1. Which of the following is false with regards to audit responsibility?
A) Reasonable assurance is a high, but not absolute, level of assurance.
B) The auditor's responsibility for illegal acts is the same as for errors and fraud.
C) The auditor of a public company is required to certify the annual financial statements.
D) Auditing standards make no distinction between error or fraud; in either case, the auditor must obtain reasonable assurance about whether the financial statements are free of material misstatement.
2. Fern has preferred stock selling for 93.4 percent of par that pays an 9.6 percent annual coupon. What would be Fern's component cost of preferred stock?