WGU C254 Topic 10 Test Questions
with Solved Solutions (2025) Updated.
Section 404 of the Sarbanes-Oxley Act of 2002, provided for increased scrutiny over which area
of corporate governance:
a. Internal controls design, implementation and effectiveness.
b. The COSO framework that was created by the PCAOB to regulate auditor activities.
c. Audit committees of boards of directors were now responsible for management of the
company's financial reporting efforts.
d. The reliability of financial reporting because CEOs must serve on the board of directors. -
Answer Internal controls design, implementation and effectiveness.
Section 404 of SOX is probably the most well-known section of Sarbanes-Oxley that requires
management to select an internal control framework and then assess the effectiveness and
report annually on both the design and operational effectiveness of that framework.
Which of the following is NOT one of the five areas of the COSO framework:
a. Control Activities.
b. Risk Management.
c. Control Environment.
d. Monitoring. - Answer Risk Management.
The five COSO framework areas are Control Environment, Risk Assessment (not management),
Control Activities, Information and Communication and Monitoring.
The impact of Sarbanes-Oxley on the accounting and auditing profession was:
a. No Impact.
b. Negligible impact because the Act created the PCAOB that continued to let the profession
self-regulate.
c. Significant because of the creation of the PCAOB and its responsibilities provided oversight
and regulation for the profession.
d. Sarbanes-Oxley essentially wiped out 100 years of accounting and auditing self- governance
for the benefit of the PCAOB. - Answer Significant because of the creation of the PCAOB and
its responsibilities provided oversight and regulation for the profession.
The creation of the PCAOB and its responsibilities by the SOX act provided oversight and
regulation for the accounting and auditing profession for the first time in over 100 years.
, b. Regulators.
c. Executive management.
d. Board of directors. - Answer Customers.
The corporate governance fabric is generally thought to include: board of directors, audit
committee, senior / executive management, internal audit, external (independent) audit and
regulators and governing bodies.
Which of the following is not believed to improve auditor independence:
a. Requiring audit firm lead partner rotation every seven years instead of five.
b. Requiring pre-approval by the audit committee of the board of directors of all audit and non-
audit services rendered to the client.
c. Requiring the independent audit committee of the board of directors to be directly
responsible for the appointment, compensation and oversight of the external auditor.
d. Prohibiting audit firms from providing most non-audit services to audited companies. -
Answer Requiring audit firm lead partner rotation every seven years instead of five.
SOX requires audit firm lead partner rotation every five years instead of seven.
The impetus for the Sarbanes-Oxley Act of 2002 was which of the following:
a. Numerous high profile, high cost public company financial reporting frauds.
b. Concerns over the size and boisterousness of public company chief executive officers (CEOs)
and chief financial officers (CFOs).
c. The financial market meltdown where many financial institutions faced the prospect of
bankruptcy.
d. Excessive compensation paid to auditors for work that did not meet professional standards. -
Answer Numerous high profile, high cost public company financial reporting frauds.
Beyond internal controls design, implementation and effectiveness assessments, the Sarbanes
Oxley act provided for which of the following:
a. Required the independent board of directors to be directly responsible for the appointment,
compensation and oversight of the external auditor
b. Created the SEC to oversee the PCAOB who in-turn oversees public company boards of
directors.
c. The companies "principal" officers, CEO and CFO, to certify and approve the integrity of their
company's financial reports.
d. The Act established whistleblower protections for senior executives and board members of
with Solved Solutions (2025) Updated.
Section 404 of the Sarbanes-Oxley Act of 2002, provided for increased scrutiny over which area
of corporate governance:
a. Internal controls design, implementation and effectiveness.
b. The COSO framework that was created by the PCAOB to regulate auditor activities.
c. Audit committees of boards of directors were now responsible for management of the
company's financial reporting efforts.
d. The reliability of financial reporting because CEOs must serve on the board of directors. -
Answer Internal controls design, implementation and effectiveness.
Section 404 of SOX is probably the most well-known section of Sarbanes-Oxley that requires
management to select an internal control framework and then assess the effectiveness and
report annually on both the design and operational effectiveness of that framework.
Which of the following is NOT one of the five areas of the COSO framework:
a. Control Activities.
b. Risk Management.
c. Control Environment.
d. Monitoring. - Answer Risk Management.
The five COSO framework areas are Control Environment, Risk Assessment (not management),
Control Activities, Information and Communication and Monitoring.
The impact of Sarbanes-Oxley on the accounting and auditing profession was:
a. No Impact.
b. Negligible impact because the Act created the PCAOB that continued to let the profession
self-regulate.
c. Significant because of the creation of the PCAOB and its responsibilities provided oversight
and regulation for the profession.
d. Sarbanes-Oxley essentially wiped out 100 years of accounting and auditing self- governance
for the benefit of the PCAOB. - Answer Significant because of the creation of the PCAOB and
its responsibilities provided oversight and regulation for the profession.
The creation of the PCAOB and its responsibilities by the SOX act provided oversight and
regulation for the accounting and auditing profession for the first time in over 100 years.
, b. Regulators.
c. Executive management.
d. Board of directors. - Answer Customers.
The corporate governance fabric is generally thought to include: board of directors, audit
committee, senior / executive management, internal audit, external (independent) audit and
regulators and governing bodies.
Which of the following is not believed to improve auditor independence:
a. Requiring audit firm lead partner rotation every seven years instead of five.
b. Requiring pre-approval by the audit committee of the board of directors of all audit and non-
audit services rendered to the client.
c. Requiring the independent audit committee of the board of directors to be directly
responsible for the appointment, compensation and oversight of the external auditor.
d. Prohibiting audit firms from providing most non-audit services to audited companies. -
Answer Requiring audit firm lead partner rotation every seven years instead of five.
SOX requires audit firm lead partner rotation every five years instead of seven.
The impetus for the Sarbanes-Oxley Act of 2002 was which of the following:
a. Numerous high profile, high cost public company financial reporting frauds.
b. Concerns over the size and boisterousness of public company chief executive officers (CEOs)
and chief financial officers (CFOs).
c. The financial market meltdown where many financial institutions faced the prospect of
bankruptcy.
d. Excessive compensation paid to auditors for work that did not meet professional standards. -
Answer Numerous high profile, high cost public company financial reporting frauds.
Beyond internal controls design, implementation and effectiveness assessments, the Sarbanes
Oxley act provided for which of the following:
a. Required the independent board of directors to be directly responsible for the appointment,
compensation and oversight of the external auditor
b. Created the SEC to oversee the PCAOB who in-turn oversees public company boards of
directors.
c. The companies "principal" officers, CEO and CFO, to certify and approve the integrity of their
company's financial reports.
d. The Act established whistleblower protections for senior executives and board members of
