Some Commentator Advocate in Favor of Audit Firm Rotation

question 29

Multiple Choice

Some commentator advocate in favor of audit firm rotation:

• A) To minimize the management participation threat
• B) To give new CPA firms the opportunity to expand and create employment opportunities for inexperienced accountants to gain valuable professional skills
• C) As a safeguard against the familiarity threat
• D) As a safeguard against auditor fee gouging

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Definitions:

Natural Rate

Refers to the level of economic output or unemployment that is consistent with stable inflation, not influenced by short-term fluctuations.

Money Supply Growth

An increase in the total amount of money in circulation or in the economy, which can affect inflation rates, interest rates, and economic growth.

Phillips Curve

A concept in economics illustrating an inverse relationship between the rate of unemployment and the rate of inflation within an economy.

Sticky-wage Theory

The sticky-wage theory suggests that wages respond slowly to changes in the economy, which can lead to unemployment or labor market imbalances.