Financial Reporting and the Securities and Exchange Commission

1.  Which one of the following is not a division of the SEC?

A) The Division of Corporation Finance. 

B) The Division of Investment Management. 

C) The Division of Compliance Information. 

D) The Division of Enforcement. 

E) The Division of Trading and Markets. 

Answer: C

Learning Objective: 12-01  

Topic: About the Securities and Exchange Commission―SEC

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

[QUESTION]

2.  The goals of the SEC include all except which one of the following?

A) Prohibiting the dissemination of materially misstated information.

B) Controlling the number of companies whose stock is listed on major stock exchanges.

C) Regulating the operation of securities markets.

D) Ensuring that full and fair information is disclosed to all investors before the securities of a company may be bought and sold.

E) Preventing the misuse of information especially by inside parties.

Answer: B

Learning Objective: 12-02  

Topic: Federal securities laws―Purpose

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

 

[QUESTION]

3.  Which one of the following Federal laws was enacted in 1935?

A) The Securities Act.

B) The Securities Exchange Act.

C) The Trust Indenture Act.

D) The Investment Company Act.

E) The Public Utility Holding Company Act.

Answer: E

Learning Objective: 12-02

Topic: Federal securities laws―Specific laws   

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

 

[QUESTION]

4.  Regulation S-K:

A) Controls the listing of securities by stock exchanges.

B) Establishes requirements for nonfinancial information to be filed with the SEC.

C) Prescribes the form of financial statements to be filed with the SEC.

D) Describes the internal controls a publicly traded company must maintain.

E) Prescribes the financial disclosure information that must be included in filings with the SEC.

Answer: B

Learning Objective: 12-02  

Topic: SEC requirements―Regulations S-K and S-X

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

[QUESTION]

5.  Which of the following are issued by the SEC, as needed, to supplement Regulation S-X and Regulation S-K?

A) SABs.

B) ASRs.

C) FRRs.

D) ARBs.

E) SRBs.

Answer: C

Learning Objective: 12-04  

Topic: The SEC authority over establishing GAAP

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

[QUESTION]

6.  Regulation S-X specifies:

A) Requirements for the nonfinancial information to be filed with the SEC.

B) Which form a company must file to register new securities.

C) That the financial statements included in a company’s annual report must be audited.

D) The form and content of financial statements to be filed with the SEC.

E) The internal controls a publicly traded company must maintain.

Answer: D

Learning Objective: 12-02  

Topic: SEC requirements―Regulations S-K and S-X

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

[QUESTION]

7.  Which one of the following forms is used when no other form is prescribed?

A) S-4.

B) S-3.

C) S-11.

D) S-8.

E) S-1.

Answer: E

Learning Objective: 12-05   

Topic: Issuer filings with SEC―Registration statements

Difficulty: 2 Medium  

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

[QUESTION]

8.  A wraparound filing: 

A) May be used by large companies to sell securities over a period of two years without re-filing with the SEC.

B) Is a simplified registration procedure for securities to be issued by small companies.

C) Allows a company to simplify its periodic filing by attaching its annual report to Form 10-K.

D) Is a filing completed using the SEC’s electronic filing system.

E) May remain in effect for a period of one to five years.

Answer: C

Learning Objective: 12-06  

Topic: Issuer filings with SEC―Periodic-10K-10Q-8K

Difficulty: 2 Medium 

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

 

[QUESTION]

9.  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?

A) S-11.

B) S-3.

C) S-8.

D) S-4.

E) S-1.

Answer: B

Learning Objective: 12-05  

Topic: Issuer filings with SEC―Registration statements

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

  

[QUESTION]

10.  What is Form 10-K?

A) A quarterly report filed with the SEC.

B) An annual report filed with the SEC.

C) A semiannual report filed with the SEC.

D) A form filed with the SEC before the company issues stock for the first time.

E) A form filed with the SEC before issuing stocks to acquire another company.

Answer: B

Learning Objective: 12-06  

Topic: Issuer filings with SEC―Periodic-10K-10Q-8K

Difficulty: 1 Easy

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

  

[QUESTION]

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

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.

Answer: E

Learning Objective: 12-06   

Topic: Issuer registration―Procedures

Difficulty: 2 Medium 

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

 

[QUESTION]

12.  When must Form 8-K be filed with the SEC?

A) Within forty-five days of the end of any quarter other than the fourth quarter of the fiscal year.

B) Within ninety days of the end of the fiscal year.

C) Within fifteen days of the occurrence of certain significant events.

D) Within sixty days of the end of the fiscal year.

E) When a relatively small company intends to issue securities.

Answer: C

Learning Objective: 12-06  

Topic: Issuer filings with SEC―Periodic-10K-10Q-8K

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

 

[QUESTION]

13.  Which of the following securities offerings is not exempt from registration prior to their sale?

A) Securities issued to a company’s board of directors.

B) Securities issued by governments.

C) Securities issued by banks.

D) Securities issued by savings and loan associations.

E) Offerings of no more than $1 million made to any number of investors within a 12-month period.

Answer: A

Learning Objective: 12-06  

Topic: Issuer registration―Securities exemptions

Difficulty: 2 Medium  

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

[QUESTION]

14.  Lechter Co. is preparing to issue stock.  Its revenues for last year were $85,000,000, and it had $52,000,000 in stock held by non-affiliates.  The company had been filing with the SEC for two years.  Which one of the following forms should have been used for registration?

A) S-1.

B) S-3.

C) S-4.

D) S-8.

E) S-11.

Answer: A

Learning Objective: 12-05  

Topic: Issuer filings with SEC―Registration statements

Difficulty: 2 Medium

Blooms: Understand

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

 

[QUESTION]

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

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.

Answer: C

Learning Objective: 12-06  

Topic: Issuer filings with SEC―Periodic-10K-10Q-8K

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

  

[QUESTION]

16.  The SEC’s operating costs are supported through

A) Tax revenues of the federal government.

B) Registration fees from issuers offering securities to the public.

C) Fees paid by stock exchanges.

D) Fees paid by stockbrokers.

E) Fees paid by accounting firms that practice before the SEC.

Answer: B

Learning Objective 12-01

Learning Objective: 12-05  

Topic: About the Securities and Exchange Commission―SEC

Topic: Issuer filings with SEC―Define and describe

Difficulty: 2 Medium 

Blooms: Understand

AACSB: Reflective Thinking

AICPA: BB Legal

[QUESTION]

17.  A proxy statement must be filed with the SEC at least how many days before being distributed?

A) 30 days.

B) 60 days.

C) 10 days.

D) 90 days.

E) 7 days.

Answer: C

Learning Objective: 12-06  

Topic: Issuer filings with SEC―Periodic-10K-10Q-8K-Proxy

Difficulty: 2 Medium  

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

[QUESTION]

18.  The SEC has usually restricted its role in establishing accounting principles to

A) Specifying the information that should be included in interim financial statements.

B) Developing definitions of key accounting terms.

C) Developing accounting standards for particular industries.

D) Determining required disclosures.

E) The promulgation and issuance of SASs (Securities Accounting Standards).

Answer: D

Learning Objective: 12-04  

Topic: SEC authority over establishing GAAP

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

 

[QUESTION]

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

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.

Answer: E

Learning Objective: 12-02  

Topic: SEC requirements―Proxy and annual report

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

AICPA: FN Measurement

[QUESTION]

20.  When would a letter of comments be issued by the SEC?

A) To request clarification of a registration statement.

B) To convey your pertinent comments to the SEC.

C) In response to a company’s filing of Form 8-K.

D) After receiving the company’s Form 10-K.

E) To indicate that a registration statement has been approved.

Answer: A

Learning Objective: 12-06  

Topic: Issuer registration―Procedures

Difficulty: 1 Easy

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

  

[QUESTION]

21.  Which one of the following regulates the initial offering of securities by a company or underwriter?

A) The Securities Act of 1933.

B) The Securities Exchange Act of 1934.

C) The Investment Company Act of 1940.

D) The Investment Advisers Act of 1940.

E) The Sarbanes-Oxley Act of 2002.

Answer: A

Learning Objective: 12-02  

Topic: Federal securities laws―Specific laws

Difficulty: 1 Easy

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

  

[QUESTION]

22.  Which one of the following prohibits fraudulent and unfair behavior such as sales practice abuses and insider trading?

A) The Securities Act of 1933.

B) The Securities Exchange Act of 1934.

C) The Investment Company Act of 1940.

D) The Investment Advisers Act of 1940.

E) The Sarbanes-Oxley Act of 2002.

Answer: B

Learning Objective: 12-02  

Topic: Federal securities laws―Specific laws

Difficulty: 1 Easy

Blooms: Remember

AACSB: Ethics

AICPA: BB Legal

 

[QUESTION]

23.  Which one of the following requires the maintenance of accounting records and adequate internal accounting controls?

A) The Securities Act of 1933.

B) The Securities Exchange Act of 1934.

C) The Investment Company Act of 1940.

D) The Foreign Corrupt Practices Act of 1977.

E) Insider Trading Sanctions Act of 1984.

Answer: D

Learning Objective: 12-02  

Topic: Federal securities laws―Specific laws

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

  

[QUESTION]

24.  Which one of the following is not a characteristic of the Public Company Accounting Oversight Board?

A) Minimizes self-regulation in the accounting profession.

B) Has the authority to amend, modify, repeal, or reject any audit standard of the ASB.

C) Only one member can be an accountant, past or present.

D) SEC has oversight and enforcement authority over the Board.

E) Enforces auditing, quality control, and independence standards and rules.

Answer: C

Learning Objective: 12-03  

Topic: Public Accounting Oversight Board―PCAOB

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal

 

[QUESTION]

25.  Which statement is false regarding the registration of public accounting firms with the PCAOB?

A) Registration is required of all U.S. firms that prepare, issue, or participate in the preparation of an audit report for an entity that issues securities.

B) Foreign accounting firms are exempt from registration.

C) Disclosure requirements include annual fees received from each issuer for the firm’s audit and non-audit services.

D) The Public Company Accounting Oversight Board subjects registered firms to periodic inspections.

E) Information regarding disagreements between the issuer and the audit firm during the previous year must be disclosed.

Answer: B

Learning Objective: 12-03  

Topic: Public Accounting Oversight Board―PCAOB

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Legal