It Is Important for the Auditor to Obtain a Good

question 51

Multiple Choice

It is important for the auditor to obtain a good understanding of the client's industry to develop a client risk profile.If the auditor is looking at a client in the fashion clothing industry,a risk specific to the industry would be

• A)the high risk of poor governance and management oversight.
• B)the high risk of defective products.
• C)the high risk of obsolescence of their inventory.
• D)the volatility in the stock market with regards to common stock.

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Definitions:

Monopoly

A market structure characterized by a single seller who controls all the supply of a particular good or service, and where entry of new competitors is obstructed.

Credit-Rating Industry

The sector of the financial industry that provides assessments of the creditworthiness of borrowers to potential lenders.

Nationally Recognized

A status achieved by entities, individuals, products, or brands that are widely acknowledged and esteemed across an entire country.

Statistical Rating Organizations

Entities that provide assessments of the creditworthiness of issuers of financial instruments through ratings.