The Securities and Exchange Commission (SEC) was established in1934 to help regulate the U.S. securities market. Which of the following statements is true concerning the SEC?
a.The SEC prohibits the sale of speculative securities.
b.The SEC regulates only securities offered for public sale.
c.Registration with the SEC guarantees the accuracy of the registrant’s prospectus.
d.The SEC’s initial influence and authority has diminished in recent years as the stock exchanges have become more organized and better able to police themselves.
12.One of the major purposes of federal security regulation is to
a.Establish the qualifications for accountants who are members of the profession
b.Eliminate incompetent attorneys and accountants who participate in the registration of securities to be offered to the public
c.Provide a set of uniform standards and test for accountants, attorneys, and others who practice before the Securities and Exchange Commission
d.Provide sufficient information to the investing public who purchases securities in the marketplace
13.Under the Securities Act of 1933, subject to some exceptions and limitations, it is unlawful to use the mails or instruments of interstate commerce to sell or offer to sell a security to the public unless
a.A surety bond sufficient to cover potential liability to investors is obtained and filed with the Securities and Exchange Commission
b.The offer is made through underwriters qualified to offer the securities on a nationwide basis
c.A registration statement has been properly filed with the Securities and Exchange Commission, has been found to be acceptable, and is in effect
d.The Securities and Exchange Commission approves of the financial merit of the offering
14.Major, Major, and Sharpe, CPA’s, are the auditors of MacLain industries. In connection with the public offering of $10 million of MacLain securities, Major expressed an unqualified opinion as to the financial statements. Subsequent to the offering, certain misstatements and omissions are revealed. Major has been sued by the purchasers of the stock offered pursuant to the registration statement, which include the financial statements audited by Major. In the ensuing lawsuit by the MacLain investors, Major will be able to avoid liability if
a.The errors and omissions were caused primarily by MacLain
b.It can be shown that at least some of the investors did not actually read the audited financial statements
c.It can prove due diligence in the audit of the financial statements of MacLain
d.MacLain had expressly assumed any liability in connection with the public offering
15.A major impact of the Foreign Corrupt Practices Act of 1977 is that registrants subject to the Securities Exchange Act of 1934 are now required to
a.Keep records which reflect the transactions and dispositions of assets and maintain a system of internal accounting controls
b.Provide access to records by authorized agencies of the federal government
c.Records all correspondence with foreign nations
d.Prepare financial statements in accordance with international accounting standards
16.The Securities and Exchange Commission’s fraud rule prohibits trading on the basis of inside information of a business corporation’s stock by
b.Officers and directors
c.All officers, directors, and stockholders
d.Officers, directors, and beneficial holders of 10 percent of the corporation’s stock
17.A CPA is subject to a criminal ability if the CPA
a.Refuses to turn over the working papers to the client
b.Performs an audit in a negligent manner
c.Willfully omits a material fact required to be stated in a registration statement
d.Willfully breaches the contract with the client
18.For interim financial reporting, an inventory loss from a temporary market decline in the first quarter which can reasonably be expected to be restored in the fourth quarter
a.Should be recognized as a loss proportionately in each of the first, second, third, and fourth quarters
b.Should be recognized as a loss proportionately in each of the first, second, and third quarters
c.Need not be recognized as a loss in the first quarter
d.Should be recognized as a loss in the first quarter
19.An inventory loss from a market decline occurred in the first quarter that was not expected to be restored in the fiscal year. For interim financial reporting purposes, how would the dollar amount of inventory in the balance sheet be affected in the first and fourth quarters?
First QuarterFourth Quarter
a. Decrease No effect
b. Decrease Increase
c. No effect Decrease
d. No effect No effect
20. Footnotes to a company’s financial statements are used to
a.More fully explain certain items in the financial statements.
b.Reflect financial notes personalized by the company’s executive team.
c.Show the detail of salaries of every employee.
d.Justify fraudulent business practices.
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