Question 1

What are some of the reasons for the corporate scandals of 2001 and 2002?

Accepted Answer

The corporate scandals of 2001 and 2002 resulted from: (i) Greed by corporate executives; (ii) a failure in the corporate governance process as practiced by many boards of directors; (iii) failure of public accounting firms to apply appropriate quality control measures to ensure independent judgments; (iv) deficiencies in self-regulatory standards of the accounting profession; (v) unreasonable market expectations; and (vi) an overburdened SEC.

Question 2

What is blue sky legislation?

Accepted Answer

Blue sky legislation represents state legislation that is intended to prevent securities fraud and to offer some protection to investors. These are for securities exempt from SEC registration because they are sold to residents of the state in which the issuing company is chartered and principally doing business.

Question 3

What is a private placement of securities?

Accepted Answer

A private placement of securities is a sale of securities according to Regulation D-Rule 506 of the Securities Act of 1933. A private placement is an issue of any dollar amount to unlimited non-accredited investors and to no more than 35 sophisticated investors, knowledgeable and experienced in financial matters, who already have sufficient information available to them about the issuing company.

Question 4

What is the purpose of the SEC's Regulation S-K?

Accepted Answer

Regulation S-K estab

Question 5

Which one of the following registration statement forms is used by large issuers that already have at least $75 million voting stock held by non-affiliates?

Accepted Answer

A)  S-11. 
B)  S-3. 
C)  S-8. 
D)  S-4. 
E)  S-1. 
A)  S-11. 
B)  S-3. 
C)  S-8. 
D)  S-4. 
E)  S-1.

Question 6

The prospectus part of a registration contains all except which of the following?

Accepted Answer

A)  Financial statements for the issuing company audited by an independent CPA along with appropriate supplementary data. 
B)  An explanation of the intended use of the proceeds to be generated by the sale of the new securities. 
C)  A description of the risks associated with the securities. 
D)  A description of the business and the properties owned by the company. 
E)  Additional data concerning expenses of issuance. 
A)  Financial statements for the issuing company audited by an independent CPA along with appropriate supplementary data. 
B)  An explanation of the intended use of the proceeds to be generated by the sale of the new securities. 
C)  A description of the risks associated with the securities. 
D)  A description of the business and the properties owned by the company. 
E)  Additional data concerning expenses of issuance.

Question 7

Which of the following is not a security as defined by the SEC?

Accepted Answer

A)  Accounts receivable. 
B)  Transferable share. 
C)  Treasury stock. 
D)  Debenture. 
E)  Investment contract. 
A)  Accounts receivable. 
B)  Transferable share. 
C)  Treasury stock. 
D)  Debenture. 
E)  Investment contract.

Question 8

What is a primary focus of the Sarbanes-Oxley Act of 2002?

Accepted Answer

A primary focus of the Sarbane

Question 9

How has the Sarbanes-Oxley Act of 2002 changed the role of the audit committee?

Accepted Answer

The audit committee is now responsible f

Question 10

When must Form 8-K be filed with the SEC and in what situations must this form be used?

Accepted Answer

Form 8-K must be filed with the SEC with

Question 11

What is required by the Trust Indenture Act of 1939?

Accepted Answer

The Trust Indenture Act of 193

Question 12

What is shelf registration?

Accepted Answer

Shelf registration is a proced

Question 13

Which one of the following is not a prescribed event for the filing of Form 8-K?

Accepted Answer

A)  Bankruptcy or receivership. 
B)  Changes in control of the registrant. 
C)  Resignation of a middle manager. 
D)  Changes in the registrant's independent auditor. 
E)  Acquisitions or dispositions of assets. 
A)  Bankruptcy or receivership. 
B)  Changes in control of the registrant. 
C)  Resignation of a middle manager. 
D)  Changes in the registrant's independent auditor. 
E)  Acquisitions or dispositions of assets.

Question 14

Name five securities offerings exempt from registration with the SEC.

Accepted Answer

Securities offerings exempt from registr

Question 15

What are the responsibilities of the SEC's Division of Corporation Finance?

Accepted Answer

The Division of Corporation Finance has

Question 16

What is a sophisticated investor?

Accepted Answer

A)  An investor with a net worth equal to or exceeding $1,000,000. 
B)  An investor holding an active CPA license. 
C)  An investor with a portfolio of 50 or more securities. 
D)  An investor having knowledge and experience in financial matters. 
E)  An investor currently serving as an audit committee member. 
A)  An investor with a net worth equal to or exceeding $1,000,000. 
B)  An investor holding an active CPA license. 
C)  An investor with a portfolio of 50 or more securities. 
D)  An investor having knowledge and experience in financial matters. 
E)  An investor currently serving as an audit committee member.

Question 17

Which one of the following forms is used in connection with employee stock plans?

Accepted Answer

A)  S-8. 
B)  S-3. 
C)  S-4. 
D)  S-1. 
E)  S-11. 
A)  S-8. 
B)  S-3. 
C)  S-4. 
D)  S-1. 
E)  S-11.

Question 18

What information needs to be included in Form 10-Q? (1) Income statements for the most recent quarter and for the year to date as well as for the comparative periods in the previous year.
(2) Income statements for the most recent quarter and for the year to date as well as for the comparative periods in the previous two years.
(3) A statement of cash flows is necessary, but only for the year to date as well as for the corresponding period in the preceding year.
(4) Two balance sheets: one for the end of the most recent quarter and one showing the company's financial position at the end of the previous fiscal year.

Accepted Answer

A)  1 and 3. 
B)  2, 3, and 4. 
C)  1 and 2. 
D)  1, 3, and 4. 
E)  2 and 4. 
A)  1 and 3. 
B)  2, 3, and 4. 
C)  1 and 2. 
D)  1, 3, and 4. 
E)  2 and 4.

Question 19

Information required in proxy statements includes all except which of the following?

Accepted Answer

A)  Listing of company directors and executive officers. 
B)  Description of the business activities including principal products and sources and availability of raw materials. 
C)  Market price of the company's common stock for each quarterly period within the two most recent fiscal years. 
D)  Five-year summary of operations including sales, total assets, income from continuing operations, and cash dividends per share. 
E)  Two-year summary of industry segments, export sales, and foreign and domestic operations. 
A)  Listing of company directors and executive officers. 
B)  Description of the business activities including principal products and sources and availability of raw materials. 
C)  Market price of the company's common stock for each quarterly period within the two most recent fiscal years. 
D)  Five-year summary of operations including sales, total assets, income from continuing operations, and cash dividends per share. 
E)  Two-year summary of industry segments, export sales, and foreign and domestic operations.

Question 20

Which one of the following forms is used when companies have filed with the SEC for less than 36 months but are not large enough to file form S-3?

Accepted Answer

A)  S-8. 
B)  S-6. 
C)  S-4. 
D)  S-1. 
E)  S-11. 
A)  S-8. 
B)  S-6. 
C)  S-4. 
D)  S-1. 
E)  S-11.

Exam 12: Financial Reporting and the Securities and Exchange Commission

What are some of the reasons for the corporate scandals of 2001 and 2002?

What is blue sky legislation?

What is a private placement of securities?

What is the purpose of the SEC's Regulation S-K?

Which one of the following registration statement forms is used by large issuers that already have at least $75 million voting stock held by non-affiliates?

The prospectus part of a registration contains all except which of the following?

Which of the following is not a security as defined by the SEC?

What is a primary focus of the Sarbanes-Oxley Act of 2002?

How has the Sarbanes-Oxley Act of 2002 changed the role of the audit committee?

When must Form 8-K be filed with the SEC and in what situations must this form be used?

What is required by the Trust Indenture Act of 1939?

What is shelf registration?

Which one of the following is not a prescribed event for the filing of Form 8-K?

Name five securities offerings exempt from registration with the SEC.

What are the responsibilities of the SEC's Division of Corporation Finance?

What is a sophisticated investor?

Which one of the following forms is used in connection with employee stock plans?

Information required in proxy statements includes all except which of the following?

Which one of the following forms is used when companies have filed with the SEC for less than 36 months but are not large enough to file form S-3?

The Equity Method of Accounting for Investments

A: the Equity Method of Accounting for Investments

Consolidation of Financial Information

A: Consolidation of Financial Information

Consolidations - Subsequent to the Date of Acquisition

A: Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

A: Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements Intra-Entity Asset Transactions

A: Consolidated Financial Statements Intra-Entity Asset Transactions

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

A: Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Consolidated Financial Statements - Ownership Patterns and Income Taxes

A: Consolidated Financial Statements - Ownership Patterns and Income Taxes

Segment and Interim Reporting

A: Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

A: Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

A: Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

A: Worldwide Accounting Diversity and International Accounting Standards

A: Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

A: Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operation

A: Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

A: Partnerships: Termination and Liquidation

Accounting for State and Local Governments, Part I

A: Accounting for State and Local Governments, Part I

Accounting for State and Local Governments, Part II

A: Accounting for State and Local Governments, Part II

Accounting for Not-For-Profit Entities

A: Accounting for Not-For-Profit Entities

Accounting for Estates and Trusts

A: Accounting for Estates and Trusts

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