When a Potential Client Has Announced Its Intention to "Go

question 64

Multiple Choice

When a potential client has announced its intention to "go public," the auditor's client acceptance decision is likely to depend upon:

• A) the results of background checks performed on individuals in key financial management positions.
• B) whether a formal RFP was used.
• C) whether the predecessor auditor was appropriately independent.
• D) characteristics of the shareholders who will purchase the public shares.

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Definitions:

Efficient Markets Hypothesis

A financial theory stating that asset prices fully reflect all available information.

Overvalued

A term used to describe a situation in which a security or asset is trading at a price that exceeds its intrinsic value.

Undervalued

A description of an asset or currency whose price is believed to be lower than its intrinsic value.

Mutual Fund Managers

Professionals responsible for managing the investment portfolio of a mutual fund, making decisions about which securities to buy, hold, or sell.