CFO Corporate Governance & Compliance Flashcards

Which U.S. federal law requires CEOs and CFOs to personally certify the accuracy of financial reports filed with the SEC?

Answer: Sarbanes-Oxley Act (SOX)

SOX Section 302 and 906 require CEOs and CFOs to certify that financial statements fairly present the company's financial condition.

What is the primary role of an audit committee within a company's board of directors?

Answer: Oversee financial reporting and internal controls

The audit committee oversees the integrity of financial reporting, internal controls, and the relationship with external auditors.

Under SOX Section 404, what must management annually assess and report on?

Answer: The effectiveness of internal controls over financial reporting

SOX 404 mandates that management assess and report on the effectiveness of the company's internal controls over financial reporting (ICFR).

Which governance framework is most widely used to design and evaluate a company's internal control system?

Answer: COSO Framework

The COSO (Committee of Sponsoring Organizations) Internal Control – Integrated Framework is the standard benchmark for internal control design and evaluation.

What does 'tone at the top' refer to in corporate governance?

Answer: The ethical climate set by senior leadership that influences organizational culture

Tone at the top describes the ethical leadership style of executives and the board, which shapes the organization's overall culture and compliance behavior.

Which of the following best describes a 'material weakness' in internal controls?

Answer: A deficiency that results in a reasonable possibility of material misstatement going undetected

A material weakness is a significant deficiency (or combination) where there is a reasonable possibility that a material misstatement will not be prevented or detected on a timely basis.