William Gregory, CPA, Is the Principal Auditor for a Multi-National

question 24

Multiple Choice

William Gregory, CPA, is the principal auditor for a multi-national corporation.Another CPA has examined and reported on the financial statements of a significant subsidiary of the corporation.Gregory is satisfied with the independence and professional reputation of the other auditor, as well as the quality of the other auditor's examination.With respect to his report on the consolidated financial statements, taken as a whole, Gregory:

• A)must not refer to the examination of the other auditor.
• B)must refer to the examination of the other auditor.
• C)may refer to the examination of the other auditor.
• D)must refer to the examination of the other auditors along with the percentage off consolidated assets and revenue that they audited.

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Definitions:

Monitoring

The process of systematically observing, checking, and recording activities or data to ensure proper compliance or performance.

Moral Hazard Problem

The risk that one party to a transaction takes on more risk because it knows that the other party bears the consequences of those risks.

High-End

Products or services that are considered to be of the highest quality and typically sold at a premium price.

Signaling

The process through which parties communicate certain attributes or intentions to others, often seen in markets and negotiations.