Question 1

The auditor's primary means of obtaining corroboration of management's information concerning litigation is a:

Accepted Answer

A) letter of audit inquiry to the entity's lawyer. 
B) letter of corroboration from the auditor's lawyer upon review of the legal documentation. 
C) confirmation of claims and assessments from the other parties to the litigation. 
D) confirmation of claims and assessments from an officer of the court presiding over the litigation. 
A) letter of audit inquiry to the entity's lawyer. 
B) letter of corroboration from the auditor's lawyer upon review of the legal documentation. 
C) confirmation of claims and assessments from the other parties to the litigation. 
D) confirmation of claims and assessments from an officer of the court presiding over the litigation. A

Question 2

An example of a Type II event or condition is an uncollectible account receivable resulting from deterioration in a customer's financial condition prior to year end, about which the entity is unaware. The customer declares bankruptcy after the balance sheet date but prior to the issuance of the financial statements.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity's ability to continue as a going concern?

Accepted Answer

A) Cash flows from operating activities are negative. 
B) Research and development projects are postponed. 
C) Significant related party transactions are pervasive. 
D) Stock dividends replace annual cash dividends. 
A) Cash flows from operating activities are negative. 
B) Research and development projects are postponed. 
C) Significant related party transactions are pervasive. 
D) Stock dividends replace annual cash dividends. A

Question 4

A legal letter will include and evaluate all contingent liabilities of the company.

Accepted Answer

A) True 
 B)False

Question 5

What is the difference between a contingent liability and a commitment?

Accepted Answer

A contingent liability is an existing co

Question 6

Discuss the steps used by an auditor to evaluate an entity's ability to continue as a going concern.

Accepted Answer

Auditing standards indicate that the aud

Question 7

Which of the following is generally requested in a legal letter?

Accepted Answer

A) A request that the attorney comment on unasserted claims where his or her views differ from management's evaluation. 
B) A list of all attorneys that performed any work for the entity during the year. 
C) A statement indicating that the attorney is responsible for the fair presentation of unasserted claims in the entity's financial statements. 
D) A request that the attorney provide a copy of all invoices given to the entity during the year. 
A) A request that the attorney comment on unasserted claims where his or her views differ from management's evaluation. 
B) A list of all attorneys that performed any work for the entity during the year. 
C) A statement indicating that the attorney is responsible for the fair presentation of unasserted claims in the entity's financial statements. 
D) A request that the attorney provide a copy of all invoices given to the entity during the year.

Question 8

The auditor must perform final analytical procedures before deciding on the appropriate audit report to issue for the entity.

Accepted Answer

A) True 
 B)False

Question 9

An auditor is concerned with completing various phases of the examination after the balance sheet date. This "subsequent period" involving formal audit procedures extends to the date of the:

Accepted Answer

A) issuance of the financial statements. 
B) final review of the audit working papers. 
C) auditor's report. 
D) delivery of the auditor's report to the entity. 
A) issuance of the financial statements. 
B) final review of the audit working papers. 
C) auditor's report. 
D) delivery of the auditor's report to the entity.

Question 10

A Type I subsequent event usually requires:

Accepted Answer

A) an adjustment to the financial statements. 
B) no adjustment to the financial statements. 
C) withdrawal from the engagement. 
D) no action. 
A) an adjustment to the financial statements. 
B) no adjustment to the financial statements. 
C) withdrawal from the engagement. 
D) no action.

Question 11

If there is substantial doubt about the entity's ability to continue as a going concern, the auditor should obtain information about the management's plans to mitigate the problem and assess the likelihood that such plans can be implemented.

Accepted Answer

A) True 
 B)False

Question 12

If a lawyer refuses to furnish corroborating information regarding litigation, claims, and assessments, the auditor should:

Accepted Answer

A) honor the confidentiality of the client-lawyer relationship. 
B) consider the refusal to be a scope limitation. 
C) seek to obtain the corroborating information from management. 
D) disclose this fact in a footnote to the financial statements. 
A) honor the confidentiality of the client-lawyer relationship. 
B) consider the refusal to be a scope limitation. 
C) seek to obtain the corroborating information from management. 
D) disclose this fact in a footnote to the financial statements.

Question 13

An auditor will ordinarily examine invoices from lawyers primarily in order to:

Accepted Answer

A) substantiate accruals. 
B) assess the legal ramifications of litigation in progress. 
C) estimate the dollar amount of contingent liabilities. 
D) identify actual or potential litigation against the entity. 
A) substantiate accruals. 
B) assess the legal ramifications of litigation in progress. 
C) estimate the dollar amount of contingent liabilities. 
D) identify actual or potential litigation against the entity.

Question 14

Type II subsequent events are conditions that require an adjustment to the account balance shown on the financial statements.

Accepted Answer

A) True 
 B)False

Question 15

An auditor's decision concerning whether or not to "dual date" the audit report is based upon the auditor's willingness to:

Accepted Answer

A) extend auditing procedures. 
B) accept responsibility for all events between year-end and the audit report date. 
C) permit inclusion of a footnote captioned: event (unaudited)subsequent to the date of the auditor's report. 
D) assume responsibility for events subsequent to the issuance of the auditor's report. 
A) extend auditing procedures. 
B) accept responsibility for all events between year-end and the audit report date. 
C) permit inclusion of a footnote captioned: event (unaudited)subsequent to the date of the auditor's report. 
D) assume responsibility for events subsequent to the issuance of the auditor's report.

Question 16

From the list below, select the procedures that an auditor would use to test for contingent liabilities.
a. Inquire of SEC officials regarding reported violations by the entity that create claims.
b. Read the entity's contracts, loan agreements, leases, and other documents.
c. Read the entity's minutes of meetings of shareholders, directors, and committees.
d. Request a representation letter from all the entity's employees.
e. Read the legal briefs of all suits filed against the entity's competitors.
f. Request the entity's management to prepare a letter of inquiry to the entity's attorney regarding pending litigation against the entity.

Accepted Answer

Audit procedures 'b,

Question 17

When a question arises about an entity's continued existence, the auditor should consider factors tending to mitigate the significance of negative information concerning the entity's means for maintaining adequate cash flow. An example of such a factor is the:

Accepted Answer

A) possibility of purchasing certain assets rather than leasing them. 
B) capability of extending the due dates of existing debt. 
C) appropriateness of changing depreciation methods from double declining balance to straight line. 
D) marketability of property and equipment that management plans to keep. 
A) possibility of purchasing certain assets rather than leasing them. 
B) capability of extending the due dates of existing debt. 
C) appropriateness of changing depreciation methods from double declining balance to straight line. 
D) marketability of property and equipment that management plans to keep.

Question 18

Reading contracts and loan agreements is one way to identify unrecorded contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 19

A written representation from an entity's management that, among other matters, acknowledges responsibility for the fair presentation of financial statements should normally be signed by the:

Accepted Answer

A) chief executive officer and the chief financial officer. 
B) chief financial officer and the chairman of the board of directors. 
C) chairman of the audit committee of the board of directors. 
D) chief executive officer, the chairman of the board of directors and the entity's lawyer. 
A) chief executive officer and the chief financial officer. 
B) chief financial officer and the chairman of the board of directors. 
C) chairman of the audit committee of the board of directors. 
D) chief executive officer, the chairman of the board of directors and the entity's lawyer.

Question 20

If an auditor dates the auditor's report on financial statements for the year ended December 31, 2013, as of February 10, 2014, except for Note J, as to which the date is March 3, 2014, the auditor is acknowledging responsibility to actively search for and ensure proper handling by management of:

Accepted Answer

A) all subsequent events occurring through March 3, 2014. 
B) all subsequent events occurring through February 10, 2014. 
C) all subsequent events occurring through February 10, 2014 and the specific subsequent event referred to in Note J through March 3, 2014. 
D) only the specific subsequent event referred to in Note J as of March 3, 2014. 
A) all subsequent events occurring through March 3, 2014. 
B) all subsequent events occurring through February 10, 2014. 
C) all subsequent events occurring through February 10, 2014 and the specific subsequent event referred to in Note J through March 3, 2014. 
D) only the specific subsequent event referred to in Note J as of March 3, 2014.

The auditor's primary means of obtaining corroboration of management's information concerning litigation is a:

Which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity's ability to continue as a going concern?

A legal letter will include and evaluate all contingent liabilities of the company.

What is the difference between a contingent liability and a commitment?

Discuss the steps used by an auditor to evaluate an entity's ability to continue as a going concern.

Which of the following is generally requested in a legal letter?

The auditor must perform final analytical procedures before deciding on the appropriate audit report to issue for the entity.

An auditor is concerned with completing various phases of the examination after the balance sheet date. This "subsequent period" involving formal audit procedures extends to the date of the:

A Type I subsequent event usually requires:

If there is substantial doubt about the entity's ability to continue as a going concern, the auditor should obtain information about the management's plans to mitigate the problem and assess the likelihood that such plans can be implemented.

If a lawyer refuses to furnish corroborating information regarding litigation, claims, and assessments, the auditor should:

An auditor will ordinarily examine invoices from lawyers primarily in order to:

Type II subsequent events are conditions that require an adjustment to the account balance shown on the financial statements.

An auditor's decision concerning whether or not to "dual date" the audit report is based upon the auditor's willingness to:

When a question arises about an entity's continued existence, the auditor should consider factors tending to mitigate the significance of negative information concerning the entity's means for maintaining adequate cash flow. An example of such a factor is the:

Reading contracts and loan agreements is one way to identify unrecorded contingent liabilities.

A written representation from an entity's management that, among other matters, acknowledges responsibility for the fair presentation of financial statements should normally be signed by the:

If an auditor dates the auditor's report on financial statements for the year ended December 31, 2013, as of February 10, 2014, except for Note J, as to which the date is March 3, 2014, the auditor is acknowledging responsibility to actively search for and ensure proper handling by management of:

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders' Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters

Exam 17: Completing the Audit Engagement

The auditor's primary means of obtaining corroboration of management's information concerning litigation is a:

Which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity's ability to continue as a going concern?

A legal letter will include and evaluate all contingent liabilities of the company.

What is the difference between a contingent liability and a commitment?

Discuss the steps used by an auditor to evaluate an entity's ability to continue as a going concern.

Which of the following is generally requested in a legal letter?

The auditor must perform final analytical procedures before deciding on the appropriate audit report to issue for the entity.

An auditor is concerned with completing various phases of the examination after the balance sheet date. This "subsequent period" involving formal audit procedures extends to the date of the:

A Type I subsequent event usually requires:

If there is substantial doubt about the entity's ability to continue as a going concern, the auditor should obtain information about the management's plans to mitigate the problem and assess the likelihood that such plans can be implemented.

If a lawyer refuses to furnish corroborating information regarding litigation, claims, and assessments, the auditor should:

An auditor will ordinarily examine invoices from lawyers primarily in order to:

Type II subsequent events are conditions that require an adjustment to the account balance shown on the financial statements.

An auditor's decision concerning whether or not to "dual date" the audit report is based upon the auditor's willingness to:

When a question arises about an entity's continued existence, the auditor should consider factors tending to mitigate the significance of negative information concerning the entity's means for maintaining adequate cash flow. An example of such a factor is the:

Reading contracts and loan agreements is one way to identify unrecorded contingent liabilities.

A written representation from an entity's management that, among other matters, acknowledges responsibility for the fair presentation of financial statements should normally be signed by the:

If an auditor dates the auditor's report on financial statements for the year ended December 31, 2013, as of February 10, 2014, except for Note J, as to which the date is March 3, 2014, the auditor is acknowledging responsibility to actively search for and ensure proper handling by management of:

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders' Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters