Exam 24: Audit Completion

If,during the completion phase of the audit,the auditor determines that he or she has not obtained sufficient evidence to draw a conclusion about the fairness of the client's financial statements,there are two choices: accumulate additional evidence or issue either a qualified or an adverse opinion.

When preparing a standard inquiry of client's attorney letter,the client's letterhead should be used,and the letter should be signed by the client company's officials.

List the three reasons why an experienced member of the audit firm must thoroughly review audit documentation at the completion of the audit.

Client representation letters are required by professional auditing standards,whereas management letters are optional.

To make a final evaluation as to whether sufficient appropriate evidence has been accumulated,the auditor will do all of the following except:

You are auditing Rodgers and Company.You are aware of a potential loss due to non-compliance 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:

The auditor's primary concern relative to presentation and disclosure-related objectives is:

In a standard inquiry of client's attorney letter,the attorney is requested to communicate about contingencies up to the balance sheet date.

Auditors,as part of completing the audit,will request the client to send a letter of inquiry to those attorneys the company has been consulting with during the year under audit regarding legal matters of concern to the company.The primary reason the auditor requests this information is to:

In connection with the annual audit,which of the following is not a "subsequent events" procedure?

With which of the following client personnel would it generally not be appropriate to inquire about commitments or contingent liabilities?

Match seven of the terms (a-p)with the description/definitions provided below (1-7): a.Commitments b.Completing the engagement checklist c.Contingent liability d.Dual-dated audit report e.Financial statement disclosure checklist f.Independent review g.Inquiry of client's attorneys h.Letter of representation i.Other information in annual reports j.Review for subsequent events k.Subsequent events l.Unadjusted misstatement worksheet m.Management letter n.Pending claim o.Unasserted claim p.Audit documentation review ________ 1.A review of the financial statements and the entire set of audit files by an independent reviewer to whom the audit team must justify the evidence accumulated and the conclusions reached. ________ 2.A potential future obligation to an outside party for an unknown amount resulting from activities that have already taken place. ________ 3.A written communication from the client to the auditor formalizing statements that the client has made about matters pertinent to the audit. ________ 4.A potential legal claim against a client where the condition for a claim exists but no claim has been filed. ________ 5.Transactions that occurred after the balance sheet date,which affect the fair presentation or disclosure of the statements being audited. ________ 6.Agreements that the entity will hold to a fixed set of conditions,such as the purchase or sale of merchandise at a stated price. ________ 7.The use of one audit report date for normal subsequent events and a later date for one or more subsequent events.

A client representation letter is:

An attorney is aware of a violation of a patent agreement that could result in a significant loss to the client if it were known.This is an example of a(n):

What is one of the main reasons an attorney may refuse to provide auditors with complete information about contingent liabilities?

If a potential loss on a contingent liability is remote,the liability usually is:

When dealing with contingencies:

The audit procedures for the subsequent events review can be divided into two categories: (1)procedures normally integrated as a part of the verification of year-end account balances,and (2)those performed specifically for the purpose of discovering subsequent events.Which of the following procedures is in the second category?

At the completion of the audit,management is typically asked to make a written statement as a part of the engagement letter that it is aware of no undisclosed contingent liabilities.

Auditing standards require the auditor to ________ other information included in annual reports pertaining directly to the financial statements.