Of the Following Scenarios, Which Would Most Likely Result in an Audit

question 26

Multiple Choice

Of the following scenarios, which would most likely result in an audit firm not accepting an engagement?

• A)Some internal controls related to credit granting procedures are not operating effectively.
• B)IT systems and architecture are antiquated and not capable of current processing and recording requirements.
• C)Significant related party transactions, of which the auditor has been advised, are a routine part of business.
• D)The client has advised that the auditor will be unable to confirm certain inventories with no valid reason given.

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Definitions:

Deadweight Loss

An economic inefficiency that occurs when the total welfare in a market is not maximized, resulting from distortions such as taxes, subsidies, or monopolies.

Excise Tax

A tax imposed on specific goods, services, or activities, often included in the price of products like tobacco, alcohol, and fuel, designed to discourage their use or generate revenue.

Perfectly Inelastic

A market condition where demand does not change regardless of changes in price.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable.