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15 Cards in this Set
- Front
- Back
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West, an officer with GyNec, Inc., has been charged with violating the Foreign Corrupt Practices Act. Specifically, West paid the food, travel and lodging expenses for Lando, vice-chair of the Department of Defense for the country of Myger, in connection with a military weapons contract which West was seeking to induce Myger to enter into. Which of of the following would constitute an affirmative defense to the charge?
A The amount in question was less than $25,000. B Such payments are traditional in dealing with Myger. C The expense was a bona fide expenditure in connection with demonstrating the weapon system to Lando. D The payments were reported as expenses on GyNec, Inc.'s financial statements. |
The correct answer was C.
Affirmative defenses to actions under the bribery provisions of the Foreign Corrupt Practices Act include: (1) the payments or gifts which were lawful under the laws of the foreign official's, political party's, party official's, or candidate's country; or (2) the payments were a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to the promotion, demonstration, or explanation of products or services; or the execution or performance of a contract with a foreign government or agency thereof. |
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ConEx began its year forecasting annual earnings per share in the range of $13.90 to $14.30. In June ConEx revised that estimate to $11.70 to $12.00 per share. On August 15th, ConEx lowered its earnings estimate to $9.00 to $9.25 per share, which it reaffirmed in a press release. October 12, Bear, ConEx's CEO, met privately with analysts from three investment and brokerage firms. When one of the analysts asked about ConEx's earnings guidance for the year, Bear reaffirmed the previous guidance. ConEx's company policy was to respond that the earnings guidance "was effective at the date given and would not be updated until the company publicly announced updated guidance." Which is correct?
A Bear is not in violation of Regulation FD (Full Disclosure) since his statement was in response to a legitimate inquiry. B Even if Bear has violated Regulation FD, ConEx is not in violation. C ConEx must immediately file with the SEC a Form 8-K confirming that it has reaffirmed its full year estimated earnings per share. D There has been no violation of Regulation FD since the disclosure was not material. |
The correct answer was C.
Both Bear and ConEx are in violation of Regulation FD. S.E.C. regulation FD ("Full Disclosure") requires that if a company intentionally discloses material non-public information to one person, it must simultaneously disclose that information to the public at large. In the case of an unintentional disclosure of material non-public information to one person, the company must make a public disclosure "promptly." Bear's confirmation to analysts in a private meeting of its previous earnings estimates, especially at a time when ConEx's earnings have been falling dramatically, would violate Regulation FD and should be promptly followed by an 8-K disclosure filed with the SEC. |
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Which of the following is NOT a requirement of section 401 of the Sarbanes-Oxley Act of 2002?
A Financial statements published by issuers are required to be accurate. B Financial statements published by issuers must be presented in a manner that does not omit material information. C All contractual relationships with government entities must be disclosed. D Financial statements must include all material off-balance sheet liabilities, obligations or transactions. |
The correct answer was C.
Section 401 of the Sarbanes-Oxley Act requires that financial statements published by issuers be accurate and presented in a manner that does not contain incorrect statements or omit material information. Also, each annual and quarterly financial report must disclose all material off-balance sheet transactions and "other relationships" with "unconsolidated entities" that may have a material current or future effect on the financial condition of the issuer. |
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Which of the following does NOT correctly state the provisions and regulations of Section 302 of the Sarbanes-Oxley Act of 2002?
A Requires the chief executive and financial officers to disclose internal audit deficiencies to the company's auditors or audit committee. B Requires that management evaluate any changes in internal control methods. C Permits an issuer to make loans to officers and directors. D Requires the company's attorneys to report securities laws violations to the CEO. |
The correct answer was C.
Sarbanes-Oxley amends securities laws to prohibit an issuer from making personal loans to officers and directors. Under Section 302 and its regulations of the Sarbanes-Oxley Act of 2002 a chief executive or financial officer must disclose internal audit deficiencies to the company's auditors or audit committee; management must evaluate any changes in internal control methods; and, the company's attorneys must report securities laws violations and breaches of fiduciary duties to the CEO. |
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Each periodic report containing financial statements filed by an issuer with the Securities Exchange Commission pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 must be accompanied by a certification of the chief executive officer and chief financial officer that the information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of the issuer. Violations of this provision may result in
A monetary fines only. B a 20 year prison sentence if the violation is willful. C a prison sentence of not more than three years. D civil penalties only. |
The correct answer was B.
Whoever certifies any statement knowing that the periodic report accompanying the statement does not comport with all the requirements as set forth in Sarbanes-Oxley may be fined up to $1,000,000 or imprisoned up to 10 years, or both. Willfully violations may result in fines of up to $5,000,000 and imprisonment up to 20 years, or both. |
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Crawford & Co., CPA has been engaged by Brace Incorporated to prepare an annual report to Brace's shareholders. In connection with the annual report, section 404 of the Sarbanes-Oxley Act of 2002 requires all of the following except:
A the inclusion of an internal control report which states the responsibility of management for establishing and maintaining an adequate internal control structure. B the auditor's evaluation may not be the basis for increased charges or fees. C the auditor must attest to, and report on, the assessment made by the management of the issuer. D the annual report must contain an internal control report which contains an assessment, as of the end of the issuer's fiscal year, of the effectiveness of the internal control structure. |
The correct answer was B.
Section 404 of the Sarbanes-Oxley Act requires the inclusion in the annual report of an internal control report which states the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; Each issuer's auditor must attest to, and report on, the assessment made by the management of the issuer; and, the annual report must contain an internal control report which contains an assessment, as of the end of the issuer's fiscal year, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting. A legislative Committee report explained the provision as follows: "[T]he Committee does not intend that the auditor's evaluation be the subject of a separate engagement or the basis for increased charges or fees." |
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Davis Enterprises, Inc., an electronics importer and domestic corporation, recently filed a form 10-Q quarterly report which it published on-line. Under Section 906 of the Sarbanes-Oxley Act of 2002, which is correct?
A The filing must be accompanied with a statement from its CFO or CEO that the report fairly represents the financial condition of the company. B All officers of Davis Enterprises, Inc., must sign the report. C The filing must be accompanied by a statement that certifies that a copy of the report has been mailed to all shareholders of record. D Any officer who certifies the reports may be liable for civil penalties for willful omissions, but not for criminal penalties. |
The correct answer was A.
Under Sarbanes-Oxley, each periodic report must be accompanied with a statement from its CFO or CEO that the reports fairly represent the financial condition of the company. The Act does not require mailing to shareholders nor does it require the signatures of all officers. Willful violations can result in both civil and criminal penalties. |
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Section 409 of the Sarbanes-Oxley Act of 2002 is entitled: Real Time Issuer Disclosures. Which if the following would NOT be reasonably inferred by Section 409?
A Issuers are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. B Disclosures are to be presented in terms that are easy to understand. C Graphic presentations of real time disclosures are discouraged. D Real time disclosures should be supported by disclosures of trends and by qualitative information as appropriate. |
The correct answer was C
Section 409 of the Sarbanes-Oxley Act requires that issuers disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. These disclosures are to be presented in terms that are easy to understand, and may include graphic presentations if appropriate. Real time disclosures might also be supported by disclosures of trends and by qualitative information. |
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Perry Corporation wishes to issue, in a public offering, preferred non-cumulative stock. Misstatements contained in financial statements which are a part of Perry's registration statement will subject Perry Corporation to liability for damages ONLY if the misstatements are
A material. B negligently made. C knowingly made. D fraudulently made. |
The correct answer was A.
For liability to be incurred under the 1933 Securities Act three things must be established: misstatement or omission of a fact, materiality of the fact, and damages. Neither fraudulent intent nor negligence is required. |
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The majority of federal and state securities regulations are aimed at: I. Adequate disclosure of material information relating to securities transactions. II. Financial reporting by public companies.
A I. only is correct. B II. only is correct. C Neither I. nor II. is correct. D Both I. and II. are correct. |
The correct answer was D.
The majority of securities regulations are aimed at: the fair and full disclosure of all material information relating to the markets and to specific securities transactions, as well as the financial reporting by public companies. |
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The Federal Securities Laws include of a series of statutes, and in turn a series of regulations. The two main statutes involved in the Federal Securities laws are the the Securities Act of 1933 and the the Securities Exchange Act of 1934. Which of the following is NOT a correct statement with respect to these laws and regulations?
A Generally speaking, the Securities Act of 1933 governs the issuance of securities by companies. B In general, the Securities Exchange Act of 1934 governs the trading, purchase and sale of securities. C Rule 10b-5, and Section 10b are known as the Anti-Fraud provisions of the Securities Exchange Act of 1934. D Rules adopted pursuant to the Securities Act of 1933 include the insider trading and market manipulation rules. |
The correct answer was D.
The two main statutes involved in the Federal Securities laws are the Securities Act of 1933 and the Securities Exchange Act of 1934. In general, the Securities Act of 1933 governs the issuance of securities by companies, and the Securities Exchange Act of 1934 governs the trading, purchase and sale of those securities. Rule 10b-5, and Section 10b are known as the anti-fraud provisions of the Securities Exchange Act of 1934. Rules adopted pursuant to Section 10b of the '34 Act (not the 1933 Act) include the insider trading and market manipulation rules. |
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Which of the following is an example of a creditor remedy involving an involuntary lien on tangible personal property?
A Artisan's lien B Second mortgage C Garnishment D Judgment |
The correct answer was A.
An artisan's lien is a lien on personal property imposed by law for nonpayment of a debt relating to an improvement on or repair to an item of personal property. A second mortgage is a voluntary lien on real estate. A garnishment involves an involuntary lien on money (intangible personal property). A judgment is an order by a court indicating an amount owed and to whom it is owed. |
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This act prohibits businesses which regularly extend credit from discriminating on the basis of sex, race, national origin, age or religion:
A Fair Debt Collection Practices Act B Equal Credit Opportunity Act C Federal Consumer Protection Act D Financial Services Modernization Act of 1999 |
The correct answer was B.
The Equal Credit Opportunity Act of 1974 was originally designed to eliminate the practice of lenders refusing to extend credit to women of child bearing age. Many other bases of discrimination are proscribed by the Act. The Fair Debt Collections Practices Act was enacted to stop abusive and deceptive practices by debt collectors. The Consumer Protection Act was an early attempt to require disclosure of charges by lenders. The Financial Services Modernization Act of 1999 is a law designed to protect privacy in connection with transmissions by financial institutions. |
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National Finance Bureau is a consumer reporting agency. The federal Fair Credit Reporting Act mandates that National Finance Bureau must
A on request, give a debtor the information in his/her file, and a list of everyone who has requested it recently. B if advised by a debtor that a file contains inaccurate information, correct the file within 30 days. C If an investigation does not resolve a debtor's dispute, permit the debtor to place a brief statement in his/her file. D remove or correct inaccurate or unverified information from its files within 10 days after its validly disputed. |
The correct answer was B.
The federal Fair Credit Reporting Act is designed to promote accuracy, fairness, and privacy of information in the files of every "consumer reporting agency." If advised by a debtor that a file contains inaccurate information, a credit reporting agency must investigate the items by presenting to its information source all relevant evidence submitted by the debtor. Corrections are only required if the information on file is incorrect or out of date. |
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Global Forwarding, Inc., is a delivery service that specializes in worldwide delivery of urgent and important business documents. Global's fleet of delivery vehicles is financed by Universal Leasing Co. Parsons, president and majority shareholder of Global, personally guaranteed the debt to Universal Leasing Corp. Global Forwarding, Inc., is in default with reapect to its obligations to Universal Leasing which has repossessed all Global's delivery vehicles. Under the law of suretyship and guaranty, Parsons will be relieved of all liability relating to his guaranty
A if Universal Leasing Corp. granted an extension of time to Global to make payments. B if Universal Leasing Corp. severely damaged several of the vehicles during repossession. C if Universal Leasing Corp. refused tender of payment by Global Forwarding, Inc. D unless Universal Leasing Corp. promptly disposes of the vehicles. |
The correct answer was C.
Refusal by a creditor of a principal debtor's tender of payment will release all guarantors. Granting an extension to the principal debtor may release a surety from all or part of his/her obligation. Failure to promptly dispose of collateral or damage to some of the collateral may partially release the guarantor(s). |
