Question

Audit committees have been identified as a major factor in promoting independence in both internal and external auditors. Which of the following is the most important limitation on the effectiveness of audit committees?

A. Audit committees are composed of independent directors. However, those directors may have close personal friendships with management.

B. Audit committee members are compensated by the organization and thus favor a shareholder's view

C. Audit committees devote most of their efforts to external audit concerns and do not pay much attention to internal auditing and the overall control environment.

D. Audit committee members do not normally have degrees in the accounting or auditing fields.

Answer 1

ANSWER:

.A .Audit committees are composed of independent directors. However, those directors may have close personal friendships with management.

Independent Directors are appointed by the Management with the approval of shareholders

Independent directors may have close personal friendship with the management.

This is the most important limitation of the Audit Committees