The PA Is Having a Discussion with His Client About

question 28

Multiple Choice

The PA is having a discussion with his client about the outcome of several lawsuits that are presently in progress.The client has requested that the comments during the discussion be removed from the audit file.The client would like the only documentation in the audit file to be the legal letter from the client and brief comments regarding the auditor's judgments with respect to the quality of disclosure in the financial statements.The client is concerned that

• A)only high-quality audit working papers be included in the working paper files.
• B)auditors may breach confidentiality and disclose information about the client.
• C)the auditor's working paper files may be subpoenaed by the courts.
• D)the audit firm does not have adequate quality control procedures.

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Definitions:

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit, indicating how much each unit sold contributes to fixed costs and profit.

Variable Costs

Expenses that fluctuate directly with the volume of production or sales, such as raw materials and direct labor costs.

Fixed Costs

Constant expenditures that do not change with the volume of production or sales, such as rent or salaries.

Contribution Margin Ratio

A measure expressing how a product's selling price exceeds variable costs, shown as a percentage of the sales price.