A Small CPA Firm Provides Audit Services to a Large

question 36

Multiple Choice

A small CPA firm provides audit services to a large local company.Almost eighty percent of the CPA firm's revenues come from this client.Which statement is most likely to be true?

• A)Appearance of independence may be lacking.
• B)The small CPA firm does not have the proficiency to perform a larger audit.
• C)The situation is satisfactory if the auditor exercises due skeptical negative assurance care in the audit.
• D)The auditor should provide an "emphasis of a matter paragraph" to his/her audit report adequately disclosing this information and then it may issue an unqualified opinion.

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Definitions:

Standard Deviation

A gauge for the degree of spread or discrepancy in a series of data points.

Real Rate of Return

The rate of return on an investment after adjusting for inflation, representing the actual growth in purchasing power.

Corporate Stocks

Equity stakes in corporations, allowing ownership and potentially receiving dividends.

Treasury Bonds

Long-term investment instruments issued by the government that pay periodic interest until expiration, at which point the face value is paid to the investor.