Question 1

IFRS uses specific terminology to refer to the likelihood of the occurrence of an organizational event.Which of the following would require note disclosure only?

Accepted Answer

A) likely to occur and the amount can be estimated 
B) possible that an outflow of resources is not required 
C) likelihood is remote 
D) amount is yet to be confirmed 
A) likely to occur and the amount can be estimated 
B) possible that an outflow of resources is not required 
C) likelihood is remote 
D) amount is yet to be confirmed

Question 2

A client has a calendar year-end.Listed below are four events that occurred after December 31.Which of these subsequent events might result in adjustment of the December 31 financial statements?

Accepted Answer

A) adoption of accelerated depreciation methods 
B) write-off of a substantial portion of inventory as obsolete 
C) collection of 90% of the accounts receivable existing at December 31 
D) sale of a major subsidiary 
A) adoption of accelerated depreciation methods 
B) write-off of a substantial portion of inventory as obsolete 
C) collection of 90% of the accounts receivable existing at December 31 
D) sale of a major subsidiary

Question 3

State the two primary types of subsequent events that require consideration by management and evaluation by the auditor and give two examples of each type.

Accepted Answer

•Events that have a direct effect on the

Question 4

As part of the review for subsequent events,the auditor will review financial statements prepared after the balance sheet date.The purpose of this review is to examine changes after year end and to look for

Accepted Answer

A) errors in capital versus maintenance charge allocations that occurred after the year end. 
B) subsequent payments to accounts payable and long term debt. 
C) subsequent receipts in accounts receivable,especially for the larger customers. 
D) changes in the business relative to results for the same period in the year under audit. 
A) errors in capital versus maintenance charge allocations that occurred after the year end. 
B) subsequent payments to accounts payable and long term debt. 
C) subsequent receipts in accounts receivable,especially for the larger customers. 
D) changes in the business relative to results for the same period in the year under audit.

Question 5

Inquiries of management are used to help identify subsequent events.To help obtain meaningful answers

Accepted Answer

A) the standard firm checklist should be followed. 
B) these inquiries must be conducted with the proper client personnel. 
C) the inquiries should be conducted by senior audit personnel. 
D) they should be asked after the effective date of the audit report. 
A) the standard firm checklist should be followed. 
B) these inquiries must be conducted with the proper client personnel. 
C) the inquiries should be conducted by senior audit personnel. 
D) they should be asked after the effective date of the audit report.

Question 6

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

Accepted Answer

A) the materiality of any liability. 
B) what constitutes adequate disclosure of the liability. 
C) the likelihood of the liability. 
D) the existence of the liability. 
A) the materiality of any liability. 
B) what constitutes adequate disclosure of the liability. 
C) the likelihood of the liability. 
D) the existence of the liability.

Question 7

There are often a large number of immaterial errors discovered that do not require an adjustment at the time they are found.How should these errors be dealt with by the auditor?

Accepted Answer

A) Since these items are individually immaterial,the auditor would not recommend adjusting entries to the client. 
B) Since there are a large number of these,the auditor would recommend adjusting entries to the client. 
C) The auditor must combine the individually immaterial errors and evaluate whether the combined amount is material. 
D) The auditor would never combine these individually immaterial amounts because that would mix apples and oranges. 
A) Since these items are individually immaterial,the auditor would not recommend adjusting entries to the client. 
B) Since there are a large number of these,the auditor would recommend adjusting entries to the client. 
C) The auditor must combine the individually immaterial errors and evaluate whether the combined amount is material. 
D) The auditor would never combine these individually immaterial amounts because that would mix apples and oranges.

Question 8

State the auditors' objectives for verifying contingent liabilities.

Accepted Answer

Auditors' objectives to verify contingen

Question 9

As part of the review for subsequent events,the auditor will review financial statements prepared after the balance sheet date.The statements should be discussed with management to determine whether they

Accepted Answer

A) were approved by the controller prior to your review. 
B) are mathematically correct,including calculation of depreciation. 
C) are prepared on the same basis as the current-period statements. 
D) were completed on a comparative basis,showing the last three years. 
A) were approved by the controller prior to your review. 
B) are mathematically correct,including calculation of depreciation. 
C) are prepared on the same basis as the current-period statements. 
D) were completed on a comparative basis,showing the last three years.

Question 10

Discuss the purpose of a management letter.

Accepted Answer

The purpose of a management letter is to

Question 11

A client acquired 25% of its outstanding capital stock after year-end and prior to completion of the auditor's fieldwork.The auditor should

Accepted Answer

A) advise management to adjust the balance sheet to reflect the acquisition. 
B) issue pro forma financial statements giving effect to the acquisition as if it had occurred at year-end. 
C) advise management to disclose the acquisition in the notes to the financial statements. 
D) disclose the acquisition in the opinion paragraph of the auditor's report. 
A) advise management to adjust the balance sheet to reflect the acquisition. 
B) issue pro forma financial statements giving effect to the acquisition as if it had occurred at year-end. 
C) advise management to disclose the acquisition in the notes to the financial statements. 
D) disclose the acquisition in the opinion paragraph of the auditor's report.

Question 12

If the amount of a probable loss on a contingent liability cannot be estimated but the event is likely,the liability should be

Accepted Answer

A) accrued and indicated in the body of the financial statements. 
B) disclosed in footnotes but not accrued. 
C) neither accrued nor disclosed in footnotes. 
D) disclosed in the auditor's report but not disclosed on the financial statements. 
A) accrued and indicated in the body of the financial statements. 
B) disclosed in footnotes but not accrued. 
C) neither accrued nor disclosed in footnotes. 
D) disclosed in the auditor's report but not disclosed on the financial statements.

Question 13

Which level of risk does the auditor normally assign to the presentation and disclosure-related assertion of completeness for contingent liabilities and subsequent events?

Accepted Answer

A) low risk for inherent risks that required information may not be disclosed in the notes 
B) medium for control risk with respect to identifying relevant events 
C) medium with respect to providing adequate detail for the notes 
D) high risk that all required information may not be disclosed in the notes 
A) low risk for inherent risks that required information may not be disclosed in the notes 
B) medium for control risk with respect to identifying relevant events 
C) medium with respect to providing adequate detail for the notes 
D) high risk that all required information may not be disclosed in the notes

Question 14

A client representation letter is a written statement from a non-independent source and therefore

Accepted Answer

A) cannot be regarded as reliable evidence on its own. 
B) can be regarded as reliable evidence only if the auditor finds strong internal controls. 
C) can be regarded as reliable evidence if the high-level corporate officials who sign it are trustworthy. 
D) needs to be confirmed by an outside,independent source such as a financial institution or law firm. 
A) cannot be regarded as reliable evidence on its own. 
B) can be regarded as reliable evidence only if the auditor finds strong internal controls. 
C) can be regarded as reliable evidence if the high-level corporate officials who sign it are trustworthy. 
D) needs to be confirmed by an outside,independent source such as a financial institution or law firm.

Question 15

List the common quality control review procedures that the auditor should conduct before completing the audit.

Accepted Answer

The common quality control review proced

Question 16

The auditor has sent inquiry letters to all of the client's law firms.Two law firms stated that the client was unlikely to win the lawsuits in question,whereas the client had said the opposite.What action should the auditor take?

Accepted Answer

A) Ask management for invoices supporting the omitted lawsuits. 
B) Request a meeting with management and the respective law firms. 
C) Ask the law firms to provide additional details with respect to the lawsuits. 
D) Change control risk to maximum and increase substantive testing. 
A) Ask management for invoices supporting the omitted lawsuits. 
B) Request a meeting with management and the respective law firms. 
C) Ask the law firms to provide additional details with respect to the lawsuits. 
D) Change control risk to maximum and increase substantive testing.

Question 17

CAS 570 - Going Concern,requires that the auditor evaluate management's assessment of the ability of the entity to continue as a going concern based on

Accepted Answer

A) inquiry with management. 
B) the opinion of the legal counsel of the company. 
C) the liquidity and solvency ratios of the firm. 
D) the evidence collected throughout the audit. 
A) inquiry with management. 
B) the opinion of the legal counsel of the company. 
C) the liquidity and solvency ratios of the firm. 
D) the evidence collected throughout the audit.

Question 18

The audit procedures for the subsequent events review can be divided into two categories: 1)procedures normally integrated as a part of the verification of year-end account balances,and 2)those performed specifically for the purpose of discovering subsequent events.Which of the following procedures would be in the second category?

Accepted Answer

A) Examine subsequent-period sales and purchases transactions to determine whether the cutoff is accurate. 
B) Correspond with lawyers. 
C) Test the collectability of accounts receivable by reviewing subsequent period cash receipts. 
D) Compare the subsequent period purchase price of inventory with the recorded cost as a test of lower-of-cost-or-market valuation. 
A) Examine subsequent-period sales and purchases transactions to determine whether the cutoff is accurate. 
B) Correspond with lawyers. 
C) Test the collectability of accounts receivable by reviewing subsequent period cash receipts. 
D) Compare the subsequent period purchase price of inventory with the recorded cost as a test of lower-of-cost-or-market valuation.

Question 19

The auditor's responsibility with regards to contingent liabilities is to

Accepted Answer

A) identify the appropriate accounting treatment. 
B) decide on the appropriate accounting treatment. 
C) prepare note disclosure. 
D) evaluate the accounting treatment of known contingent liabilities. 
A) identify the appropriate accounting treatment. 
B) decide on the appropriate accounting treatment. 
C) prepare note disclosure. 
D) evaluate the accounting treatment of known contingent liabilities.

Question 20

State the various types of contingent liabilities that concern the auditors the most.

Accepted Answer

Types contingent liabilities that concer

IFRS uses specific terminology to refer to the likelihood of the occurrence of an organizational event.Which of the following would require note disclosure only?

A client has a calendar year-end.Listed below are four events that occurred after December 31.Which of these subsequent events might result in adjustment of the December 31 financial statements?

State the two primary types of subsequent events that require consideration by management and evaluation by the auditor and give two examples of each type.

As part of the review for subsequent events,the auditor will review financial statements prepared after the balance sheet date.The purpose of this review is to examine changes after year end and to look for

Inquiries of management are used to help identify subsequent events.To help obtain meaningful answers

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

There are often a large number of immaterial errors discovered that do not require an adjustment at the time they are found.How should these errors be dealt with by the auditor?

State the auditors' objectives for verifying contingent liabilities.

As part of the review for subsequent events,the auditor will review financial statements prepared after the balance sheet date.The statements should be discussed with management to determine whether they

Discuss the purpose of a management letter.

A client acquired 25% of its outstanding capital stock after year-end and prior to completion of the auditor's fieldwork.The auditor should

If the amount of a probable loss on a contingent liability cannot be estimated but the event is likely,the liability should be

Which level of risk does the auditor normally assign to the presentation and disclosure-related assertion of completeness for contingent liabilities and subsequent events?

A client representation letter is a written statement from a non-independent source and therefore

List the common quality control review procedures that the auditor should conduct before completing the audit.

The auditor has sent inquiry letters to all of the client's law firms.Two law firms stated that the client was unlikely to win the lawsuits in question,whereas the client had said the opposite.What action should the auditor take?

CAS 570 - Going Concern,requires that the auditor evaluate management's assessment of the ability of the entity to continue as a going concern based on

The auditor's responsibility with regards to contingent liabilities is to

State the various types of contingent liabilities that concern the auditors the most.

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Professional Ethics and Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Client Acceptance,Planning,and Materiality

Assessing the Risk of Material Misstatement

Internal Control and COSO Framework

Assessing Control Risk and Designing Test of Controls

Develop Risk Response: Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

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Exam 18: Completing the Audit

IFRS uses specific terminology to refer to the likelihood of the occurrence of an organizational event.Which of the following would require note disclosure only?

A client has a calendar year-end.Listed below are four events that occurred after December 31.Which of these subsequent events might result in adjustment of the December 31 financial statements?

State the two primary types of subsequent events that require consideration by management and evaluation by the auditor and give two examples of each type.

As part of the review for subsequent events,the auditor will review financial statements prepared after the balance sheet date.The purpose of this review is to examine changes after year end and to look for

Inquiries of management are used to help identify subsequent events.To help obtain meaningful answers

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

There are often a large number of immaterial errors discovered that do not require an adjustment at the time they are found.How should these errors be dealt with by the auditor?

State the auditors' objectives for verifying contingent liabilities.

As part of the review for subsequent events,the auditor will review financial statements prepared after the balance sheet date.The statements should be discussed with management to determine whether they

Discuss the purpose of a management letter.

A client acquired 25% of its outstanding capital stock after year-end and prior to completion of the auditor's fieldwork.The auditor should

If the amount of a probable loss on a contingent liability cannot be estimated but the event is likely,the liability should be

Which level of risk does the auditor normally assign to the presentation and disclosure-related assertion of completeness for contingent liabilities and subsequent events?

A client representation letter is a written statement from a non-independent source and therefore

List the common quality control review procedures that the auditor should conduct before completing the audit.

The auditor has sent inquiry letters to all of the client's law firms.Two law firms stated that the client was unlikely to win the lawsuits in question,whereas the client had said the opposite.What action should the auditor take?

CAS 570 - Going Concern,requires that the auditor evaluate management's assessment of the ability of the entity to continue as a going concern based on

The auditor's responsibility with regards to contingent liabilities is to

State the various types of contingent liabilities that concern the auditors the most.

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Professional Ethics and Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Client Acceptance,Planning,and Materiality

Assessing the Risk of Material Misstatement

Internal Control and COSO Framework

Assessing Control Risk and Designing Test of Controls

Develop Risk Response: Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters