Question 2 (30 points) Suppose that you are an auditor at a large accounting firm. On your audit assignment at a global company client, your manager asks you to think of a procedure to test the client company's claim that they have $100 million in accounts receivable and only $20 million in accounts payable. The client company then says that "they are in the best financial condition in the industry." a) Discuss which audit objectives the procedure is supposed to fulfill b) Suppose your boss drops by your office to ask you about what procedure you would recommend she conduct to test these assertions. What would you say, and why? Question 3 (40 points) Your friend, Jason Wakk, is analyzing some stocks for his personal investment and is confused. So, he comes to you for some help in understanding costs of capital. He says that the company he's been following has cost of equity of 15% and pays 15% interest on their debt. He thinks then it's pretty easy to calculate their WACC because the equity and debt cost the same, so the WACC must be just 15%. a) Is Jason right about the WACC? Why or why not? b) Because of the coronavirus situation, the US government has lowered its Treasury rates to increase money supply and make it easier for businesses to get loans. Jason wants to know how this would affect the costs of equity and debt. How would you respond? How about the WACC? c) Finally, Jason asks why companies have different costs of equity: "Don't all companies have the same ERP? Then, why aren't their costs of equity the same?" Explain to Jason