The New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASD) require that listed firms have audit committees of independent (that is, outside) company directors. Audit committees review the firm’s audited financial statements with management and with the outside auditor and recommend to the full board of directors that the statements be included in the company’s annual report. As a committee member, you might ask management about the following:
1. What are the key business and financial risks the company has to deal with in its financial reporting?
2. What financial reporting areas involved subjective judgments or estimates, and how are those judgments made and estimates determined?
3. Are there significant areas where the company’s accounting policies were difficult to determine?
4. How do the company’s accounting practices compare with those of others in the industry?
5. Are the financial statements and underlying accounting methods consistent with those used last year?
6. Are alternative accounting practices being proposed or considered that should be brought to the committee’s attention?
7. Were there serious problems in preparing the financial statements?
8. Have outside parties including the SEC, major investors, analysts, and the news media voiced concern about the company’s accounting practices?
9. Were there disagreements between management and the auditor regarding accounting practices and, if so, how were they resolved?
Source: Audit Committee Update 2000, PricewaterhouseCoopers LLP.

Required:
Explain for each question why the audit committee and investors might be interested in the answer.