There Is Not Much Room for Professional Judgement When Performing

question 5

True/False

There is not much room for professional judgement when performing audits, as a result of the detailed guidance provided by organizations, such as the PCAOB.

---

Definitions:

Single Factor Model

A model that explains the returns of an asset or portfolio using a single risk factor.

SMB Beta

A measure used in finance to assess the sensitivity of a stock's return relative to the size factor in an asset pricing model.

Factor Portfolio

A portfolio that is constructed to have a high sensitivity to certain economic or financial factors, aiming to capture specific risk premiums.

Well-diversified Portfolio

An investment portfolio comprised of various assets to reduce exposure to risk by spreading investments across different industries, asset classes, or other categories.