B. Internal control is a method, or process, that is carried out by an entity's board of directors, management, and other personnel, and designed to provide reasonable assurance that objectives in the following four categories will be achieved: (1) effectiveness and efficiency of operations; (2) reliability of financial reporting; (3) compliance with applicable laws and regulations; and (4) safeguarding of assets. The concerns of the financial statement auditor will relate to no. 2, reliability of financial reporting.

C. It is not necessary that the chief accounting officer review all accounting transactions. Therefore, this is not one of a financial statement auditor's major concerns.

D. Corporate morale problems are not relevant to a financial statement audit.