Management's attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity's control environment when:

Question

Quizplus · Accepted Answer

Choice "C" is correct. When management is dominated by one individual who is also a shareholder, there may not be any factors to moderate management's aggressive style. In such situations, management's style is likely to have a strong impact on the control environment. Choice "A" is incorrect. An active audit committee tends to moderate management's aggressive reporting style. Choice "B" is incorrect. External policies established by outside parties would tend to moderate management's aggressive reporting style. Choice "D" is incorrect. An effective internal audit function would tend to moderate management's aggressive reporting style.

Management's Attitude Toward Aggressive Financial Reporting and Its Emphasis on Meeting