Management's emphasis on meeting projected profit goals most likely would significantly influence an entity's control environment when:

Question

Quizplus · Accepted Answer

Choice "B" is correct. Management's emphasis on meeting projected profit goals would significantly influence an entity's control environment when a significant portion of management compensation is represented by stock options, because management would then have a personal interest that might be at odds with accurate financial reporting. Choice "A" is incorrect. An effective internal audit function would tend to moderate management's emphasis on meeting projected profit goals, and would therefore tend to dampen the effect on the control environment. Choice "C" is incorrect. External policies established by outside parties would tend to moderate management's emphasis on meeting projected profit goals, and would therefore tend to dampen the effect on the control environment. Choice "D" is incorrect. Active participation of those charged with governance would tend to moderate management's emphasis on meeting projected profit goals, and would therefore tend to dampen the effect on the control environment.

Management's Emphasis on Meeting Projected Profit Goals Most Likely Would