Question 1

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 2

The initial review of the working papers prepared by any given auditor is normally done by the

Accepted Answer

A)  partner assigned to the audit. 
B)  supervisor or manager. 
C)  senior. 
D)  immediate supervisor. 
A)  partner assigned to the audit. 
B)  supervisor or manager. 
C)  senior. 
D)  immediate supervisor.

Question 3

Klein Corporation has reported a loss for the 6th year in a row. Klein also has a large bank loan due in the coming year, bringing its current ratio to .60. Further, due to recent economic slowdown, Klein had to increase its bad debt expense by 4% and also saw its largest client, Forest Prairie file for bankruptcy. Forest Prairie's purchases made up 18% of Klein's total sales in the past year. Forest Prairie also had an unpaid balance to Klein at year end.
To reduce expenses Klein has reduced employee training from 5 days to 1 day. During the year, an employee was seriously injured in the production process when his arm was caught in a press. The employee has filed a lawsuit against Klein for $1 000 000 and claims that he was not properly trained to use the equipment. The legal proceeding for this case should begin in the next fiscal year. Since Klein has never been involved in such a lawsuit before, the legal counsel indicated that they were not able to estimate the amount and likelihood that Klein would have to pay.
Required:
Evaluate the going concern situation at Klein and indicate what the auditor would be required to do under CAS 570.

Accepted Answer

It is evident that Klein has a going con

Question 4

CAS 450 requires the auditor to communicate all misstatements to the audit committee

Accepted Answer

A)  if the misstatements are slightly material. 
B)  if the misstatements are material. 
C)  if the misstatements are other than trivial. 
D)  regardless of materiality. 
A)  if the misstatements are slightly material. 
B)  if the misstatements are material. 
C)  if the misstatements are other than trivial. 
D)  regardless of materiality.

Question 5

Refusal by a client to prepare and sign the representation letter would require a(n)

Accepted Answer

A)  qualified opinion as to scope limitation or a disclaimer of opinion. 
B)  adverse opinion or a denial of opinion. 
C)  qualified opinion as to accounting treatment departure or an adverse opinion. 
D)  unqualified opinion with an explanatory paragraph. 
A)  qualified opinion as to scope limitation or a disclaimer of opinion. 
B)  adverse opinion or a denial of opinion. 
C)  qualified opinion as to accounting treatment departure or an adverse opinion. 
D)  unqualified opinion with an explanatory paragraph.

Question 6

CAS require the auditor to review the other information in the annual report to ascertain its consistency with the financial statements. If there is a material inconsistency, the client should be requested to change the information. If the client refuses, the auditor should

Accepted Answer

A)  issue an adverse opinion. 
B)  issue a qualified opinion. 
C)  consider what further action is warranted, including making contact with the audit committee. 
D)  issue an unqualified opinion, bill the client, and withdraw from any future engagements. 
A)  issue an adverse opinion. 
B)  issue a qualified opinion. 
C)  consider what further action is warranted, including making contact with the audit committee. 
D)  issue an unqualified opinion, bill the client, and withdraw from any future engagements.

Question 7

Whenever subsequent events are used to evaluate the amounts included in the statements, care must be taken to distinguish between conditions that existed at the balance sheet date and those that came into being after the end of the year. The subsequent information should not be incorporated directly into the statements if the conditions causing the change in valuation

Accepted Answer

A)  did not take place until after year-end. 
B)  took place before year-end. 
C)  occurred both before and after year-end. 
D)  are reimbursable through insurance policies. 
A)  did not take place until after year-end. 
B)  took place before year-end. 
C)  occurred both before and after year-end. 
D)  are reimbursable through insurance policies.

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

The initial review of the working papers prepared by any given auditor is normally done by the

CAS 450 requires the auditor to communicate all misstatements to the audit committee

Refusal by a client to prepare and sign the representation letter would require a(n)

CAS require the auditor to review the other information in the annual report to ascertain its consistency with the financial statements. If there is a material inconsistency, the client should be requested to change the information. If the client refuses, the auditor should

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

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

Exam 18: Completing the Audit

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

The initial review of the working papers prepared by any given auditor is normally done by the

CAS 450 requires the auditor to communicate all misstatements to the audit committee

Refusal by a client to prepare and sign the representation letter would require a(n)

CAS require the auditor to review the other information in the annual report to ascertain its consistency with the financial statements. If there is a material inconsistency, the client should be requested to change the information. If the client refuses, the auditor should

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

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