Certified Public Accountant Regulatory Frameworks & Compliance 5 — Questions and Answers
Question 1: Under the AML/BSA framework, a Suspicious Activity Report (SAR) must be filed within how many days of detecting a suspicious transaction?
- 15 calendar days
- 30 calendar days (Correct answer)
- 45 calendar days
- 60 calendar days
Correct answer: 30 calendar days
Financial institutions must file a SAR within 30 calendar days of the date they initially detect facts that may constitute a basis for filing.
Question 2: Under the Sarbanes-Oxley Act Section 301, audit committees of public companies must be directly responsible for which of the following?
- Preparing the company's financial statements
- Appointing, compensating, and overseeing the external auditor (Correct answer)
- Approving all executive compensation packages
- Filing the company's annual report with the SEC
Correct answer: Appointing, compensating, and overseeing the external auditor
SOX Section 301 requires audit committees to be directly responsible for the appointment, compensation, and oversight of the external auditor.
Question 3: Which of the following best describes the purpose of Regulation FD (Fair Disclosure) issued by the SEC?
- Requiring fair and complete disclosures in audit reports
- Prohibiting selective disclosure of material nonpublic information to certain investors (Correct answer)
- Mandating fair pricing in securities transactions
- Requiring equal treatment of shareholders in mergers
Correct answer: Prohibiting selective disclosure of material nonpublic information to certain investors
Regulation FD prohibits companies from selectively disclosing material nonpublic information to institutional investors or analysts without simultaneously disclosing it publicly.
Question 4: A CPA serving as a tax advisor identifies a 'listed transaction' that their client has participated in. Under Circular 230, what must the CPA disclose?
- Nothing, as client confidentiality prohibits disclosure
- The transaction to the IRS Office of Tax Shelter Analysis (OTSA) (Correct answer)
- The transaction to the SEC within 30 days
- The transaction to the AICPA ethics hotline
Correct answer: The transaction to the IRS Office of Tax Shelter Analysis (OTSA)
Circular 230 requires material advisors who organize or sell listed transactions to file disclosure statements with the IRS Office of Tax Shelter Analysis.
Question 5: Under the Federal Sentencing Guidelines, which factor is most significant in reducing organizational culpability scores for compliance program effectiveness?
- The organization's annual revenue
- Having an effective ethics and compliance program in place before the offense (Correct answer)
- The number of years the company has been in business
- The company's market share in its industry
Correct answer: Having an effective ethics and compliance program in place before the offense
Under the Federal Sentencing Guidelines, having an effective compliance and ethics program before the offense can significantly reduce an organization's culpability score and fines.
Question 6: Which statement correctly describes the difference between a 'review' and an 'audit' engagement under professional standards?
- Both provide the same level of assurance but differ in cost
- A review provides limited assurance while an audit provides reasonable assurance (Correct answer)
- A review requires testing of internal controls; an audit does not
- An audit provides limited assurance while a review provides reasonable assurance
Correct answer: A review provides limited assurance while an audit provides reasonable assurance
A review provides limited (negative) assurance based primarily on inquiry and analytical procedures, while an audit provides reasonable (positive) assurance through more extensive testing.
Question 7: Under ERISA's fiduciary duty standards, a plan fiduciary who breaches their duty of loyalty is personally liable for:
- Only the plan's administrative expenses incurred during the breach period
- Restoring losses to the plan and disgorging any profits made through the breach (Correct answer)
- A fixed statutory penalty of $10,000 per violation
- Criminal penalties only, with no civil liability
Correct answer: Restoring losses to the plan and disgorging any profits made through the breach
ERISA Section 409 makes fiduciaries personally liable to restore all losses caused by the breach and to disgorge any profits they personally made from the breach.
Certified Public Accountant Regulatory Frameworks & Compliance 5
Under the AML/BSA framework, a Suspicious Activity Report (SAR) must be filed within how many days of detecting a suspicious transaction?