An Investor Is Considering Investing in One of Two Companies

question 56

Essay

An investor is considering investing in one of two companies.The companies have very similar reported financial position and results of operations.However,only one of the companies has its financial statements audited.
a.Describe what creates the demand for an audit in this situation.Include a discussion of how audited financial statements facilitate this investment transaction,and the effect of the audit on business risk and information risk.
b.Identify the potential consequences to the company of not having its financial statements audited.

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Definitions:

Humanization

The process of making something more humane or civilized, often involving the incorporation of values such as empathy, respect, and understanding.

Taken-For-Granted Knowledge

Information or beliefs that are widely accepted without question or critical examination.

Contemporary Colonialism

Modern or recent forms of control and influence by one country over another, often associated with exploitation.

Colonial World

Refers to the period and regions impacted by colonialism, where powerful foreign nations dominated and exploited less powerful regions, significantly influencing their social, economic, and political structures.