When Dealing with Audit Risk

question 55

Multiple Choice

When dealing with audit risk,

• A) audit risk should not be a factor when determining if a new client should be accepted.
• B) audits with a low acceptable audit risk generally result in lower audit fees.
• C) if management of a company has a reputation of integrity, but is also known to take aggressive financial risks, the auditor should not accept the company as a new client.
• D) if the auditor concludes that acceptable audit risk is low, but the client is still acceptable, the auditor may still accept the engagement but increase the fee proposed to the client.

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Definitions:

Private Institutions

Organizations or establishments that are owned and operated by private individuals or groups, rather than by the government, often in the context of education or healthcare.

Mental Patients

Individuals receiving treatment for mental health disorders, often characterized by disturbances in thought, emotion, and behavior.

Public Advocates

Individuals or organizations that seek to increase public awareness and influence policy decisions on behalf of community interests or societal benefits.

Receive Treatment

The process of undergoing medical care, therapy, or intervention for the improvement of a health condition or disorder.