If the Client Has Set Unreasonable Objectives or If the Performance

question 50

Multiple Choice

If the client has set unreasonable objectives or if the performance measurement system encourages aggressive accounting,the auditor will

• A)increase inherent risk of financial statement misstatements.
• B)lower inherent risk of financial statement misstatements.
• C)increase control risk of financial statement misstatements.
• D)lower control risk of financial statement misstatements.

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Definitions:

Fixed Asset

Long-term tangible property or equipment that a firm owns and uses in its operations to generate income.

Liquidity

The convenience with which one can convert an asset into cash without influencing its market price.

Financial Distress

A situation in which a company struggles to meet or has difficulty paying off its financial obligations to creditors.

Liquid Assets

Assets that can be quickly and easily converted into cash without significant loss of value.