978-0078025877 Chapter 14 Solution Manual Part 1

Chapter 14 – SEC Reporting

Q14-1 The basis of the SEC’s legal authority to regulate accounting principles stems

Q14-2 The Securities Act of 1933 regulates the initial registration of securities. The

Q14-3 The Division of Corporation Finance receives the registration statements of

Q14-4 The Foreign Corrupt Practice Act of 1977 requires that companies maintain

accurate accounting records and an adequate system of internal control. An adequate

system of internal control should contain the following:

a.

Strong budgetary controls

b.

An objective internal audit function that helps develop, document, and

then monitor the control system

c.

An active audit committee comprised of nonmanagement members from

the company’s board of directors

d.

A review of the internal control system by the independent auditors

*The FCPA indicated that the cost of an internal control procedure should

not outweigh its benefit to the firm

Q14-5 Regulation S-X covers the form and content of financial disclosures; specifically,

this Reg. covers the form and content of financial statements, schedules, footnotes,

Q14-6 Two types of public offerings of securities are exempted from the

comprehensive registration requirements of the SEC. The first type of offering exempted

Q14-7 A company uses a Form S-1 registration form when the general registration is

for a first-time offering and no other publicly traded stock has been issued by that

for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted

on a website in whole or part.

Q14-8 (a) A customary review is a thorough examination by the SEC and may result in

acceptance of the registration or a comment letter from the SEC.

(b) A comment letter is issued by the SEC specifying the deficiencies that must be

Q14-9 Form 10-K is the annual filing to the SEC, and is broken into four parts. Parts I, II,

and III contain the basic financial information including the audited financial statements,

the management discussion and analysis, the report by management on internal control,

Q14-10 Interim reports submitted to the SEC are not required to be audited. The public

Q14-11 In 2004, the SEC enlarged the list of items that must be reported on the Form 8-

1.03.

The bankruptcy or receivership of the company

2.01.

Completion of the acquisition or disposition of assets

2.02.

Public announcement of material financial results

2.03.

Creation of a direct financial obligation under an off-balance sheet

arrangement

2.04.

An event that accelerates or increases an obligation under an off-balance

sheet arrangement

2.05.

Costs associated with exit or disposal activities

2.06

Material impairments of assets

4.01

Changes in the registrant’s certifying accountant

4.02

Non-reliance on previously issued financial statements or audit report

5.03

Changes in the registrant’s fiscal year

Q14-12 A proxy is a request by the company, or by a stockholder, for a security holder’s

vote on a corporate matter. Proxy solicitations must include a full discussion of the

Q14-13 Part I of the Foreign Corrupt Practices Act (FCPA) prohibits individuals

associated with United States companies from giving bribes to foreign governmental or

political officials for the purpose of securing a contract or otherwise increasing the

Q14-14 The MD&A must include a discussion of trends and expected changes on the

company’s financial condition, changes in financial condition, and its results from

for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted

on a website in whole or part.

C14-1 Objectives of Securities Acts [CMA Adapted]

a. Investment practices of the 1920s that contributed to the erosion of the stock

market include the following:

– The prices of securities were manipulated through the use of “wash sales” or

b. 1. The objectives of the Securities Act of 1933 are to:

– provide investors with financial and other information concerning the initial

2. The objectives of the Securities Exchange Act of 1934 are to:

– regulate the trading of securities on secondary markets by requiring the

registration of securities traded on any national exchange.