Term
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Definition
| Two or more persons who are engaged in business as co-owners |
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Term
| limited liability company |
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Definition
| a non-corporate business entity whose owners (members) have limited liability and can participate actively in its management |
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Term
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Definition
The most common form of business organization.
Chartered by a state and given many legal rights as an entity separate from its owners.
Characterized by the limited liability of its owners, the issuance of shares of easily transferable stock and existence as a going concern. |
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Term
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Definition
| The process of becoming a corporation |
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Term
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Definition
| gives the company separate legal standing from its owners and protects those owners from being personally liable in the event that the company is sued |
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Term
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Definition
| Shares of stock are usually held by a small number of persons, frequently relatives or friends |
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Term
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Definition
| Refers to the method by which a corporation is being governed, directed, administered or controlled and to the goals for which it is being governed |
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Term
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Definition
| Directors must exercise the care of an ordinarily prudent and diligent person in a like position, under similar circumstances |
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Term
| shareholders power to remove directors |
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Definition
Common Law - Can Remove for Cause
Bylaws or Articles May Permit Removal Without Cause
Some Statutes Permit Removal Without Cause |
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Term
| board of directors power to remove board members |
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Definition
Common Law – Cannot Remove With or Without Cause
Statutes – May Permit Removal for Limited Reasons (i.e., conviction of a felony) |
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Term
| shareholder approval required for change |
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Definition
| amendment to the articles of incorporation, merger, sale of substantially all assets and dissolution. |
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Term
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Definition
| a power granted by a shareholder to another person to exercise the shareholder’s voting rights. The term “_______” is also sometimes applied to the person to whom the power is given, but such person is often referred to as the "_____ holder" |
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Term
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Definition
| Interested in the firm’s financial performance. |
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Term
| social activist shareholder |
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Definition
| Pressuring firms to adopt their postures on social causes |
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Term
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Definition
Information filed at regular and
frequent intervals that contains information that might affect investment decisions |
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Term
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Definition
Limits the nonauditing services an auditor can provide
Enhances financial disclosure with requirements, such as:
reporting off-balance sheet transactions
prohibiting personal loans to executives and directors
requiring auditors to assess and report upon internal controls
Audit committees must have at least one financial expert
CEOs and CFOs certify and are held responsible for financial representations
Whistle-blowers are afforded protection
Code of Ethics disclosure
Requires auditing firms to rotate the auditors working with specific companies
Makes it unlawful for accounting firms to provide services where conflicts of interests exist |
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Term
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Definition
| Defined as a process designed by, or under the supervision of, the company’s principal executive and financial officers, or persons performing similar functions, and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. |
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Term
| require compliance program |
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Definition
| SOX Section 301, 406 and related SEC rules regarding audit committee complaint procedures and codes of ethics |
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Term
| 6 steps in implementing a code of ethics |
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Definition
distribute internally & externally
assist employees in understanding
specify management’s role
make employee’s responsible for understanding the code
establish grievance procedures
provide a concluding statement |
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Term
| what SEC considers when determining whether to bring charges and what charges to bring |
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Definition
What compliance procedures were in place to prevent the misconduct and why those procedures failed
Where in the organization the misconduct occurred and how high up was knowledge of the misconduct
Whether the behavior was systemic or symptomatic |
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Term
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Definition
| A shareholder rights plan aimed at discouraging or preventing a hostile takeover |
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Term
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Definition
| A contract in which a corporation agrees to make payments to key officers in the event of a change in control of the corporation |
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Term
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Definition
| Using critical information from inside a company and using that information for one’s own personal financial gain. |
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