Each Year, Most US Companies Bring a CPA Firm to Audit

question 26

Multiple Choice

Each year, most US companies bring a CPA firm to audit their books. This is an example of:

• A) how most companies do not trust their managers.
• B) separation of decision management and decision control.
• C) the impact of influence costs.
• D) the benefits of decentralization or outsourcing.

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Definitions:

Cost of Equity

The return a firm theoretically pays to its equity investors to compensate them for the risk they undertake by investing their capital.

WACC

Weighted Average Cost of Capital; an estimation of a corporation's cost of capital, with each capital category being weighted in proportion.

Cost of Equity

The return that shareholders require on their investment in the company, often estimated using models such as the Capital Asset Pricing Model (CAPM).