1. Potential voting rights from call options heldby an investor should be taken into account indetermining whether power over the investeeexists, but only when the call options are "out ofthe money".2. An investor's rights must be substantive togive rise to power over the investee.3. Protective rights such as the ability to removekey management personnel under restrictedcircumstances do not contribute to establishingpower over the investee.4. If unanimous consent is required from two ormore investors, this gives rise to power over theinvestee.Ture of false?

“Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

1. Potential voting rights from call options held by an investor should be taken into account in determining whether power over the investee exists, but only when the call options are "out of the money". 2. An investor's rights must be substantive to give rise to power over the investee.

1. Potential voting rights from call options held by an investor should be taken into account in determining whether power over the investee exists, but only when the call options are "out of the money". 2. An investor's rights must be substantive to give rise to power over the investee.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter1: Quality Auditing: Why It Matters

Section: Chapter Questions

Problem 20CYBK: Which of the following factors is not an example of a risk relevant to the client continuance...

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Question

1. Potential voting rights from call options held
by an investor should be taken into account in
determining whether power over the investee
exists, but only when the call options are "out of
the money".
2. An investor's rights must be substantive to
give rise to power over the investee.
3. Protective rights such as the ability to remove
key management personnel under restricted
circumstances do not contribute to establishing
power over the investee.
4. If unanimous consent is required from two or
more investors, this gives rise to power over the
investee.
Ture of false?

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