1. Phillips CPA Firm is auditing the accounts of Tojo Enterprises, Inc., a national distributor of kitchen appliances. After reviewing the minutes of board of directors meetings as well as recent SEC filings, Phillips CPA firm have noted that key executives are extremely close to achieving a substantial bonus if the firm's stock price achieves a certain level in the market. Based on this finding, what might Phillips CPA Firm decide to do?

		Phillips CPA Firm are likely to assume fraud risk is high, due to senior management's proximity to achieving certain desired stock prices.
		Phillips CPA Firm are likely to audit competing companies within the same industry as a basis for comparison.
		None of these answer choices are correct.

2. Claire and Billy, two audit managers, are working on the audit of StayBright LLC, a regional retailer of paint and other acrylic products. The auditors have noted that StayBright LLC has some complicated processes in place, and wish to understand more about these processes. Which of the following would be the best strategy for the auditors to employ to understand these processes better?

		The auditors should consider conducting a walkthrough procedure of key transaction processes, in order to understand them better.
		The auditors should consider retaining specialists in order to ensure key processes are properly understood and documented.
		The auditors should consider requesting the internal audit function document all key processes and summarize them accordingly for the external auditors.