A client owning 18% of the voting stock of an investee has accounted for the investment under the equity method. The effect of using the equity method rather than the fair value method is material. In this instance,
a) The financial statements are not fairly presented.
b) A decision as to whether an 18% interest provides an ability to exercise significant influence rests with management, and the auditor should consider the equity method to be the appropriate valuation method
c) Because an interest of less than 20% implies that the investor cannot exercise significant influence over the investee, the auditor will need to obtain evidence to support a claim to the contrary
d) If the equity method is used in the published financial statements, and the auditor agrees that this method is appropriate, no disclosure that the 20% presumption was set aside is required.