Regarding: Miller Energy Resources, KPMG LLP, and Riordan.

A. What is a penny stock?Why does the SEC care about such a small and thinly traded stock?Do you think that the fact that this was a relatively small company within minimal stock capitalization might have played into the engagement partner's relative lack of skepticism regarding management's assertions?Explain.

B. What audit procedures should KPMG have conducted with regard to the valuation of the oil and gas reserves?