Threats to Auditor Independence Can Come from Various Sources

question 23

Multiple Choice

Threats to auditor independence can come from various sources. Which of these is referred to in the Code of Ethics as self-review threat?

• A) the possibility of potential employment with the audit client
• B) preparation of original data used to generate a financial statement that is the subject matter of the audit engagement
• C) concern on the part of the auditor about the possibility of losing the engagement.
• D) pressure to reduce inappropriately the extent of work performed in order to reduce fees.

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Definitions:

WACC

The weighted average cost of a company's capital from all sources, including equity and debt, used to evaluate investment possibilities.

Debt Ratio

The debt ratio measures a company's financial leverage by comparing its total liabilities to its total assets, indicating the proportion of a company's assets that are financed through debt.

Dividend

A portion of a company's earnings distributed to shareholders, usually in the form of cash or stock.

Information Content

The value of data provided to investors or decision-makers, particularly how much it can influence the assessment or future performance of an asset or company.