📝 Sarbanes-Oxley Act (SOX) MCQ — CMA Exam | CMA Course

Why It Matters

Knowing that the audit committee, not management, hires external auditors is crucial for passing CMA/CPA exams and for ensuring corporate governance compliance under SOX.

Key Takeaways

• Audit committee, not management, hires external auditor under SOX.
• Shareholders vote board; they don’t directly hire auditors.
• CEO and CFO are both senior management, thus ineligible.
• Independence of auditor is protected by board sub‑committee oversight.
• Audit committee can resolve disputes between auditors and management.

Summary

The video tackles a multiple‑choice question on the Sarbanes‑Oxley Act (SOX): who is responsible for hiring the external auditor? It walks viewers through the four answer options—shareholders, CEO, CFO, and audit committee—explaining why only one aligns with SOX requirements. Key insights include eliminating shareholders because they merely elect the board, and recognizing that the CEO and CFO are both senior management, making them interchangeable and therefore unsuitable. The correct answer is the audit committee, a sub‑group of the board tasked with hiring, compensating, and dismissing the external auditor to preserve auditor independence. The instructor emphasizes that management runs day‑to‑day operations, while the board represents ownership. Allowing management to select its auditor would compromise independence, so the audit committee, independent of management, performs that function. He quotes the lecture: “the audit committee … hires, compensates and fires the external auditor,” and notes that any auditor‑management disputes are escalated to this committee. For CMA and CPA candidates, understanding this governance rule is essential for exam success and for real‑world compliance. It underscores the broader principle that auditor independence is safeguarded by board‑level oversight, a cornerstone of corporate accountability under SOX.

Original Description

This MCQ practice session delivers a rigorous evaluation of the Sarbanes-Oxley Act (SOX), testing your ability to analyze mandatory internal controls and enhanced financial disclosure requirements. Mastering these stringent regulatory frameworks is critical for assessing corporate governance and auditor independence, equipping you with the vital compliance expertise required to pass your Certified Management Accountant Exam and excel throughout your CMA Course.

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✅ Mapped to your CPA course (Becker, UWorld, Gleim, Miles, Surgent & more)

✅ In-depth explanations of key concepts

✅ Tons of MCQs (including AICPA)

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❌ Not a replacement for your CPA course — a powerful supplement

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