When Selecting Staff for the Audit Engagement

question 42

Multiple Choice

When selecting staff for the audit engagement,

• A) only staff members who are CPAs should be assigned to the audit.
• B) only managers and above need to have appropriate competence and capabilities to perform the audit.
• C) continuity of staff members from year to year should not be a factor.
• D) staff assigned to the audit must be knowledgeable about the client's industry.

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Definitions:

Beta Coefficient

A measure of a stock's volatility or risk relative to the overall market.

Market Risk Premium

The extra return expected by investors for holding a risky market portfolio instead of risk-free securities.

Risk-free Interest Rate

The theoretical return on investment with zero risk of financial loss, typically associated with government bonds.

Total Risk

The sum of all risks affecting an investment, including both systematic (market) and unsystematic (individual) risks.