Company a Hired Q to Perform Its Year-End Audit

question 43

Multiple Choice

Company A hired Q to perform its year-end audit. Subsequent to year-end, A discovers that one of its customers, who owes Company A a material amount, has filed for bankruptcy protection. Assume that the financial statements and audit report have already been issued. Q should:

• A) recall the financial statements.
• B) inform regulators that the audit report can no longer be relied upon.
• C) inform the client that the regulators should be notified that the audit report can no longer be relied upon.
• D) reissue a revised audit report.

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Definitions:

Inelastic

A characteristic of goods or services for which demand does not significantly change with a change in price.

Total Revenue

The total amount of money generated from the sale of goods or services by a company before any costs or expenses are deducted.

Inelastic

Describing demand that is relatively unresponsive to price changes, meaning the quantity demanded changes very little when the price changes.

Total Revenue

The total amount of money generated by the sale of goods or services before any costs are subtracted.