A PA firm can experience high levels of business risk if the audit firm
A)does a poor job preparing client risk profiles.
B)pays its employees wages that are not in line with the market.
C)experiences significant litigation or has clients declare bankruptcy.
D)has a generous vacation policy for its staff.

Question

Quizplus · Accepted Answer

If the audit firm experiences significant litigation or has clients declare bankruptcy, this can have a major impact on the financial health of the PA firm as well. This is because the PA firm's revenue and reputation can be adversely affected if their clients face such issues. However, poor client risk profiling, employee wages, and vacation policies do not directly impact the business risk of the PA firm.

A PA Firm Can Experience High Levels of Business Risk