An Auditor Knows That an Audit Client Operating in an Industry

question 45

Multiple Choice

An auditor knows that an audit client operating in an industry in which common stock is valued based on the price-earnings ratio will soon make an initial public offering. All of the following are true except:

• A)materiality should be reduced.
• B)risk of material misstatement should increase.
• C)detection risk should decrease.
• D)audit risk should increase.