Which of the Following Factors Most Likely Would Cause a CPA

question 469

Multiple Choice

Which of the following factors most likely would cause a CPA to decide not to accept a new audit engagement?

• A) The CPA's lack of understanding of the prospective client's internal auditor's computer-assisted audit techniques.
• B) Management's disregard of its responsibility to maintain an adequate internal control environment.
• C) The CPA's inability to determine whether related party transactions were consummated on terms equivalent to arm's-length transactions.
• D) Management's refusal to permit the CPA to perform substantive tests before the year-end.

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Definitions:

Cost Reconciliation

The process of analyzing and explaining the differences between the reported cost and the actual cost of manufacturing or production.

Work In Process

Stock comprising products that are currently being manufactured but are not yet finished.

FIFO Method

A method of inventory valuation where the first items produced or purchased are the first ones to be expended or sold.

Equivalent Units

Units of production expressed in terms of fully completed units; a concept used in manufacturing to measure output in a period that factors in incomplete units.