Most Audit Partners at CPA Firms Are Compensated Based on the Gross

question 42

Multiple Choice

Most audit partners at CPA firms are compensated based on the gross billings or net CPA firm profits generated by the audit clients that they serve.As a result,when an audit partner serves a particular client for an extended period of time,which of the following threats is most likely to arise?

• A) The self-interest threat
• B) The advocacy threat
• C) The adverse interest threat
• D) The self-review threat

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Definitions:

Net Method

An accounting method that records purchases after deducting any available discounts, directly showing the net purchase cost.

Credit Terms

Conditions under which credit will be extended to a customer, including repayment timeframe and interest rate.

Merchandise Inventory

Goods a company has in stock and available for sale, typically in a retail or wholesale setting.

Inventory Shrinkage

The loss of products between purchase and sale, often due to theft, damage, or errors in counting.