In Order to Obtain an Understanding of the Client's Business

question 147

Multiple Choice

In order to obtain an understanding of the client's business, the audit firm will consider

• A) inherent and control risk of the client.
• B) audit risk to the CPA firm.
• C) the client's business risk and the risk of material misstatements in the financial statements.
• D) the CPA firm's potential ongoing revenue from the audit client.

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Definitions:

Un-standardized Test Statistic

A test statistic that has not been converted to a standard form, representing raw effect sizes or differences observed in data.

Standardized Test Statistic

A test statistic that has been converted into a standard form so that it can be directly compared to a distribution.

Rank Sum

A statistical measure used to compare the distributions of two or more groups by summing ranks assigned to their observations.

Alternative Hypothesis

A statistical hypothesis that suggests a difference or effect, contrary to the null hypothesis.