Question

Which firm provides the better signal when trying to decide which of the​ firms' stock to​ buy? A. Firm​ A, which uses an independent accounting firm for auditing. B. Firm​ B, which uses an internal group for auditing. C. Firm​ D, which​ hasn't been under SEC investigation for over 5 years. D. Firm​ C, which has seen its stock go up by​ $20 per share in the last week.

Answer 1

Answer:

A

Explanation:

In this question, we are trying to look at which of these firms, one per option should one buy its stocks given the underlying conditions in each of the option. Let’s proceed!

Option B is wrong

We should not buy their stock because what they use are internal evaluators who are probable to be biased in their dealings

Option C is wrong

Having not been investigated by the regulatory body for that long, they may have been doing several things that is not ethical and as such they may not be trustworthy enough for their stock to be bought.

Option D is wrong principally because, taking a decision based on what happened just a week ago may be too hasty. If their stocks are golden to buy, there should probably be a wait time to monitor the situation effectively.

Option A is the only correct answer here. Using independent auditors as accessors would give the true nature of the business and as such if they are worthy enough to purchase their stock. The independent Auditors are not skewed towards being biased