Which of the following factors is not a reason for manager optimism in reporting?
Management anticipates issuing new equity
Management strongly believes in its firm’s prospects
Management anticipates receiving a new stock option grant
Management attempts to prevent being replaced because of consistently poor performance
Which of the following monitoring mechanisms are examples of internal governance agents?
Supervisory Board
External Auditors
Audit Committee
A, B, and C
A and C
Consider the following statement: “Managers have no incentives to prevent that their firm’s shares are overvalued.” This statement is
True
False
Which of the following factors is a requirement for financial policies to be effective in providing a positive signal to investors?
The financial policy needs to include debt financing
The financial policy needs to be costly to management
The financial policy needs to be profitable to investors
None of the above
All of the above
Which of the following factors is not a constraint on effective voluntary disclosure?
Management’s credibility
Management’s legal liability
Proprietary costs of public information
The EU Market Abuse Directive
Consider the following statement: “One of the primary objectives of the mandatory external audit is to prevent fraud.” This statement is
True
False
Consider the following statement: “In the EU, the auditor issues an unqualified report if the firm’s financial statements fully conform to the International Financial Reporting Standards.” This statement is
Ttrue
False
A responsibility of the audit committee is to
Oversee the external auditor’s work and ensure its independence from management
Monitor the company’s reporting process and internal audit and control procedures