Before Accepting an Engagement to Audit a New Entity,an Auditor

question 15

Multiple Choice

Before accepting an engagement to audit a new entity,an auditor is required to

• A) Make inquiries of the predecessor auditor.
• B) Tell the company whether or not the auditor is willing to issue a "clean" opinion.
• C) Prepare a memorandum setting forth the staffing requirements and documenting the preliminary audit plan.
• D) Become a member of the entity's board of directors.

---

Definitions:

Stock Price

The market value of a single share of a company's stock.

Marginal Tax Rate

The rate at which the next dollar of taxable income will be taxed, indicating the tax bracket into which the last dollar of income falls.

Dividend Payout

The portion of a company's earnings that is distributed to its shareholders as dividends.

Capital Gains

The profit earned from the sale of assets or investments that have increased in value over the time they were held.