Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

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 and assume responsibility for a greater period of time. 
B)  accept responsibility for subsequent events. 
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 and assume responsibility for a greater period of time. 
B)  accept responsibility for subsequent events. 
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

Question 3

The issuance of bonds by the client subsequent to the balance sheet date would require a footnote disclosure in,but no adjustment to,the financial statements under audit.

Accepted Answer

A) True 
 B)False  True

Question 4

Auditors of public companies must obtain certain representations from management regarding internal control over financial reporting.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 6

Auditors must communicate in writing about internal control weaknesses to the audit committee or those charged with governance.

Accepted Answer

A) True 
 B)False

Question 7

If the client refuses to prepare and sign a letter of representation,the auditor would be required to issue either a qualified opinion or a disclaimer of opinion.

Accepted Answer

A) True 
 B)False

Question 8

One of the primary approaches in dealing with uncertainties in loss contingencies uses a ________ threshold.

Accepted Answer

A)  monetary 
B)  materiality 
C)  probability 
D)  analytical 
A)  monetary 
B)  materiality 
C)  probability 
D)  analytical

Question 9

Distinguish between contingent liabilities and commitments.

Accepted Answer

Contingent liabilities are potential fut

Question 10

If an attorney refuses to provide the auditor with information about material existing lawsuits or unasserted claims,current professional standards require that the auditor consider the refusal as a scope limitation.

Accepted Answer

A) True 
 B)False

Question 11

The fieldwork for the December 31,2013 audit of Treble Corporation ended on March 17,2014.The financial statements and auditor's report were issued and mailed to stockholders on March 29,2014.In each of the material situations (1 through 5)below,indicate the appropriate action (a,b,c,d,or e).The possible actions are as follows:
a.Adjust the December 31,2013 financial statements.
b.Disclose the information in a footnote in the December 31,2013 financial statements.
c.Request the client revise and reissue the December 31,2013 financial statements.The revision should involve an adjustment to the December 31,2013 financial statements.
d.Request the client revise and reissue the December 31,2013 financial statements.The revision should involve the addition of a footnote,but no adjustment,to the December 31,2013 financial statements.
e.No action is required.
The situations are as follows:
________ 1.On January 16,2014 a lawsuit was filed against Treble for a patent infringement action that allegedly took place in early 2010.In the opinion of Treble's attorneys,there is a reasonable (but not probable)danger of a significant loss to Treble.
________ 2.On February 19,2014,Treble settled a lawsuit out of court that had originated in 2009 and is currently listed as a contingent liability.
________ 3.On March 30,2014,Treble settled a lawsuit out of court that had originated in 2007 and is currently listed as a contingent liability.
________ 4.On February 2,2014,you discovered an uninsured lawsuit against Treble that had originated on August 30,2010.
________ 5.On April 7,2014,you discovered that a debtor of Treble went bankrupt on January 22,2014,due to a major uninsured fire that occurred on January 2,2014.

Accepted Answer

The answer of The fieldwork for the December 31,2013 audit...

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements regarding the letter of representation is not correct?

Accepted Answer

A)  It is prepared on the client's letterhead. 
B)  It is addressed to the CPA firm. 
C)  It is signed by high-level corporate officials, usually the president and chief financial officer. 
D)  It is optional, not required, that the auditor obtain such a letter from management. 
A)  It is prepared on the client's letterhead. 
B)  It is addressed to the CPA firm. 
C)  It is signed by high-level corporate officials, usually the president and chief financial officer. 
D)  It is optional, not required, that the auditor obtain such a letter from management.

Question 14

The letter of representation obtained from an audit client should be:

Accepted Answer

A)  dated as of the end of the period under audit. 
B)  dated as of the audit report date. 
C)  dated as of any date decided upon by the client and auditor. 
D)  dated as of the issuance of the financial statement. 
A)  dated as of the end of the period under audit. 
B)  dated as of the audit report date. 
C)  dated as of any date decided upon by the client and auditor. 
D)  dated as of the issuance of the financial statement.

Question 15

A client has a calendar year-end.Listed below are four events that occurred after December 31.Which one of these subsequent events might result in adjustment of the December 31 financial statements?

Accepted Answer

A)  Sale of a major subsidiary 
B)  Adoption of accelerated depreciation methods 
C)  Write-off of a substantial portion of inventory as obsolete 
D)  Collection of 90% of the accounts receivable existing at December 31 
A)  Sale of a major subsidiary 
B)  Adoption of accelerated depreciation methods 
C)  Write-off of a substantial portion of inventory as obsolete 
D)  Collection of 90% of the accounts receivable existing at December 31

Question 16

If the auditor determines that a subsequent event that affects the current period financial statements occurred after fieldwork was completed but before the audit report was issued,what date(s)may the auditor use on the report?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 17

Which of the following procedures and methods are important in assessing a company's ability to continue as a going concern?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 18

When using the probability threshold for contingencies,the likelihood of the occurrence of the event is classified as:

Accepted Answer

A)  not likely, likely, or highly likely. 
B)  remote, reasonably possible, or probable. 
C)  slight, moderate, great. 
D)  remote, likely, possible. 
A)  not likely, likely, or highly likely. 
B)  remote, reasonably possible, or probable. 
C)  slight, moderate, great. 
D)  remote, likely, possible.

Question 19

Current professional auditing standards make it clear that management,not the auditor,is responsible for identifying and deciding the appropriate accounting treatment for contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 20

If an auditor concludes there are contingent liabilities,then he or she must evaluate the:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Exam 24: Audit Completion

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

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

The issuance of bonds by the client subsequent to the balance sheet date would require a footnote disclosure in,but no adjustment to,the financial statements under audit.

Auditors of public companies must obtain certain representations from management regarding internal control over financial reporting.

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

Auditors must communicate in writing about internal control weaknesses to the audit committee or those charged with governance.

If the client refuses to prepare and sign a letter of representation,the auditor would be required to issue either a qualified opinion or a disclaimer of opinion.

One of the primary approaches in dealing with uncertainties in loss contingencies uses a ________ threshold.

Distinguish between contingent liabilities and commitments.

If an attorney refuses to provide the auditor with information about material existing lawsuits or unasserted claims,current professional standards require that the auditor consider the refusal as a scope limitation.

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

Which of the following statements regarding the letter of representation is not correct?

The letter of representation obtained from an audit client should be:

A client has a calendar year-end.Listed below are four events that occurred after December 31.Which one of these subsequent events might result in adjustment of the December 31 financial statements?

If the auditor determines that a subsequent event that affects the current period financial statements occurred after fieldwork was completed but before the audit report was issued,what date(s)may the auditor use on the report?

Which of the following procedures and methods are important in assessing a company's ability to continue as a going concern?

When using the probability threshold for contingencies,the likelihood of the occurrence of the event is classified as:

Current professional auditing standards make it clear that management,not the auditor,is responsible for identifying and deciding the appropriate accounting treatment for contingent liabilities.

If an auditor concludes there are contingent liabilities,then he or she must evaluate the:

The Assurance Services Market

The Audit Standards Setting Process

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Nature and Type of Audit Evidence

Audit Planning

Considering Materiality and Audit Risk

Considering Internal Control

Considering the Risk of Fraud

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

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

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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