Chapter 2 Corporate Governa - Chapter 2 Corporate...

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Chapter 2: Corporate Governance and Audits Chapter 2: Corporate Governance and Audits Student: ___________________________________________________________________________ 1. The objective of financial reporting is to provide useful information to interested users. True False 2. Financial transparency relates to how well resources are protected and managed by the company and its management. True False 3. Corporate governance is a process by which the owners, but not the creditors, exert control over the resources of the enterprise. True False 4. Management can influence who sits on the board and the audit committee as well as other governance controls that might be put into place. True False 5. A commission sponsored by the New York Stock Exchange issued a report in 2010 indicating that successful governance depends heavily upon honest, competent, and industrious managers. True False 6. The board’s fundamental objective should be to build a system of internal controls that will ensure the financial statements are free from all error. True False 7. An important aspect of governance is the independentjudgment of boards about what is in the best interests of the company and its shareholders. True False
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8. The external auditor has the primary responsibility for creating a culture of performance with integrity and ethical behavior within the client’s organization. True False 9. Since the board is responsible to protect the interest of the shareholders, independence is not a necessary attribute for board members. True False 10. Companies must strike the right balance in the appointment of independent and non-independent directors to ensure an appropriate range and mix of expertise, diversity, and knowledge on the board. True False 11. It is effective for a board to take a “check the box” mentality when implementing and complying with governance mandates and best practices. True False 12. The first decade of the twenty-first century has seen more changes in corporate governance than at any time since the Great Depression. True False 13. Governance failures over the past decade were primarily limited to the United States. True False 14. Board of directors that did not spend sufficient time or have sufficient expertise to perform duties led to corporate governance failures. True False 15. The audit committee is a subcommittee of the board of directors comprised of independent outside directors. True False 16. The auditor must communicate significant audit adjustments to the audit committee. True False
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17. Any major disagreement the auditor has with management should be discussed with the audit committee. True False 18. Managers of organizations are hired by Boards of Directors to perform responsibilities such as the implementation of internal control. True False 19. The Sarbanes-Oxley Act prohibits auditors from performing consulting services for their audit clients.
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