When Auditors Divest Themselves of Shares Owned in a Client

question 47

True/False

When auditors divest themselves of shares owned in a client company, they are eliminating
their self-review threat to independence.

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Definitions:

Yearly Return

The total gain or loss on an investment over a one-year period, expressed as a percentage of the investment's initial value.

Variable Costs

Expenditures that adjust in relation to the level of production.

Fixed Costs

Costs that do not vary with the level of output produced by a firm, such as rent, salaries, and insurance premiums.

Profit

The financial gain obtained when the revenue from a business activity exceeds the expenses, costs, and taxes.