Choice "C" is correct. Active engagement by an audit committee in representing the Board of Directors relative to all matters of internal and external audits is evidence of the board's understanding of their oversight responsibility over financial reporting.
Choice "b" is incorrect. Management's operating style typically relates to the manner in which employees regard the importance of internal controls. Qualified personnel actively engaged in ensuring effective financial reporting relate to management's operating style.
Choice "d" is incorrect. The organizational structure principle typically involves the appropriate alignment of reporting relationships to ensure that controls are not undermined (e.g., internal auditors should not report to the CFO).
Choice "a" is incorrect. The authority and responsibility principle is typically related to defining staff responsibilities in a manner that is compatible with their authority and consistent with effective financial reporting.