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NEW QUESTION: 1
Which of the following statements is correct regarding corporate compensation systems and related bonuses?
I.A bonus system should be considered part of the control environment of an organization and should be considered in formulating a report on internal control.
II.Compensation systems are not part of an organization's control system and should not be reported as such.
III.An audit of an organization's compensation system should be performed independently of an audit of the control system over other functions that impact corporate bonuses.
A. IIIonly
B. II and IIIonly
C. IIonly
D. Ionly
Answer: D
NEW QUESTION: 2
Which of the following processes should be included in a benchmarking activity?
I.Identify key measures.
II.
Collect data on performances and practices.
III.
Identify opportunities for improvement.
A. I and III only.
B. I, II, and III.
C. II only.
D. II and III only.
Answer: B
NEW QUESTION: 3
Which of the following statements is correct?
A. A firm's cost of capital is affected only by the firm's investment policies but it is independent of the firm's financing policies.
B. A firm's cost of capital is not affected by the firm's investment policies.
C. A firm's cost of capital is affected by both the firm's financing and investment policies.
Answer: C
Explanation:
Both financing and investment policies affect the cost of capital. The investment policy determines the riskiness of the firm's assets, and therefore the required returns on debt and equity. The financing decisions affect the cost of debt by determining the relative amounts of outstanding debt and equity, as well as the risk of default.
