Multiple Choice Questions
1. Which of the following statements is true?
a. The Securities Exchange Act of 1934 regulates intrastate stock offerings made by a company.
b. The Securities Act of 1933 regulates the subsequent public trading of securities through brokers and markets.
c. The Securities Exchange Act of 1934 is commonly referred to as blue sky legislation.
d. The Securities Act of 1933 regulates the initial offering of securities by a company.
2. What is the purpose of Regulation S-K?
a. Defines generally accepted accounting principles in the United States.
b. Establishes required disclosure of nonfinancial information with the SEC.
c. Establishes required financial disclosures with the SEC.
d. Indicates which companies must file with the SEC on an annual basis.
3. What is the difference between Regulation S-K and Regulation S-X?
a. Regulation S-K establishes reporting requirements for companies in their initial issuance of securities whereas Regulation S-X is directed toward the subsequent issuance of securities.
b. Regulation S-K establishes reporting requirements for companies smaller than a certain size whereas Regulation S-X is directed toward companies larger than that size.
c. Regulation S-K establishes regulations for nonfinancial information filed with the SEC whereas Regulation S-X prescribes the form and content of financial statements included in SEC filings.
d. Regulation S-K establishes reporting requirements for publicly held companies whereas Regulation S-X is directed toward private companies.
4. The Securities Exchange Act of 1934
a. Regulates the public trading of previously issued securities through brokers and exchanges.
b. Prohibits blue sky laws.
c. Regulates the initial offering of securities by a company.
d. Requires the registration of investment advisers.
5. Which of the following is a requirement of the Sarbanes-Oxley Act of 2002?
a. Registration of all auditing firms with the Public Company Accounting Oversight Board.
b. Annual inspection of all auditing firms registered with the Public Company Accounting Oversight Board.
c. A monetary fee assessed on organizations issuing securities.
d. Overall assessment of the work of the SEC each year.
6. Which of the following is not correct with regard to the Public Company Accounting Oversight Board?
a. The board can expel a registered auditing firm without SEC approval.
b. All registered auditing firms must be inspected at least every three years.
c. The board members must be appointed by Congress.
d. The board has the authority to set auditing standards rather than utilize the work of the Auditing Standards Board.
7. Which of the following is not a way by which the Sarbanes-Oxley Act attempts to ensure auditor independence from an audit client?
a. The auditing firm must be appointed by the client's audit committee.
b. Audit fees must be approved by the Public Company Accounting Oversight Board.
c. The audit committee must be composed of members of the client's board of directors who are independent of the management.
d. The external auditor cannot also perform financial information system design and implementation work.
8. What is a registration statement?
a. A statement that must be filed with the SEC before a company can begin an initial offering of securities to the public.
b. A required filing with the SEC before a large amount of stock can be obtained by an inside party.
c. An annual filing made with the New York Stock Exchange.
d. A filing made by a company with the SEC to indicate that a significant change has occurred.
9. Which of the following is a registration statement used by large companies that already have a significant following in the stock market?
a. Form 8-K.
b. Form 10-K.
c. Form S-1.
d. Form S-3.
10. What was the significance of the controversy in 1977 over the appropriate accounting principles to be used by oil- and gas-producing companies?
a. Several major lawsuits resulted.
b. Companies refused to follow the SEC's dictates.
c. Partners of a major accounting firm were indicted on criminal charges.
d. The SEC overruled the FASB on its handling of this matter.