Question 1

Which of the following is NOT an example of a contingent liability?

Accepted Answer

A)  income tax disputes 
B)  writing off a bad debt 
C)  product warranties 
D)  pending legal action for patent infringement, product liability, or other actions 
A)  income tax disputes 
B)  writing off a bad debt 
C)  product warranties 
D)  pending legal action for patent infringement, product liability, or other actions B

Question 2

Footnote disclosure in the financial statement is necessary if the contingent liability:

Accepted Answer

A)  is remote. 
B)  is probable. 
C)  is reasonably possible. 
D)  has occurred. 
A)  is remote. 
B)  is probable. 
C)  is reasonably possible. 
D)  has occurred. C

Question 3

During the final review of working papers and financial statements, it is common to have the analytical procedures done by a:

Accepted Answer

A)  partner. 
B)  senior. 
C)  junior staff member. 
D)  manager. 
A)  partner. 
B)  senior. 
C)  junior staff member. 
D)  manager. A

Question 4

When the proper disclosure in the financial statements of material contingencies is through footnotes, the footnote should describe the nature of the contingency to the extent it is known and the:

Accepted Answer

A)  auditor's opinion as to the expected outcome. 
B)  steps the client has taken to ensure that it doesn't recur. 
C)  opinion of legal advisers or management as to the expected outcome. 
D)  opinion of an outside independent party, such as an appraiser, as to the expected outcome. 
A)  auditor's opinion as to the expected outcome. 
B)  steps the client has taken to ensure that it doesn't recur. 
C)  opinion of legal advisers or management as to the expected outcome. 
D)  opinion of an outside independent party, such as an appraiser, as to the expected outcome.

Question 5

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?

Accepted Answer

A)  Confirm, as of the completion of fieldwork, accounts receivable that have increased significantly from the year-end date. 
B)  Inquire of management concerning events that may have occurred. 
C)  Read the minutes of the board of directors meetings. 
D)  Obtain a legal counsel's letter as of the completion of fieldwork. 
A)  Confirm, as of the completion of fieldwork, accounts receivable that have increased significantly from the year-end date. 
B)  Inquire of management concerning events that may have occurred. 
C)  Read the minutes of the board of directors meetings. 
D)  Obtain a legal counsel's letter as of the completion of fieldwork.

Question 6

If the client's balance sheet date is 30 June 2012, the audit report date is 11 September 2012, and the date the financial statements and audit report are issued is 10 October 2012, then the auditor is responsible for reviewing subsequent events occurring between 30 June 2012 and 10 October 2012.

Accepted Answer

A) True 
 B)False

Question 7

An agreement by a client to purchase an asset, irrespective of future trading conditions, is known as a contingency.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Management representation letters are required by professional auditing standards, whereas management letters are optional.

Accepted Answer

A) True 
 B)False

Question 10

ASA 240 requires the auditor to communicate all irregularities, including fraud and illegal acts, to the audit committee:

Accepted Answer

A)  only if the act is highly material. 
B)  only if the act is immaterial. 
C)  only if the act is material. 
D)  regardless of materiality. 
A)  only if the act is highly material. 
B)  only if the act is immaterial. 
C)  only if the act is material. 
D)  regardless of materiality.

Question 11

As part of phase IV of the audit, auditors evaluate evidence they obtained during the first three phases of the audit to determine whether they should perform additional procedures for presentation- and disclosure-related objectives.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

.Inquire of management (orally and in wr

Question 13

The statement that BEST expresses the auditor's responsibility with respect to events occurring between the balance sheet date and the end of the audit examination is that the:

Accepted Answer

A)  auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period. 
B)  auditor is fully responsible for events occurring in the subsequent period and should extend all detailed procedures through the last day of fieldwork. 
C)  auditor's responsibility is to determine that a proper cutoff has been made and that transactions recorded on or before the balance sheet date actually occurred. 
D)  auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the balance sheet date. 
A)  auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period. 
B)  auditor is fully responsible for events occurring in the subsequent period and should extend all detailed procedures through the last day of fieldwork. 
C)  auditor's responsibility is to determine that a proper cutoff has been made and that transactions recorded on or before the balance sheet date actually occurred. 
D)  auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the balance sheet date.

Question 14

After the financial statements have been issued, if a 'subsequent discovery of facts occurs' (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 required only if:

Accepted Answer

A)  management makes the discovery and informs the auditor. 
B)  the discovery of facts relates to developments that occurred after the date of the auditor's report. 
C)  the facts discovered already existed at the audit report date. 
D)  the auditor makes the subsequent discovery of facts himself or herself. 
A)  management makes the discovery and informs the auditor. 
B)  the discovery of facts relates to developments that occurred after the date of the auditor's report. 
C)  the facts discovered already existed at the audit report date. 
D)  the auditor makes the subsequent discovery of facts himself or herself.

Question 15

The management letter:

Accepted Answer

A)  is required by ASA 580 whenever there are 'reportable conditions'. 
B)  must follow the format prescribed by the ASIC. 
C)  spells out to the audit committee the auditor's responsibilities under generally accepted auditing standards. 
D)  is optional and is intended to help the client operate its business more effectively. 
A)  is required by ASA 580 whenever there are 'reportable conditions'. 
B)  must follow the format prescribed by the ASIC. 
C)  spells out to the audit committee the auditor's responsibilities under generally accepted auditing standards. 
D)  is optional and is intended to help the client operate its business more effectively.

Question 16

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:

Accepted Answer

A)  analytical procedures. 
B)  inquiries of the client and its legal counsel. 
C)  confirmations of creditors. 
D)  statistical sampling procedures. 
A)  analytical procedures. 
B)  inquiries of the client and its legal counsel. 
C)  confirmations of creditors. 
D)  statistical sampling procedures.

Question 17

A letter of representation written by the client's management to the auditor formalises resolutions of disagreements about different matters throughout the audit.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)  is remote. 
B)  is probable. 
C)  is reasonably possible. 
D)  has occurred. 
A)  is remote. 
B)  is probable. 
C)  is reasonably possible. 
D)  has occurred.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Distinguish between a 'management representation letter' and a 'management letter', and state the
primary purpose of each.

Accepted Answer

1.ASA 580 requires the auditor to obtain

Which of the following is NOT an example of a contingent liability?

Footnote disclosure in the financial statement is necessary if the contingent liability:

During the final review of working papers and financial statements, it is common to have the analytical procedures done by a:

When the proper disclosure in the financial statements of material contingencies is through footnotes, the footnote should describe the nature of the contingency to the extent it is known and the:

If the client's balance sheet date is 30 June 2012, the audit report date is 11 September 2012, and the date the financial statements and audit report are issued is 10 October 2012, then the auditor is responsible for reviewing subsequent events occurring between 30 June 2012 and 10 October 2012.

An agreement by a client to purchase an asset, irrespective of future trading conditions, is known as a contingency.

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.

Management representation letters are required by professional auditing standards, whereas management letters are optional.

ASA 240 requires the auditor to communicate all irregularities, including fraud and illegal acts, to the audit committee:

As part of phase IV of the audit, auditors evaluate evidence they obtained during the first three phases of the audit to determine whether they should perform additional procedures for presentation- and disclosure-related objectives.

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

The statement that BEST expresses the auditor's responsibility with respect to events occurring between the balance sheet date and the end of the audit examination is that the:

After the financial statements have been issued, if a 'subsequent discovery of facts occurs' (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 required only if:

The management letter:

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:

A letter of representation written by the client's management to the auditor formalises resolutions of disagreements about different matters throughout the audit.

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

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

Distinguish between a 'management representation letter' and a 'management letter', and state the primary purpose of each.

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

Audit evidence

Audit planning and documentation

Materiality and risk

Internal control and control risk

Fraud auditing

The impact of information technology on the audit process

Overall audit plan and audit program

Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

Completing tests in the sales and collection cycle: Accounts receivable

Audit sampling

Audit of transaction cycles and financial statement balances I

Audit of transaction cycles and financial statement balances II

Audit reporting

Other auditing and assurance engagements

Filters

Exam 17: Completing the audit

Which of the following is NOT an example of a contingent liability?

Footnote disclosure in the financial statement is necessary if the contingent liability:

During the final review of working papers and financial statements, it is common to have the analytical procedures done by a:

When the proper disclosure in the financial statements of material contingencies is through footnotes, the footnote should describe the nature of the contingency to the extent it is known and the:

If the client's balance sheet date is 30 June 2012, the audit report date is 11 September 2012, and the date the financial statements and audit report are issued is 10 October 2012, then the auditor is responsible for reviewing subsequent events occurring between 30 June 2012 and 10 October 2012.

An agreement by a client to purchase an asset, irrespective of future trading conditions, is known as a contingency.

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.

Management representation letters are required by professional auditing standards, whereas management letters are optional.

ASA 240 requires the auditor to communicate all irregularities, including fraud and illegal acts, to the audit committee:

As part of phase IV of the audit, auditors evaluate evidence they obtained during the first three phases of the audit to determine whether they should perform additional procedures for presentation- and disclosure-related objectives.

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

The statement that BEST expresses the auditor's responsibility with respect to events occurring between the balance sheet date and the end of the audit examination is that the:

After the financial statements have been issued, if a 'subsequent discovery of facts occurs' (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 required only if:

The management letter:

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:

A letter of representation written by the client's management to the auditor formalises resolutions of disagreements about different matters throughout the audit.

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

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

Distinguish between a 'management representation letter' and a 'management letter', and state the primary purpose of each.

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

Audit evidence

Audit planning and documentation

Materiality and risk

Internal control and control risk

Fraud auditing

The impact of information technology on the audit process

Overall audit plan and audit program

Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

Completing tests in the sales and collection cycle: Accounts receivable

Audit sampling

Audit of transaction cycles and financial statement balances I

Audit of transaction cycles and financial statement balances II

Audit reporting

Other auditing and assurance engagements

Filters