Your Firm Has Just Acquired a New Audit Client

question 9

Multiple Choice

Your firm has just acquired a new audit client. The new client is highly leveraged with borrowing from several institutions. It is planning to expand the business by obtaining additional debt finance in the near future. Based on these facts, which one of the following should be most carefully examined?

• A) Transactions that result in healthy revenues
• B) Large market capitalization
• C) Loans and other financing transactions between related entities
• D) Dividend paid out in the previous year

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Definitions:

Worker Safety

Regulations and practices designed to protect employees from hazards and risks associated with their work environment.

Dust Particles

Tiny solid particles often found in the air, resulting from soil dust, pollen, soot, and other materials.

Textile Company

A company engaged in the production and distribution of yarn, cloth and clothing made from natural fibers like cotton, wool, or synthetic fibers.

Opportunity Cost

Foregoing the chance to benefit from other alternatives when one choice is made.