How Is a CPA Firm Insulated from Being Pressurized by Management

question 30

Multiple Choice

How is a CPA firm insulated from being pressurized by management?

• A) The audit committee approves hiring, firing, and paying fees to external auditors.
• B) The chairman of the board approves the external auditor's fees as well as the engagement letter.
• C) The IRS approves the external auditor's fees as well as the engagement letter.
• D) The CPA firm is not insulated from management.

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Definitions:

Groupthink

A phenomenon within groups where the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Prejudice

A preconceived opinion or judgment about someone or something that is not based on reason or actual experience, often manifesting as bias or discrimination.

Self-Esteem

A person's overall subjective emotional evaluation of their own worth.

Stanley Milgram

A psychologist best known for his controversial experiment on obedience conducted in the 1960s, demonstrating people's willingness to follow orders from an authority figure.