Which of the following best describes why publicly-traded corporations follow the practice of having the external auditor appointed by the board of directors or elected by the stockholders?
A)To promote an adversarial relationship between the auditor and the corporation's management.
B)To enhance auditor independence from the management of the corporation.
C)To encourage a policy of rotation of the independent auditors.
D)To give management more leverage over the auditor's decisions.

Question

Quizplus · Accepted Answer

Having an external auditor appointed by the board of directors or elected by the stockholders promotes auditor independence from the management of the corporation. This ensures that the auditor provides an unbiased and accurate assessment of the company's financial statements, which enhances the reliability of financial reporting. It is essential to prevent conflicts of interest from arising between the auditor and company management, which could compromise the auditor's impartiality.

Which of the Following Best Describes Why Publicly-Traded Corporations Follow