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NEW QUESTION: 1
M is a listed company. It is hoping to invest in a risky new venture. M has a substantial amount of cash to invest in the venture. M would have found it difficult to raise new finance as it has a high level of gearing.
Which of the following statements about stakeholders' conflicting interests are true?
A. The directors would only be exposed to the systematic risk from the investment in the new venture.
B. M's credit rating is likely to fall as a result of this new venture.
C. M's diversification will mean less risk for the shareholders.
D. M's shareholders would only be exposed to the systematic risk from the investment in the new venture.
Answer: B,D

NEW QUESTION: 2
Which of the following is true about the term "likely misstatement?"
A. It refers to misstatements that have been specifically identified by the auditor.
B. It refers to misstatements that have not been specifically identified, but which are likely to exist based
on the auditor's judgment.
C. It includes both identified misstatements and an estimate of unidentified misstatements.
D. It refers to the cumulative effect of misstatements from prior years on the current year's financial
statements.
Answer: B
Explanation:
Explanation/Reference:
Explanation:
Choice "A" is correct. A "likely misstatement" is one that has not been specifically identified, but which is
likely to exist based on the auditor's judgment.
Choice "B" is incorrect. "Likely misstatement" does not refer to the cumulative effect of prior year errors. It
is a measure of misstatements the auditor considers likely to exist, that have not been specifically
identified.
Choice "C" is incorrect. "Likely misstatement" is a measure of misstatements the auditor considers likely to
exist, that have not been specifically identified.
Choice "D" is incorrect. The term "likely misstatement" includes only an estimate of potential errors. It does
not include specific misstatements identified during the audit.

NEW QUESTION: 3

A. Option B
B. Option A
C. Option C
D. Option D
Answer: A