Regarding an Organization's Decision to Retain an External Audit Firm

question 104

Multiple Choice

Regarding an organization's decision to retain an external audit firm, the chief audit executive (CAE) should:

• A) Work with the organization's chief financial officer to evaluate the external auditor's performance and together make the decision.
• B) Not be involved in this decision process as it would compromise the CAE's objectivity.
• C) Evaluate the external auditor's performance and retain the external auditor if quality and cost criteria are met.
• D) Assist the audit committee by facilitating the development of an appropriate evaluation process.

Recognize the classification of various operational costs including selling, administrative, and manufacturing overhead.

Understand the concepts of opportunity, fixed, variable, and step-variable costs and how they behave.

Identify the cost behavior in terms of variable and fixed costs and the impact of activity level changes on these costs.

Delineate the concepts of committed fixed costs and the relevant range for cost behavior analysis.

---

Definitions:

Fibrous Tissue

A type of connective tissue composed mainly of collagen fibers, providing structural support and strength to organs and body structures.

Sporting Accident

An unexpected and unfortunate incident that occurs during sports activities, potentially leading to injuries.

Ligament

Bands of tough, elastic connective tissue that connect bones to other bones, stabilizing joints and supporting anatomical movements.

Tendon

A fibrous connective tissue that attaches muscle to bone, facilitating movement.