A Material Weakness Will Always Exist When a Company Has

question 45

Multiple Choice

A material weakness will always exist when a company has:

• A) a decentralized structure and authority is shared in a system of matrix management.
• B) an audit committee that provides ineffective oversight of financial reporting and ICFR.
• C) a corporate culture with a strong emphasis on achieving profitability.
• D) inexperienced workers serving in demanding positions.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including direct materials, direct labor, and manufacturing overhead.

Income Summary Account

An account used in the closing process that summarizes the revenues and expenses of a period, ultimately transferring the net income or loss to retained earnings.

Accounting Period

The time span for which financial statements are prepared, typically a year, a quarter, or a month.

Actual Manufacturing Overhead

The real expenses incurred during the manufacturing process, excluding direct labor and raw material costs, such as utilities, depreciation, and maintenance.