, Appendix I
The Sarbanes-Oxley Act, Internal Controls, and Management
Accounting
Multiple Choice Questions
1. The Sarbanes-Oxley Act:
A. arose because of several accounting scandals that rocked the public's confidence in
published financial statements.
B. was enacted, in part, to bring about reform in companies' financial reporting
processes.
C. has distinct guidelines for reporting on an organization's internal
control practices.
D. contains provisions whereby the chief executive officer (CEO) and chief financial
officer (CFO) can be held criminally responsible if their firm's financial statements
are found to be fraudulent in nature.
E. all of the other answers are
correct.
2. Internal controls focus on all of the following except:
A. effectiveness of
operations.
B. reliability of financial
reporting.
C. compliance with applicable laws and
regulations.
D. maximization of profit and cash
flows.
E. efficiency of
operations.
App I-1
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
,3. Which of the following is a typical internal control?
A. The use of password-protected computers and
software.
B. The requirement that separate individuals authorize cash disbursements and
sign checks.
C. The use of physical controls over inventories to prevent loss
from theft.
D. A physical count of inventory at year-end to verify amounts shown on the
company's accounting records.
E. All of the other answers are
correct.
4. The Sarbanes-Oxley Act established the:
A. Securities and Exchange Commission
(SEC).
B. Public Company Accounting Oversight Board
(PCAOB).
C. Financial Accounting Standards Board
(FASB).
D. Institute of Management Accountants
(IMA).
E. American Accounting Association
(AAA).
5. Which of the following bodies oversees audits and auditors, and sanctions firms and
individuals for violations of laws and regulations?
A. American Institute of Certified Public Accountants
(AICPA).
B. American Accounting Association
(AAA).
C. Public Company Accounting Oversight Board
(PCAOB).
D. Financial Accounting Standards Board
(FASB).
E. Accounting Principles Board
(APB).
App I-2
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
, 6. Which of the following is not a provision of (nor an outgrowth of) the Sarbanes-Oxley
Act?
A. A public company's annual report must contain a separate disclosure that assesses
the company's internal controls.
B. Management is essentially responsible for establishing and maintaining
internal controls.
C. A company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO) can be
held criminally responsible if their firm's financial statements are fraudulent.
D. A company must prepare a balance sheet, an income statement, a statement of
stockholders' equity, and a statement of cash flows.
E. A new body, the Public Company Accounting Oversight Board, oversees and
investigates the audits and auditors of public companies.
7. Which of the following statements regarding the Sarbanes-Oxley Act is (are) true?
A. Management must establish and maintain a system of internal controls over
financial reporting.
B. Management must periodically assess a company's system of internal controls over
financial reporting.
C. Management must include in the company's annual report a separate report that
assesses internal controls.
D. A company's auditors are required to report on management's assessment of
internal controls.
E. All of the other answers are
correct.
8. The provisions of sections 302 and 404 of the Sarbanes-Oxley Act (as originally
enacted) have proved especially troublesome for:
A. Small
businesses.
B. Private
universities.
C. Cities and
municipalities.
D. Healthcare
providers.
E. Individual
taxpayers.
App I-3
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
The Sarbanes-Oxley Act, Internal Controls, and Management
Accounting
Multiple Choice Questions
1. The Sarbanes-Oxley Act:
A. arose because of several accounting scandals that rocked the public's confidence in
published financial statements.
B. was enacted, in part, to bring about reform in companies' financial reporting
processes.
C. has distinct guidelines for reporting on an organization's internal
control practices.
D. contains provisions whereby the chief executive officer (CEO) and chief financial
officer (CFO) can be held criminally responsible if their firm's financial statements
are found to be fraudulent in nature.
E. all of the other answers are
correct.
2. Internal controls focus on all of the following except:
A. effectiveness of
operations.
B. reliability of financial
reporting.
C. compliance with applicable laws and
regulations.
D. maximization of profit and cash
flows.
E. efficiency of
operations.
App I-1
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
,3. Which of the following is a typical internal control?
A. The use of password-protected computers and
software.
B. The requirement that separate individuals authorize cash disbursements and
sign checks.
C. The use of physical controls over inventories to prevent loss
from theft.
D. A physical count of inventory at year-end to verify amounts shown on the
company's accounting records.
E. All of the other answers are
correct.
4. The Sarbanes-Oxley Act established the:
A. Securities and Exchange Commission
(SEC).
B. Public Company Accounting Oversight Board
(PCAOB).
C. Financial Accounting Standards Board
(FASB).
D. Institute of Management Accountants
(IMA).
E. American Accounting Association
(AAA).
5. Which of the following bodies oversees audits and auditors, and sanctions firms and
individuals for violations of laws and regulations?
A. American Institute of Certified Public Accountants
(AICPA).
B. American Accounting Association
(AAA).
C. Public Company Accounting Oversight Board
(PCAOB).
D. Financial Accounting Standards Board
(FASB).
E. Accounting Principles Board
(APB).
App I-2
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
, 6. Which of the following is not a provision of (nor an outgrowth of) the Sarbanes-Oxley
Act?
A. A public company's annual report must contain a separate disclosure that assesses
the company's internal controls.
B. Management is essentially responsible for establishing and maintaining
internal controls.
C. A company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO) can be
held criminally responsible if their firm's financial statements are fraudulent.
D. A company must prepare a balance sheet, an income statement, a statement of
stockholders' equity, and a statement of cash flows.
E. A new body, the Public Company Accounting Oversight Board, oversees and
investigates the audits and auditors of public companies.
7. Which of the following statements regarding the Sarbanes-Oxley Act is (are) true?
A. Management must establish and maintain a system of internal controls over
financial reporting.
B. Management must periodically assess a company's system of internal controls over
financial reporting.
C. Management must include in the company's annual report a separate report that
assesses internal controls.
D. A company's auditors are required to report on management's assessment of
internal controls.
E. All of the other answers are
correct.
8. The provisions of sections 302 and 404 of the Sarbanes-Oxley Act (as originally
enacted) have proved especially troublesome for:
A. Small
businesses.
B. Private
universities.
C. Cities and
municipalities.
D. Healthcare
providers.
E. Individual
taxpayers.
App I-3
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
