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 that do not pay their bills.
D) has a generous vacation policy for its staff.

Question

Quizplus · Accepted Answer

The audit firm experiencing significant litigation or having clients that do not pay their bills can have a negative impact on the PA firm's business risk. This can lead to financial loss or damage to the firm's reputation, which can ultimately result in loss of clients and revenue. Poor preparation of client risk profiles (option A) may increase the risk of audit failures but may not impact the PA firm's business risk. Paying employees wages below the market rate (option B) and having a generous vacation policy (option D) may affect the morale and retention of employees but do not pose significant business risk to the firm.

A PA Firm Can Experience High Levels of Business Risk