Answer (A) is correct . The audit committee consists of outside directors who are independent of management. Its purpose is to help keep external and internal auditors independent of management and to assure that the directors are exercising due care. This committee selects the external auditors, reviews their overall audit plan, examines the results of external and internal auditing engagements, meets regularly with the chief audit executive, and reviews the internal audit activity’s engagement work schedule, staffing plan, and financial budget. These functions should increase public confidence that financial statements are fairly presented.
Answer (B) is incorrect because Transience of internal auditors impairs the proficiency of the internal audit activity.
Answer (C) is incorrect because If illegal activities involve senior management, distribution of engagement communications should be to the audit committee, not the CEO.
Answer (D) is incorrect because The work of the internal and external auditors should be coordinated to minimize duplicate efforts. Coordination does not impair independence or reduce public confidence.
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