An Auditor Would Be Most Likely to Identify a Contingent

question 536

Multiple Choice

An auditor would be most likely to identify a contingent liability by obtaining a (an) :

• A) Accounts payable confirmation.
• B) Transfer agent confirmation.
• C) Standard bank confirmation.
• D) Related party transaction confirmation.

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Definitions:

Risk-Free Rate

The expected return on an investment that carries no risk, commonly exemplified by the interest rate on government bonds.

Call Option

An option contract that grants the holder the right to buy an underlying asset at a predetermined price before the option expires, without the obligation to do so.

Intrinsic Value

The perceived or calculated true value of an asset, investment, or company based on fundamental analysis without regard to its market value.

Strike Price

The fixed price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.