Can You Cut the Mustard?
from Summer 2001
Wondering whether you meet the new standards for service on an audit committee? To find out, take this quiz developed by Corporate Board Member with the help of accountants. Correct answers can be found at the bottom of the page. If you are stumped by any of the questions, you may want to sign up for one of the courses listed on the next page.1) Primary responsibility for the accuracy of financial statements and accompanying footnotes rests with the audit committee.
A) True
B) False
2) The audit committee is responsible for making sure the external auditors are independent.
A) True
B) False
3) Best practices require audit committees to meet how often?
A) Once a year
B) Twice a year
C) Four to six times a year
D) As often as the CFO deems necessary
4) Generally, an error in the financial statements is considered “material” and must be corrected if it is off by how much?
A) 1%
B) 3%
C) 5%
D) anything at all
5) At what point can companies properly recognize revenues on the income statement?
A) when payment has been received
B) when the service has been performed or the product shipped
C) when an invoice has been sent
D) any of the above
Answers
1) B (Primary responsibility for the accuracy of financial statements rests with management.)
2) A
3) C
4) D
5) B
