Exam 24: Completing the Audit

The auditor has a responsibility to review transactions and activities occurring after the balance sheet date to determine whether anything occurred that might affect the statements being audited.The procedures required to verify these transactions are commonly referred to as the review for

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Question 1

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An environmental clean-up lawsuit is pending against your client.What information about the lawsuit would you as the auditor need in order to determine the proper accounting treatment?

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The first step is to determine if a contingency exists.Three conditions are required for a contingent liability to exist: (1)there is a potential future payment to an outside party or the impairment of an asset that resulted from an existing condition;(2)there is uncertainty about the amount for the future payment or impairment;and (3)the outcome will be resolved by some future event or events.
Since the lawsuit meets the criteria for a contingent liability,the next step is to evaluate the significance of the potential liability and the nature of the disclosure needed in the financial statements to obtain evidence about the occurrence and right and obligations presentation and disclosure objective.Accounting standards describe three levels of likelihood of occurrence and the appropriate financial statement treatment for each likelihood as follows:
a. Probable-future event likely to occur and amount can be reasonably estimated then the financial statement accounts are adjusted.If amount cannot be reasonably estimated,then a footnote disclosure is necessary.
b. Reasonably possible-chance of occurring is more than remote,but less than probable.Footnote disclosure is necessary.
c. Remote-chance of occurrence is slight.No disclosure is necessary.

The auditor is responsible for communicating significant internal control deficiencies to the audit committee,or those charged with governance.This communication

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Question 3

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Which of the following subsequent events is most likely to result in an adjustment to a company's financial statements?

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Question 4

Management furnishes the independent auditor with information concerning litigation,claims,and assessments.Which of the following is the auditor's primary means of initiating action to corroborate such information?

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Question 5

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

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Question 6

Because a management representation letter is a written statement from a nonindependent source,it cannot be regarded as reliable evidence.

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Question 7

Auditing standards require the auditor's assessment of going concern issues.

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Question 8

You are auditing Rodgers and Company.You are aware of a potential loss due to noncompliance with environmental regulations.Management has assessed that there is a 40% chance that a $10M payment could result from the non-compliance.The appropriate financial statement treatment is to

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Question 9

What needs to be included in a standard inquiry to the client's attorney letter sent to a client's legal counsel?

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Question 10

An auditor performs interim work at various times throughout the year.The auditor's subsequent events work should be extended to the date of

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Question 11

If an attorney refuses to provide the auditor with information about material existing lawsuits or unasserted claims,

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Question 12

At the completion of the audit,management is asked to make a written statement that it is not aware of any undisclosed contingent liabilities.This statement would appear in the

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Question 13

After performing all audit procedures in each area,the auditor must integrate the results into an overall conclusion about the financial statements.

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Question 14

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.

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Question 15

Which of the following is not a reason why the auditor requests that the client provide a letter of representation?

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Question 16

List the four principal purposes of the required communication with the audit committee regarding certain additional information obtained during the audit.

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Question 17

The probability threshold for dealing with uncertainty in loss contingencies uses the terms likely and unlikely.

(True/False)

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Question 18

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

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Question 19

What are the three required conditions for a contingent liability to exist?

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Question 20

Showing 1 - 20 of 130

Exam 24: Completing the Audit

The auditor has a responsibility to review transactions and activities occurring after the balance sheet date to determine whether anything occurred that might affect the statements being audited.The procedures required to verify these transactions are commonly referred to as the review for

An environmental clean-up lawsuit is pending against your client.What information about the lawsuit would you as the auditor need in order to determine the proper accounting treatment?

The auditor is responsible for communicating significant internal control deficiencies to the audit committee,or those charged with governance.This communication

Which of the following subsequent events is most likely to result in an adjustment to a company's financial statements?

Management furnishes the independent auditor with information concerning litigation,claims,and assessments.Which of the following is the auditor's primary means of initiating action to corroborate such information?

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

Because a management representation letter is a written statement from a nonindependent source,it cannot be regarded as reliable evidence.

Auditing standards require the auditor's assessment of going concern issues.

You are auditing Rodgers and Company.You are aware of a potential loss due to noncompliance with environmental regulations.Management has assessed that there is a 40% chance that a $10M payment could result from the non-compliance.The appropriate financial statement treatment is to

What needs to be included in a standard inquiry to the client's attorney letter sent to a client's legal counsel?

An auditor performs interim work at various times throughout the year.The auditor's subsequent events work should be extended to the date of

If an attorney refuses to provide the auditor with information about material existing lawsuits or unasserted claims,

At the completion of the audit,management is asked to make a written statement that it is not aware of any undisclosed contingent liabilities.This statement would appear in the

After performing all audit procedures in each area,the auditor must integrate the results into an overall conclusion about the 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.

Which of the following is not a reason why the auditor requests that the client provide a letter of representation?

List the four principal purposes of the required communication with the audit committee regarding certain additional information obtained during the audit.

The probability threshold for dealing with uncertainty in loss contingencies uses the terms likely and unlikely.

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

What are the three required conditions for a contingent liability to exist?

The Demand for Audit and Other Assurance Services

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Legal Liability

Audit Responsibilities and Objectives

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Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

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