Red and Green,CPAs Are the External Auditors for Blue Corporation,a

question 34

Multiple Choice

Red and Green,CPAs are the external auditors for Blue Corporation,a publicly-held company.Blue Corporation has outsourced its internal audit function to Red and Green.Which of the following statements is true?

• A)Doing internal audit work does not impair the independence of Red and Green.
• B)The independence of Red and Green is impaired only if employees of Red and Green act in a management capacity or make management decisions.
• C)The independence of Red and Green is impaired only if a member of Red and Green's engagement team is hired to manage an accounting function in Blue Corporation.
• D)Public accounting firms cannot be both the internal and external auditors for publicly-held companies and maintain independence.

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Definitions:

Total Contribution Margin

This refers to the total amount of revenue left over after deducting all variable costs, indicating the total contribution towards covering fixed costs and generating profit.

Break-even Point

The point at which total revenue equals total costs, resulting in no profit or loss for the business.

Sales Mix

The combination of different products or services that a company sells, which impacts the overall profitability.

Contribution Margin Ratio

A ratio that measures the percentage of sales revenue available to cover fixed expenses and generate profit, calculated as the contribution margin divided by sales revenue.