Question

During a new audit engagement, the auditor notices that the client has had three external audit firms perform their annual audits over the past five years due primarily to increases in audit fees. The auditor also notes that the client has been twice downgraded by several of the major credit rating agencies over the past two years and that its current issuer credit rating is at the lowest investment grade level by both Standard & Poor’s and Moody’s Investors Service. Which (if any) of the following fraud risk factors would be most concerning to the auditor?

          During a new audit engagement, the auditor notices that the client has had three external audit firms perform their annual audits over the past five years due primarily to increases in audit fees. The auditor also notes that the client has been twice downgraded by several of the major credit rating agencies over the past two years and that its current issuer credit rating is at the lowest investment grade level by both Standard & Poor’s and Moody’s Investors Service. Which (if any) of the following fraud risk factors would be most concerning to the auditor?

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Added by Jasmine H.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

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Solved by Expert Adi S

04/29/2024

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The client has changed external audit firms multiple times due to increasing audit fees, has experienced downgrades in credit ratings, and currently holds a low investment grade rating. Show more…

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During a new audit engagement, the auditor notices that the client has had three external audit firms perform their annual audits over the past five years due primarily to increases in audit fees. The auditor also notes that the client has been twice downgraded by several of the major credit rating agencies over the past two years and that its current issuer credit rating is at the lowest investment grade level by both Standard & Poor’s and Moody’s Investors Service. Which (if any) of the following fraud risk factors would be most concerning to the auditor?

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