Which of the Following Is a Strong Indicator That a Material

question 28

Multiple Choice

Which of the following is a strong indicator that a material weakness in internal control exists?

• A)Restatement of previously issued financial statements to reflect a correction.
• B)Inadequate controls over non-routine transactions.
• C)Inadequate controls over the period-end financial reporting process.
• D)Weaknesses in a control activity.

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Definitions:

Principal-Agent Problem

The principal-agent problem occurs when there is a conflict of interest between a principal (owner or shareholder) and an agent (manager or executive) due to differing goals, with the agent potentially making decisions that benefit themselves at the expense of the principal.

Public Choice

A branch of economics that studies the decision-making processes of government entities and its impact on economic policy.

Regulatory Capture

A situation where regulatory agencies are dominated by the interests of the industries they are supposed to regulate, rather than serving the public interest.

Special-Interest Effect

The scenario where a small group gains significant benefits from a public policy or action, often at the expense of the larger population.