An Auditor Knows That an Audit Client Operating in an Industry

question 17

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.

Differentiate between moral competence and moral performance in social-cognitive theory.

Describe the Freudian perspective on moral development, including the role of the superego.

Recognize alternative perspectives to Kohlberg’s theory, including Gilligan’s ethics of care.

Understand the impact of personal experiences and social interactions on moral reasoning and moral behavior.

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Definitions:

Market Rate

The prevailing price or cost of goods, services, or labor in a competitive market, determined by supply and demand forces.

Risk-Free Rate

The return on an investment with no risk of financial loss, often represented by the yield on government bonds.

Discount Rate

The interest rate charged to commercial banks and other financial institutions for the loans they take from the central bank or the rate used in discounted cash flow analysis to determine the present value of future cash flows.

Annually

Pertaining to an occurrence, calculation, or payment that happens every year.