In Assessing Whether to Accept a Client for an Audit

question 5

Multiple Choice

In assessing whether to accept a client for an audit engagement, an auditor should consider the:

• A)entity's business risk.
• B)auditor's engagement risk.
• C)integrity of management.
• D)All the given answers are correct.

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Definitions:

Dividends Declared

The portion of a company's earnings that is approved by the board of directors to be distributed to shareholders.

Retained Earnings

The portion of net income that is not distributed to shareholders and is instead reinvested in the business.

Dividends In Arrears

Dividends on preferred stock that have not been paid in the scheduled time but are owed to preferred shareholders.

Cumulative Preferred Shares

Cumulative Preferred Shares are a type of preferred stock where dividends accumulate if not paid out, ensuring shareholders are paid past dividends before common shareholders.