In Its 2004 Through 2006 Inspections, Which of the Following

question 116

Multiple Choice

In its 2004 through 2006 inspections, which of the following was not a deficiency the PCAOB noted related to inadequate testing of stockholders' equity transactions?

• A) The auditors failed to properly address and evaluate the substance, business purpose, or significant terms of the equity arrangements.
• B) The auditors failed to consider the accounting principles potentially applicable to the equity transactions.
• C) The auditors failed to evaluate whether the audit clients had appropriately determined the fair values assigned to equity-based transactions and to test the reasonableness of such fair values.
• D) The auditors failed to disclose each class of stock issued by the clients.

---

Definitions:

Money Wages

Wages paid to employees in terms of money, as opposed to real wages, which are wages adjusted for inflation.

Real Wages

The purchasing power of wages or income, taking into account the effects of inflation on buying power.

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, used to estimate inflation.

Economic Rent

The extra income earned by a resource over its opportunity cost.