Exam 17: Completing the Audit

The management representation letter is prepared on the client's letterhead, addressed to the audit firm and signed by the chief executive officer and chief financial officer.

No disclosure in the financial statement is necessary if the contingent liability is:

Because a management representation letter is a written statement from a non- independent source, it cannot be regarded as sufficient evidence of any assertions.

The audit standards set out a standard format for management letters.

How many presentation and disclosure objectives are there?

If a potential loss on a contingent liability is probable and amount of the loss can be reasonably estimated, the liability should be:

State the three conditions required for a contingent liability to exist.

An agreement which commits the firm to a set of fixed conditions in the future regardless of what happens to profits or the economy as a whole is a definition of a:

Harvey, CPA, is preparing an audit program for the purpose of ascertaining the occurrence of subsequent events that may require adjustment or disclosure essential to a fair presentation of the financial statements in conformity with applicable accounting standards. Which one of the following procedures would be LEAST appropriate for this purpose?

Current auditing standards require the performance of analytical procedures during the completion phase of the audit.

List the five categories of specific matters that should be included in a management representation letter. Include an example from each category.

Discuss three audit procedures commonly used to search for contingent liabilities.

Often, procedures for presentation- and disclosure- related objectives are integrated with the auditor's tests for:

ASA 720 requires the auditor to read other information in documents containing audited financial reports that pertains directly to the financial report and to compare that information to make sure that it corresponds. If there is a material inconsistency, the client should be requested to change the information. If the client refuses, the auditor should:

ASA 570 requires the auditor to evaluate whether there is a substantial doubt about a client's ability to continue as a going concern. One of the most important types of evidence to assess the going concern question is:

Subsequent events which require adjustment to the financial statements provide additional information about significant conditions/events which did not exist at the balance sheet date.

When auditing contingent liabilities, the primary objective at the initial stage of the tests is to determine:

After the financial statements have been issued, if a subsequent discovery of facts occurs, that is, the auditor becomes aware that some information in the statements is materially misleading, the auditor should ask the client to issue an immediate revision. This is only required if:

What is the purpose of a management representation letter?

If the auditor concludes that there are contingent liabilities, he or she must evaluate the significance of the potential liability and the nature of the disclosure needed in the financial statements. Which of the following statements is NOT true?