Exam 16: Advanced Topics Concerning Complex Auditing Judgments

Audit Program for Goodwill Impairment Testing. Outline the major elements of an audit program to determine whether there is a goodwill impairment, and if there is, the extent of the goodwill impairment.

Which of the following models is associated with Level 3 in the FASB hierarchy for ascertaining fair value?

The FASB has set a hierarchy of inputs to consider in assessing fair value. Which of the following relates to Level 3?

Which of the following is not an element of pensions and other postemployment benefits that is difficult to estimate?

Which of the following factors would be least likely to affect the estimate of the warranty liability?

The significant judgments related to "net finance receivables" include assessing the allowance for noncollectibility.

Which of the following is not a significant challenge related to valuation issues for audits of merger and acquisition transactions?

Materiality judgments are made in light of the surrounding circumstances, but need not necessarily involve both quantitative and qualitative considerations.

Which of the following would not be a reason to lower the threshold for materiality?

Complex audit judgments and decisions often involve accounts that require subjective estimates by management.

Which method focuses on assuring that the year-end balance sheet is correct and does not consider the impact of prior-year uncorrected misstatements reversing in later years?

For nonprofit entities, appropriate benchmarks for materiality judgments would include which of the following?

In making judgments about the effect of the internal auditors' work on the external auditor's procedures in specific audit areas, which of the following is not one of the issues related to the specific audit areas that is considered by the external auditor?

Which of the following should the client have as part of its process for estimating fair value?

Considering Qualitative Factors. What are the considerations that may cause a quantitatively small misstatement to be considered material?

The SEC's position is generally that if management refuses to correct a material misstatement, then the auditor is obligated to issue a qualified or an adverse opinion on the financial statements.

Which of the following factors can mitigate concerns that the auditor might otherwise have about a material weakness that was identified at an interim date?

The auditor considers materiality only at the overall financial statement level.

There are systematic processes that the auditor can use in making most of the complex judgments in the financial statements.

Which of the following statements is not true regarding the use of a judgmental approach by auditors in determining whether a misstatement is clearly trivial?