In making client acceptance decisions the audit firm will consider:
A) inherent and control risk of the client.
B) audit risk to the CPA Firm.
C) the client's business risk and the CPA Firm's engagement risk.
D) CPA Firm's potential ongoing revenue from the audit client.

Question

Quizplus · Accepted Answer

In client acceptance decisions, the audit firm will consider the client's business risk and the CPA Firm's engagement risk. This helps the CPA Firm to determine whether they can perform quality audit and provide reasonable assurance about the financial statements of the client. Factors that affect the engagement risk include the reputation of the client, relationship with the client, the nature of the client's business, and the complexity of the engagement. Thus, the correct answer is option C. Options A and B are not comprehensive enough as inherent and control risk are only two components of the engagement risk that the auditor will consider. Option D is incorrect as the potential revenue from the audit client should not influence the client acceptance decision.

In Making Client Acceptance Decisions the Audit Firm Will Consider