Exam 17: Completing the Audit Engagement

Which of the following procedures should an auditor generally perform regarding subsequent events?

Generally,loss contingencies that are judged to be remote

The date of the management representation letter should coincide with the

Ajax,Inc.,is an affiliate of the audit client and is audited by another audit firm.Which of the following is most likely to be used by the auditor to obtain assurance that all guarantees by the client of the affiliate's indebtedness have been detected?

In the course of the examination of financial statements for the purpose of expressing an opinion,the auditor normally prepares a schedule of unadjusted differences for which the auditor did not propose adjustments when they were discovered.What is the primary purpose of this schedule?

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

After issuance of the auditor's report,the auditor has no obligation to make any further inquiries with respect to audited financial statements covered by that report unless

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

The field work for the December 31,2011 audit of Pumpkin Corporation ended on March 13,2012.The financial statements and auditor's report were issued and mailed to stockholders on March 23,2012.In each of the situations below,select from the list at the end of the problem the appropriate action to be taken by the auditor.Assume all situations are material. Situations: 1.On April 5,2012,you discovered that on February 16,2012,a flood destroyed the entire uninsured inventory in one of Pumpkin's warehouses. 2.On February 17,2012,you discovered that on February 16,2012,a flood destroyed the entire uninsured inventory in one of Pumpkin's warehouses. 3.On February 17,2012,you discovered that on November 30,2011,a flood destroyed the entire uninsured inventory in one of Pumpkin's warehouses. 4.On April 5,2012,you discovered that on March 30,2012,a fire destroyed one of Pumpkin's 10 plants. 5.On April 7,2012,you discovered that a debtor of Pumpkin went bankrupt on January 6,2012. 6.On January 16,2012,a lawsuit was filed against Pumpkin for a patent infringement action that allegedly took place in early 2001.In the opinion of Pumpkin's attorneys,there is a reasonable (but not probable)danger of a significant loss to Pumpkin. 7.On February 19,2012,Pumpkin settled a lawsuit out of court that had originated in 2000 and is currently listed as a contingent liability. Possible Actions: a.Adjust the December 31,2011 financial statements. b.Disclose the information in a footnote in the December 31,2011 financial statements c.Request the client revise and reissue the December 31,2011 financial statements.The revision should involve an adjustment to the December 31,2011 financial statements. d.Request the client revise and reissue the December 31,2011 financial statements.The revision should involve the addition of a footnote,but no adjustment,to the December 31,2011 financial statements. e.No action is required.

Identify the two primary types of subsequent events that require consideration by management and evaluation by the auditor and give two examples of each type.

An auditor should obtain evidential matter relevant to all the following factors concerning third-party litigation against a client except the:

While auditing other business processes,an auditor may identify information about contingent liabilities.What specific audit procedures relating to other business processes could uncover these liabilities?

Which of the following statements extracted from a client's lawyer's letter concerning litigation,claims,and assessments most likely would cause the auditor to request clarification?

Which of the following procedures would an auditor most likely perform to obtain evidence about an entity's subsequent events?

After an auditor has issued an audit report on a nonpublic entity,there is no obligation to make any further audit tests or inquiries with respect to the audited financial statements covered by that report unless

Auditors often request that the audit client send a letter of inquiry to those attorneys who have been consulted with respect to litigation,claims,and/or assessments.The primary reason for this request is to provide the auditor with

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

Every contingent liability must be recorded.

Which of the following auditing procedures is ordinarily performed last?

A Type I subsequent event usually requires