Describe what is meant by "audit risk." Explain why each of the following statements is true.

a. A public accounting firm should attempt to achieve the same audit risk for all audit clients when circumstances are similar.

b. A public accounting firm should decrease audit risk for audit clients when external users rely heavily on the statements.

c. A public accounting firm should decrease audit risk for audit clients when there is a reasonably high likelihood of a client's filing bankruptcy.

d. Different public accounting firms should attempt to achieve reasonably similar audit risks for clients with similar circumstances.

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Statement of Earnings Prairie Stores Corporation For the 53 Weeks For the 52 Weeks Ended Ended May 3, 2002 April 28, 2001 April 29, 2000 Revenue Net sales $8,351,149 $6,601,255 Other income 59.675 8,410,824 43.186 6.644.441 $5,959,587 52.418 6,012,005 Costs and expenses Cost of sales 5,197,375 4,005,548 3,675,369 Marketing, general, and administrative expenses 2,590,080 2,119,590 Provision for loss on restructured operations Interest expense 64,100 141.662 46.737 7.993,217 6,171,875 1,828,169 38.546 5,542,084 Earnings from continuing operations before income taxes 417,607 472,566 469,921 Income taxes 196,700 217.200 214.100 Earnings from continuing operations 220,907 255,366 255,821 Provision for less on discontinued operations, net of income taxes $20,700 Net earnings $200.207 $255.366 $255,821