BEC CPA Exam Notes 2025 Expert
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SU 1 (18% of test) - 🧠ANSWER ✔✔Corporate Governance
Basic Corporate Documents - 🧠ANSWER ✔✔Articles of Incorporation:
Corp's name, # Share authorized, Address of Registered Office, Name of
Registered Agent, Name and Address of each incorporator
Filed with secretary of state
Articles of Incorporation are general.
Bylaws: contain information about managing affairs of corporation. Bylaws
are detailed.
,Common and Preferred Shareholders - 🧠ANSWER ✔✔Common have
contributed basic capital for the corporation to carry on business. Preferred
have a contractual right to dividends and liquidation rights before common
shareholders.
Board of Directors - 🧠ANSWER ✔✔Board acts on behalf of S/H. Major
decisions made by board. Board selects officers. Board declares dividends.
Directors owe a fiduciary duty to corporation.
Business Judgment Rule - 🧠ANSWER ✔✔Protects and officer or director
from honest mistakes of judgment.
Corporate Opportunity - 🧠ANSWER ✔✔Director must give corporation first
right of refusal.
SOX Reporting - 🧠ANSWER ✔✔Targets officers, BOD, and Public Auditors
It is applicable to issuers. Each member of audit committee must be an
independent member of BOD (cannot receive compensation from corp.)
One must be a financial expert.
Audit Committee reports to BOD not management. PCAOB regulates
accounting profession.
,Sec 302 of SOX - 🧠ANSWER ✔✔CEO and CFO certify financial statements
free from material misstatements, responsible for system of internal
controls, and informed audit committee of any deficiencies. Also report any
fraud whether or not material.
Sec 404 of SOX - 🧠ANSWER ✔✔Name internal control model must be
named and management has taken responsibility for establishing system of
internal controls.
Sec 802, 906, 1103, 1107 - 🧠ANSWER ✔✔802: Criminal Penalties for
destroying documents
906: Fines and Jail Time for certifying noncomplying filings
1107: Jail time for retaliation against informants
COSO Model of Internal Control - 🧠ANSWER ✔✔Widely recognized as
standard for internal control system.
3 Objectives of Control - 🧠ANSWER ✔✔Operations, Reporting, Compliance
(ORC)
Operations include the safeguarding of an entity's assets. Reporting relates
to information needed by users to make sounds financial decisions.
Compliance deals with rules and regulations that should be complied with.
3
COPYRIGHT©JOSHCLAY 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY
STATEMENT. ALL RIGHTS RESERVED
, Internal Control does not provide absolute assurance.
Breakdowns: employee carelessness, management overwrite, collusion
Components of Internal Control - 🧠ANSWER ✔✔CRIME
Control Environment, Risk Assessment, Control Activities, Information and
Communication, Monitoring
Control Environment - 🧠ANSWER ✔✔5 Principles: 1.) Integrity and Ethical
Values (Tone at the Top) 2.) Oversight by Board 3.) Reporting lines and
structure 4.) Retain competent individuals 5.) Hold individuals accountable
Risk Assessment - 🧠ANSWER ✔✔Specifies objective with clarity to enable
the identification and assessment of risks.
Identifies and analyzes risks.
Considers potential for fraud.
Identifies changes that could affect internal control.
Management's responsibility to assess risk.
Control Activities - 🧠ANSWER ✔✔Helps ensure that management
directives are carried out. These are preventive or detective.
Verified | Ace the Test
SU 1 (18% of test) - 🧠ANSWER ✔✔Corporate Governance
Basic Corporate Documents - 🧠ANSWER ✔✔Articles of Incorporation:
Corp's name, # Share authorized, Address of Registered Office, Name of
Registered Agent, Name and Address of each incorporator
Filed with secretary of state
Articles of Incorporation are general.
Bylaws: contain information about managing affairs of corporation. Bylaws
are detailed.
,Common and Preferred Shareholders - 🧠ANSWER ✔✔Common have
contributed basic capital for the corporation to carry on business. Preferred
have a contractual right to dividends and liquidation rights before common
shareholders.
Board of Directors - 🧠ANSWER ✔✔Board acts on behalf of S/H. Major
decisions made by board. Board selects officers. Board declares dividends.
Directors owe a fiduciary duty to corporation.
Business Judgment Rule - 🧠ANSWER ✔✔Protects and officer or director
from honest mistakes of judgment.
Corporate Opportunity - 🧠ANSWER ✔✔Director must give corporation first
right of refusal.
SOX Reporting - 🧠ANSWER ✔✔Targets officers, BOD, and Public Auditors
It is applicable to issuers. Each member of audit committee must be an
independent member of BOD (cannot receive compensation from corp.)
One must be a financial expert.
Audit Committee reports to BOD not management. PCAOB regulates
accounting profession.
,Sec 302 of SOX - 🧠ANSWER ✔✔CEO and CFO certify financial statements
free from material misstatements, responsible for system of internal
controls, and informed audit committee of any deficiencies. Also report any
fraud whether or not material.
Sec 404 of SOX - 🧠ANSWER ✔✔Name internal control model must be
named and management has taken responsibility for establishing system of
internal controls.
Sec 802, 906, 1103, 1107 - 🧠ANSWER ✔✔802: Criminal Penalties for
destroying documents
906: Fines and Jail Time for certifying noncomplying filings
1107: Jail time for retaliation against informants
COSO Model of Internal Control - 🧠ANSWER ✔✔Widely recognized as
standard for internal control system.
3 Objectives of Control - 🧠ANSWER ✔✔Operations, Reporting, Compliance
(ORC)
Operations include the safeguarding of an entity's assets. Reporting relates
to information needed by users to make sounds financial decisions.
Compliance deals with rules and regulations that should be complied with.
3
COPYRIGHT©JOSHCLAY 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY
STATEMENT. ALL RIGHTS RESERVED
, Internal Control does not provide absolute assurance.
Breakdowns: employee carelessness, management overwrite, collusion
Components of Internal Control - 🧠ANSWER ✔✔CRIME
Control Environment, Risk Assessment, Control Activities, Information and
Communication, Monitoring
Control Environment - 🧠ANSWER ✔✔5 Principles: 1.) Integrity and Ethical
Values (Tone at the Top) 2.) Oversight by Board 3.) Reporting lines and
structure 4.) Retain competent individuals 5.) Hold individuals accountable
Risk Assessment - 🧠ANSWER ✔✔Specifies objective with clarity to enable
the identification and assessment of risks.
Identifies and analyzes risks.
Considers potential for fraud.
Identifies changes that could affect internal control.
Management's responsibility to assess risk.
Control Activities - 🧠ANSWER ✔✔Helps ensure that management
directives are carried out. These are preventive or detective.
