2-49 106 The following factors describe a potential audit client. For each factor, indicate whether it is indicative of poor corporate governance. Explain the reasoning for your assessment. Finally, identify the risks to reliable financial reporting that are associated with each factor. a. The company is in the financial services sector and has a large number of consumer loans, including mortgages, outstanding. b. The CEO's and CFO's compensation is based on three com- ponents: (a) base salary, (b) bonus based on growth in assets and profits, and (c) significant stock options. The audit committee meets semiannually. It is chaired by a retired CFO who knows the company well because she had served as the CFO of a division of the firm. The other two members are local community members-one is the president of the Chamber of Commerce and the other is a retired exec- utive from a successful local manufacturing firm.