Auditors Often Request That the Audit Client Send a Letter

question 16

Multiple Choice

Auditors often request that the audit client send a letter of inquiry to those attorneys who have been consulted with respect to litigation,claims,and/or assessments.The primary reason for this request is to provide the auditor with

• A) An estimate of the dollar amount of the probable loss.
• B) An expert opinion as to whether a loss is possible, probable, or remote.
• C) Information concerning the progress of cases to date.
• D) Corroborative inquiries made of the client by the auditor.

---

Definitions:

Reverse Split

A reverse split is a stock market maneuver in which a company reduces the number of its existing shares to increase the share price without changing the company's market capitalization.

Information Content Effect

The impact of news or information release on the price and trading volume of securities.

Stock Split

A corporate decision to fragment its current shares into additional shares to raise the market fluidity of the shares.

Clientele Effect

A theory suggesting that the types of investors attracted to a company depend on the company's dividend policy and related tax treatments.