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.

---

Definitions:

Nobel Peace Prize

An international award given annually to individuals or groups who have made significant contributions to peace.

Creative Immortality

The concept that an individual's creative work or ideas can achieve lasting recognition or memory beyond their lifetime.

Experiential Immortality

The psychological concept that through memories, actions, or impacts on the world, individuals can achieve a form of immortality in the minds of others.

Natural Immortality

The philosophical or religious belief that the soul or spirit exists perpetually beyond the death of the physical body.