Brandon Is Working on the Audit of Michum Inc

question 59

Multiple Choice

Brandon is working on the audit of Michum Inc.In accordance with CAS 550 (related parties) ,Brandon had obtained a management confirmation of all related-party transactions.When auditing the purchasing cycle of Michum,Brandon found that the company had purchased over $500 000 of merchandise from Elite Crust Inc. ,a company that is owned by the CEO's brother.The $500 000 purchase is a material amount and it was not included in the confirmation provided by Michum.Brandon should

• A)inform the audit committee.
• B)qualify the audit report.
• C)discuss this issue with the management of Michum.
• D)reduce materiality to increase the likelihood of discovering other undisclosed related party transactions.

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Definitions:

Illegal Cooperative Agreements

Illegal cooperative agreements refer to unlawful arrangements between competing businesses to fix prices, divide markets, or engage in other anti-competitive practices.

Trade Restraint

Any measure or policy that restricts international trade, including tariffs, quotas, and embargoes.

Predatory Pricing

is a competitive strategy where a company sets extremely low prices to eliminate competition and create a monopoly.

Monopolist

A monopolist is a single supplier in a market that has significant control over the price and supply of a particular good or service.