The Sarbanes-Oxley Act (SOX)forced Companies to Validate Their Internal Financial

question 70

Multiple Choice

The Sarbanes-Oxley Act (SOX) forced companies to validate their internal financial control processes by:

• A)putting strict limits on the amount of non-audit fees (consulting or otherwise)that an accounting firm can earn from a firm that it audits.
• B)requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports.
• C)requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them.
• D)requiring senior management and the boards of public companies to validate and certify the process through which funds are allocated and controlled.

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Definitions:

Laffer Effect

Refers to the economic theory proposing that there is an optimal tax rate that maximizes government revenue without hindering economic growth.

Labor Supply Curve

A graphical representation of the relationship between the quantity of labor supplied and the wage rate in an economy.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, calculated as the percentage change in quantity demanded divided by the percentage change in price.

Logarithmic Scales

Logarithmic scales are a way of displaying data on graphs where the scale is divided according to orders of magnitude, so each step on the scale represents a tenfold change in the data.