Rico, an Accountant, Contracts to Conduct an Audit for Sushi

question 44

Multiple Choice

Rico, an accountant, contracts to conduct an audit for Sushi Restaurants. In performing the audit, Rico fails to detect a Sushi employee's obvious theft of funds from the firm. Rico is most likely

• A)liable if a normal audit would have revealed the theft.
• B)liable if the accountant failed to issue a qualified opinion with the audit.
• C)not liable because a normal audit is not intended to discover fraud.
• D)not liable if the theft was due to Sushi's negligence.

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Definitions:

Marginal Propensity to Consume

The ratio of change in consumption to the change in disposable income, indicating how much income will be spent rather than saved.

Investment

Investment involves allocating resources, such as capital or time, in the expectation of generating a profit or benefit in the future.

Interest Rates

A charge, calculated as a percentage of the principal, demanded by a lender from a borrower for assets' usage.

Disposable Income

Income that remains for saving or spending after direct taxes (such as income tax) have been deducted from an individual's earnings.