Which of the Following Is the Most Important Limitation on the Effectiveness

question 437

Multiple Choice

Which of the following is the most important limitation on the effectiveness of audit committees?

• A) Audit committees may be composed of independent directors; however, those directors may have close personal and professional friendships with management.
• B) Audit committee members are compensated by the organization and thus favor a stockholder view.
• C) Audit committees devote most of their efforts to external audit concerns and do not pay much attention to internal auditing and the overall control environment.
• D) Audit committee members do not normally have degrees in the accounting or auditing fields.

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Definitions:

Equivalent Units

A concept used in process costing that converts partially completed units into an equivalent number of fully completed units to accurately measure inventory and cost of goods sold.

Weighted-Average Method

A method of costing inventory that determines the cost of goods sold and the closing inventory by averaging the cost of all items available for sale throughout the period.

Ending Inventory

The worth of merchandise on hand for purchase at the conclusion of a financial period.

Equivalent Units

Equivalent units are a calculation in process costing that converts partially completed units into a number of equivalent fully completed units.