When an Auditor Accepts an Audit Engagement but Does not

question 41

Multiple Choice

When an auditor accepts an audit engagement but does not possess the industry expertise of the business entity involved,the auditor should:

• A)Engage financial experts familiar with the nature of the business entity.
• B)Obtain a knowledge of matters that relate to the nature of the entity's business.
• C)Refer a substantial portion of the audit to another CPA who will act as the principal auditor.
• D)First inform management that an unqualified opinion cannot be issued.

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Definitions:

Creditors

Individuals or institutions that extend credit or lend money to others with the expectation of being repaid, usually with interest.

Shareholder

An individual or entity that owns shares in a company and holds a stake in its ownership and profits.

Dissolved

The process of legally dissolving a corporation or partnership, effectively ending its existence.

Close Corporation

A business structure characterized by a small number of shareholders, no need for formal board meetings, and less stringent regulatory requirements.