Question 1

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

Accepted Answer

A)  Loss of a plant as a result of a flood 
B)  Sale of long-term debt or capital stock 
C)  Settlement of litigation in excess of the recorded liability 
D)  Major purchase of a business that is expected to double the sales volume 
A)  Loss of a plant as a result of a flood 
B)  Sale of long-term debt or capital stock 
C)  Settlement of litigation in excess of the recorded liability 
D)  Major purchase of a business that is expected to double the sales volume

Question 2

Which of the following is not one of the categories of items included in the client letter of representation?

Accepted Answer

A)  Subsequent events 
B)  Completeness of information 
C)  Recognition, measurement, and disclosure 
D)  Materiality 
A)  Subsequent events 
B)  Completeness of information 
C)  Recognition, measurement, and disclosure 
D)  Materiality

Question 3

Which of the following is a contingent liability with which an auditor is particularly concerned?

Accepted Answer

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

Question 4

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:

Accepted Answer

A)  contingent liabilities. 
B)  subsequent year's transactions. 
C)  late unusual occurrences. 
D)  subsequent events. 
A)  contingent liabilities. 
B)  subsequent year's transactions. 
C)  late unusual occurrences. 
D)  subsequent events.

Question 5

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

Accepted Answer

•To communicate auditor responsibilities

Question 6

The fieldwork for the December 31,2013 audit of Schmidt Corporation ended on March 17,2014.The financial statements and auditor's report were issued on March 29,2014.In each of the material situations (1 through 5)below,indicate the appropriate action (a,b,c ).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.No action is required.
The situations are as follows:
________ 1.On March 1,2014,one of Schmidt Corporation's major customers declared bankruptcy.The customer's financial condition in 2013 was deteriorating and they owed Schmidt Corporation a large sum of money as of the balance sheet date.
________ 2.On February 17,2014,Schmidt Corporation sold some machinery for its book value.
________ 3.On February 20,2014,a flood destroyed the entire uninsured inventory in one of Schmidt's warehouses.
________ 4.On January 5,2014,there was a significant decline in the market value of the securities held for resale from their value as of the balance sheet date.
________ 5.On March 10,2014,the company settled a lawsuit at an amount significantly higher than the amount recorded as a liability on the books as of the balance sheet date.

Accepted Answer

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

Question 7

Auditors are required to obtain a letter of representation that describes management's planned solutions to all internal control weaknesses identified during an audit.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

•Inquire of management (orally and in wr

Question 9

An auditor has the responsibility to actively search for subsequent events that occur subsequent to the:

Accepted Answer

A)  balance sheet date. 
B)  date of the auditor's report. 
C)  balance sheet date, but prior to the audit report. 
D)  date of the management representation letter. 
A)  balance sheet date. 
B)  date of the auditor's report. 
C)  balance sheet date, but prior to the audit report. 
D)  date of the management representation letter.

Question 10

The letter of representation is prepared on the CPA firm's letterhead,addressed to the client's chief executive officer,and signed by the audit engagement partner.

Accepted Answer

A) True 
 B)False

Question 11

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 come into being after the balance sheet date.The subsequent information should not be incorporated directly into the statements if the conditions causing the change in valuation:

Accepted Answer

A)  took place before the balance sheet date. 
B)  did not take place until after the balance sheet date. 
C)  occurred both before and after the balance sheet date. 
D)  are reimbursable through insurance policies. 
A)  took place before the balance sheet date. 
B)  did not take place until after the balance sheet date. 
C)  occurred both before and after the balance sheet date. 
D)  are reimbursable through insurance policies.

Question 12

Inquiries of management regarding the possibility of unrecorded contingencies will be useful in uncovering:

Accepted Answer

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

Question 13

The audit firm issues an audit report for its client.The auditor's have NO obligation to make further inquiries with respect to the client's audited financial statements unless:

Accepted Answer

A)  a development occurs that may affect the company's long term viability as a company. 
B)  final resolution was made on disclosed contingency for which no liability needed to be accrued. 
C)  new information comes to the auditor's attention concerning an event that occurred prior to the date of the audit report that, if known, would have impacted the audit opinion. 
D)  a lawsuit, in which the risk of loss was considered remote, was resolved in the company's favor. 
A)  a development occurs that may affect the company's long term viability as a company. 
B)  final resolution was made on disclosed contingency for which no liability needed to be accrued. 
C)  new information comes to the auditor's attention concerning an event that occurred prior to the date of the audit report that, if known, would have impacted the audit opinion. 
D)  a lawsuit, in which the risk of loss was considered remote, was resolved in the company's favor.

Question 14

With what types of contingencies might an auditor be concerned?

Accepted Answer

The auditor is generally concerned with

Question 15

An auditor's decision concerning whether or not to dual date an audit report is primarily based on the auditor's decision to:

Accepted Answer

A)  extend appropriate audit procedures. 
B)  assume responsibility for events after the date of the auditor's report. 
C)  assume responsibility for event from fiscal year end to the date of the audit report. 
D)  roll the dice and hope for a successful outcome. 
A)  extend appropriate audit procedures. 
B)  assume responsibility for events after the date of the auditor's report. 
C)  assume responsibility for event from fiscal year end to the date of the audit report. 
D)  roll the dice and hope for a successful outcome.

Question 16

Which of the following groups has the responsibility for identifying and deciding the appropriate accounting treatment for recording or disclosing contingent liabilities?

Accepted Answer

A)  Auditors 
B)  Legal counsel 
C)  Management 
D)  Management and the auditors 
A)  Auditors 
B)  Legal counsel 
C)  Management 
D)  Management and the auditors

Question 17

Auditors often integrate procedures for presentation and disclosure objectives with:

Accepted Answer

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

Question 18

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

Accepted Answer

A)  Merger or acquisition activities 
B)  Bankruptcy (due to deteriorating financial condition) of a customer with an outstanding accounts receivable balance 
C)  Issuance of common stock 
D)  An uninsured loss of inventories due to a fire 
A)  Merger or acquisition activities 
B)  Bankruptcy (due to deteriorating financial condition) of a customer with an outstanding accounts receivable balance 
C)  Issuance of common stock 
D)  An uninsured loss of inventories due to a fire

Question 19

Auditors are required to communicate either orally or in writing with the audit committee about internal control weaknesses.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 24: Audit Completion

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

Which of the following is not one of the categories of items included in the client letter of representation?

Which of the following is a contingent liability with which an auditor is particularly concerned?

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:

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

Auditors are required to obtain a letter of representation that describes management's planned solutions to all internal control weaknesses identified during an audit.

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

An auditor has the responsibility to actively search for subsequent events that occur subsequent to the:

The letter of representation is prepared on the CPA firm's letterhead,addressed to the client's chief executive officer,and signed by the audit engagement partner.

Inquiries of management regarding the possibility of unrecorded contingencies will be useful in uncovering:

The audit firm issues an audit report for its client.The auditor's have NO obligation to make further inquiries with respect to the client's audited financial statements unless:

With what types of contingencies might an auditor be concerned?

An auditor's decision concerning whether or not to dual date an audit report is primarily based on the auditor's decision to:

Which of the following groups has the responsibility for identifying and deciding the appropriate accounting treatment for recording or disclosing contingent liabilities?

Auditors often integrate procedures for presentation and disclosure objectives with:

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

Auditors are required to communicate either orally or in writing with the audit committee about internal control weaknesses.

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

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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