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Week Six - material misstatement and in accordance with...

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A: The bank requires a quarterly review because they are the ones taking the risk of lending the money. They need some sort of assurance that the financial statements are in order. Requesting a review by a reputable firm of their approval is the best way to go about reducing their financial risk. By requiring an audit, they would be lowering their financial risk even further as an audit is a more in depth process which provides more assurance that the financial statements are free of
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Unformatted text preview: material misstatement and in accordance with GAAP standards. This is the reason the bank was able to lower the interest rate a full percentage point because they were more satisfied that an audit will provide more assurance and this reduces the possibility of the loan not being repaid. Requiring only a review which provides less assurance enabled the bank to charge a higher interest rate because they were assuming more of a risk....
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