The Auditor Has Sent Inquiry Letters to All of the Client's

question 56

Multiple Choice

The auditor has sent inquiry letters to all of the client's law firms.Two law firms stated that the client was unlikely to win the lawsuits in question,whereas the client had said the opposite.What action should the auditor take?

• A)Ask management for invoices supporting the omitted lawsuits.
• B)Request a meeting with management and the respective law firms.
• C)Ask the law firms to provide additional details with respect to the lawsuits.
• D)Change control risk to maximum and increase substantive testing.

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Definitions:

Ceteris Paribus

A Latin phrase meaning "other things being equal," used in economics to isolate the effect of one variable by holding others constant.

Consumer Income

Refers to the total earnings or financial inflow that consumers receive from all sources, affecting their purchasing power and demand for goods and services.

Equilibrium Price

The price at which the quantity of goods supplied matches the quantity of goods demanded in a market, leading to a stable market condition.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price level in a specified period.