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Appendix I - The Sarbanes-Oxley Act, Internal Controls, and Management Accounting
App I-1
APPENDIX I
The Sarbanes-Oxley Act, Internal Controls, and
Management Accounting
ANSWERS TO REVIEW QUESTIONS
I-1 The Sarbanes-Oxley Act of 2002 was enacted by the U.S. Congress to bring about
I-2 Internal controls over financial reporting refers to the broad set of policies,
processes, and procedures that enable both the organization’s management and
I-3 The Public Company Accounting Oversight Board (PCAOB) is an agency established
I-4 SOX 302 is a section of the Sarbanes-Oxley Act, which requires the signing officers
I-5 SOX 404 is a section of the Sarbanes-Oxley Act, which requires a company to
I-6 SOX sections 302 and 404 are controversial because they place a great burden on
businesses to document and report on their internal controls over financial
Appendix I - The Sarbanes-Oxley Act, Internal Controls, and Management Accounting
App I-2
SOLUTIONS TO EXERCISES
EXERCISE I-7 (15 MINUTES)
Answers will vary depending on each students work experience and the college the student
EXERCISE I-8 (15 to 30 MINUTES)
EXERCISE I-9 (30 MINUTES)
EXERCISE I-10 (30 to 45 MINUTES)
EXERCISE I-11 (15 MINUTES)
Some observers have suggested that it is unrealistic to expect a company to regularly
EXERCISE I-12 (15 MINUTES)
The company’s internal control system is flawed. The same employee is responsible for
App I-3
EXERCISE I-12 (CONTINUED)
records and the count.
SOX sections 302 and 404 require the company’s management to establish, maintain,
EXERCISE I-13 (20 MINUTES)
The accounting adjustments contemplated by John Winslow are unethical because they will
