Risks Associated with Specific Industries May Affect the Auditor's Assessment

question 20

Multiple Choice

Risks associated with specific industries may affect the auditor's assessment of client business risk and acceptable audit risk,and even influence client acceptance decisions.Which of the following businesses would be the most risky for the auditor to accept as a new client?

• A)a small manufacturer of metal and plastic parts that has steady profits and has been in business for 15 years
• B)a client who is developing a computer game that is expected to be ready in three years and has no other products
• C)a retail company in the clothing industry that has mid-range pricing and appeals to a large population sector
• D)a firm consisting of a partnership of ten lawyers that operates out of three different cities in one province

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Definitions:

Threshold

The point of intensity at which a stimulus begins to produce a sensation or elicit a response, marking the limit between the absence and the beginning of a perception.

Membrane Potential

The difference in electric potential between the interior and the exterior of a biological cell.

Action Potential

A rapid change in electrical potential across a cell's membrane that occurs when a neuron sends information down an axon.

Synapse

The junction between two neurons or a neuron and a muscle or gland cell, where electrical or chemical signals are transmitted.