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NEW QUESTION: 1
The Options Theoretic approach to calculating economic capital considers the value of capital as being equivalent to a call option with a strike price equal to:
A. The market value of the debt
B. The notional value of the debt
C. The value of the assets
D. The value of the firm
Answer: B
Explanation:
Explanation
The Options Theoretic approach to calculating economic capital is a top-down approach that considers the value of capital as being equivalent to a call option with a strike price equal to the notional value of the debt - ie, the shareholders have a call option on the assets of the firm which they can acquire by paying the debt holders a value equal to their notional claim (ie the face value of the debt). Therefore Choice 'a' is the correct answer and the other choices are incorrect.
NEW QUESTION: 2
In using the work of a specialist, an auditor referred to the specialist's findings in the auditor's report. This
would be an appropriate reporting practice if the:
A. Auditor, as a result of the specialist's findings, adds an explanatory paragraph emphasizing a matter
regarding the financial statements.
B. Auditor understands the form and content of the specialist's findings in relation to the representations in
the financial statements.
C. Client is not familiar with the professional certification, personal reputation, or particular competence of
the specialist.
D. Auditor, as a result of the specialist's findings, decides to indicate a division of responsibility with the
specialist.
Answer: A
Explanation:
Explanation/Reference:
Explanation:
Choice "B" is correct. When expressing an unqualified opinion, the auditor generally will not refer to the
work or findings of a specialist. The auditor may, however, make reference to a specialist in an explanatory
paragraph if such a reference will facilitate understanding of the explanatory paragraph or of the departure
from an unqualified opinion.
Choice "A" is incorrect. Lack of client familiarity with the specialist does not affect the auditor's report. Also,
it is the auditor (not the client) who must be satisfied regarding the specialist's qualifications.
Choice "C" is incorrect. The auditor must understand the form and content of the specialist's findings in
relation to the representations in the financial statements to be able to review the specialist's work.
However, this does not affect whether or not the auditor refers to the specialist in the auditor's report.
Choice "D" is incorrect. An auditor should not divide responsibility for the audit with a specialist. Further,
making reference to the specialist in an unmodified unqualified report generally is inappropriate.
NEW QUESTION: 3
The user successfully executed the individual bill transaction for the contract account. The account balance was not updated.
Why could this have happened? (Choose two)
A. The print document was outsorted.
B. The customer is on a future budget billing plan.
C. You selected the 'Bill' level of processing.
D. The meter reading result was implausible.
Answer: A,C
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