.
d. Chief Accounting Officer.

10. CPA-06747 B1 Page 11
The Gotham Corporation regularly produces
budget vs. actual data for its managers. The
company is particularly sensitive to personnel
costs, and division variances of greater than five
percent for any period are promptly investigated to
determine if there have been unfilled positions, or
if there has been extraordinary overtime. Timely
exception resolution of this character illustrates
the information and communication principles
typically associated with:
a. Financial Reporting Information.
b. Internal Control Information.
c. Internal Communication.
d. External Communication.
11. CPA-06748 B1 Page 10
The external auditors for the Horace Company
assess the achievement of internal control
objectives each year and communicate the
assessment to management and the Board.
Communication by the external auditor illustrates
which principle of the information and
communication component of the Committee on
Sponsoring Organization's Integrated
Framework?
a. Financial Reporting Information.
b. Internal Control Information.
c. Internal Communication.
d. External Communication.
12. CPA-06749 B1 Page 9
The Instafab Corporation regularly assesses
whether the financial statements of the company
fairly state the financial position, results of
operations and cash flows associated with the
underlying transactions. Leases, for example are
regularly evaluated for their status as a capital or
operating lease and, if capital, the valuation of the
asset and liability are evaluated for fairness,
depreciation methods and interest rates are
properly computed and inclusion or exclusion of
activity from the statement of cash flows is
carefully evaluated. The regular evaluation of
transactions as part of the risk assessment
component of the Committee on Sponsoring
Organization's Framework reflects the principle of:
a. Financial Reporting Objectives.
b. Financial Reporting Risks.
c. Fraud Risk.
d. Assessment Risk.
13. CPA-06750 B1 Page 9
Jasper International considers cash receipting and
cash disbursement processes as part of their risk
assessment. The consideration of processes
relates to the:
a. Financial Reporting Objectives.
b. Financial Reporting Risks.
c. Fraud Risk.
d. Assessment Risk.
14. CPA-06751 B1 Page 7
The Treadway Commission was established to
study factors that lead to fraudulent financial
reporting. The Treadway Commission was
established by:
a. Sarbanes Oxley Act of 2002.
b. Securities and Exchange Commission.
c. Private sponsoring organizations.
d. Treadway Foundation.

15. CPA-06752 B1 Page 7
The Committee on Sponsoring Organizations
prepared the Internal Control Integrated
Framework:
a. To help businesses assess internal
control.
b. To respond to the internal control
assessment requirements of the
Sarbanes Oxley Act of 2002.
c. As part of the Congressional task force
known as the Treadway Commission.
d. To compliment the overarching concepts
of the enterprise risk management
framework.
16. CPA-06753 B1 Page 19
Able Corporation owns numerous businesses
along the coast of Florida. The company'

b2. corporate governance 3. cpa-06740 b1 page 6 · pdf filecpa-06663 newly released 2010 b1...

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