Exam 16: Auditing Operations and Completing the Audit

A client's previous two years of financial statements understated estimated warranty payable by $30,000 and $50,000 respectively,both immaterial amounts.This year,the auditors estimate that the accrual is understated by an additional $60,000.In this year's audit,$100,000 represents a material amount.Assuming that the entire understatement is to be recorded,the decrease in this year's income due to these understatements is:

The audit of which of the following balance sheet accounts doesnot normally result in verification of an income statement account?

Future purchase commitments should be disclosed in the notes to the financial statements.

Specific misstatement in one of a client's 2,000 accounts receivable is referred to as a(n):

Shortly after year-end,Allen Corporation was informed of the bankruptcy of Quest.Allen Corporation showed a receivable of $20,000 (a material amount)due from Quest as of year-end-none of which seems recoverable.The receivable had been questionable for some time as Quest had been experiencing financial difficulties for the past several years.Yet,Quest's bankruptcy did not occur until after Allen Corporation's year-end.Under these circumstances:   $\quad$ $\quad$ $\quad$ $\quad$ The financial The event requires financial The auditor's report should be statements should be statement disclosure, but no modified for a lack of adiusted adjustment consistency A- Yes No No B- Yes No Yes C- No Yes Yes D- No Yes No

When a nonpublic audit client has omitted required supplementary information,the audit report should include a(n)?

For clients that distribute checks or cash payments and have significant payroll control weakness,which of the following audit procedures is aimed at determining whether every name on the company payroll is a bona fide employee actually on the job?

Hall accepted an engagement to audit the year 1 financial statements of XYZ Company.XYZ completed the preparation of the year 1 financial statements on February 13,year 2,and Hall began the audit work on February 17,year 2.Hall completed the audit work on March 24,year 2,and completed the report on March 28,year 2.The client's representation letter normally would be dated:

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 is that:

Auditors must communicate internal control "significant deficiencies" to:

A common audit procedure in the audit of payroll transactions involves tracing selected items from the payroll journal to employee time cards that have been approved by supervisory personnel.This procedure is designed to provide evidence in support of the audit proposition that:

Which of the following procedures is not a procedure that is completed near the end of the engagement?

The auditors' best course of action with respect to "other information (not including required supplemental information)" included in an annual report containing the auditors' report is to:

The primary objective of analytical procedures used near the end of an audit is to:

One reason why the independent auditors perform analytical procedures on the client's operations is to identify:

An approach that quantifies the total of uncorrected misstatement as of the current year-end based on the effects of reflecting misstatements during the current year (and not considering any unadjusted previous year misstatements)is referred to as the:

A nonpublic client has provided required supplementary information with its audited financial statements.The auditor's proper reporting responsibility includes:

When auditing the statement of cash flows of a profitable,growing company which combination is most likely? Cash flows from operations Cash flows from investing A- Positive Positive B- Positive Negative C- Negative Positive D- Negative Negative

Analytical procedures are required as a part of the:

An auditor should obtain written representations from the company's attorney concerning litigation claims and assessments,which may be limited to matters that are considered either individually or collectively material.An understanding on the limits of materiality for this purpose has been reached by: