The Auditor Is Responsible for Evaluating the Likelihood of a Client

question 52

Multiple Choice

The auditor is responsible for evaluating the likelihood of a client not going bankrupt for the next 12 months.What basis will the auditor use to assess this issue?

• A)Management integrity.
• B)Control environment.
• C)Absolute assurance.
• D)Substantial doubt.

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Definitions:

Joseph Schumpeter

An economist and political scientist known for his theories on economic innovation and the concept of "creative destruction" in capitalism.

Risk Bearing

The acceptance of the possibility of loss on an investment or business venture, along with the responsibility of managing and mitigating potential risks.

Usury Law

Regulations governing the amount of interest that can be charged on a loan, intended to protect borrowers from exorbitant rates.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.