An Accountant Has Accepted an Engagement in Which the Audit

question 60

Multiple Choice

An accountant has accepted an engagement in which the audit procedures of inquiry and analytical procedures will be employed.These procedures will form the basis for issuance of:

• A)a compilation report.
• B)audit report on supplemental information issued by the client.
• C)management advisory report requested by the audit committee.
• D)review report on financial statements for a nonpublic company.

Understand the concept of adverse selection and its implications on markets.

Distinguish between moral hazard and adverse selection and their respective remedies.

Grasp how personal investment influences loan credibility and project viability.

Realize the importance of monitoring and incentives in mitigating employee moral hazard.