Engagement Risk Has Been Defined as the Risk of Potential

question 45

Multiple Choice

Engagement risk has been defined as the risk of potential losses that are incurred by the auditor in being associated with a particular client.Which of the following factors are not associated with increased engagement risk for the auditor?

• A)Management with questionable integrity.
• B)A failed company.
• C)Materially misstated financial statements.
• D)All of these factors increase engagement risk.

Recognize the financial implications of leasing for both the lessee and the lessor.

Comprehend the role and terms of sale and leaseback agreements.

Identify characteristics and implications of direct leases.

Understand the criteria the CRA uses to determine the validity of a lease for tax purposes.

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Definitions:

Reasonable Value

A fair market price or level of compensation that would be deemed equitable under normal circumstances.

Gratuitous Promise

A promise for which no consideration is given or required in return, often unenforceable without a deed or under specific legal conditions.

Consideration

In contract law, consideration refers to the value (such as money, a service, or a promise) that is given in exchange for a contractual obligation from the other party.

Illusory Contract

An agreement that fails to bind one party due to vague or unenforceable terms, making it appear to be a contract only in illusion.