An Auditor Determines That There Is an Inherent Risk That

question 35

Multiple Choice

An auditor determines that there is an inherent risk that stock options exercised or expired remain on the organization's books.This determination is most likely tied to which of the following management assertions?

• A)Valuation.
• B)Presentation and disclosure.
• C)Rights and obligations.
• D)Existence.

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Definitions:

Underwriter

A person or entity that assesses and accepts the risk of insurance or issue of securities, setting terms for coverage or offering prices for shares.

IPO

An Initial Public Offering is the process by which a private company becomes publicly traded on a stock exchange by offering its stock for the first time to the general public.

Green Shoe Provision

An option in an IPO that allows underwriters to buy up to an additional 15% of company shares at the offering price to manage demand and stabilize the stock price after the IPO.

Quiet Period

A time frame in which companies are restricted from making certain announcements to prevent affecting their stock price before a securities offering.