Exam 16: Auditing Operations and Completing the Audit

If not adjusted, a situation in which the total likely misstatement in the financial statements exceeds a material amount is likely to lead to an audit report modification.

Shortly after year-end, Zero Corporation was informed of the bankruptcy of Bingo. Zero Corporation showed a receivable of $10,000 due from Bingo as of year-end-none of which seems recoverable. The receivable had been questionable for some time as Bingo had been experiencing financial difficulties for the past several years. Yet, Bingo's bankruptcy did not occur until after Zero Corporation's year-end. Under these circumstances: The financial statements shoud be acjusted The event requires financial statement disclosure, but no adjustment The auditor's report should be modified for a lack of consistency A. Yes No No B. Yes No Yes C. No Yes Yes D. No Yes No

If management fails to list an unasserted claim in the letter of inquiry to a lawyer, the lawyer is not required to inform the auditors of the omission.

Normally, general risk contingencies need not be disclosed in the financial statements.

In auditing the balance sheet, most revenue and expense accounts are also audited. Which accounts are most likely to be audited when auditing Accounts Receivable?

Which of the following is the best reason why the auditors should consider observing a client's distribution of regular payroll checks?

When auditing the statement of cash flows of a profitable, growing company which combination is most likely? Cash fows from operations Cash flows from imesting A. Positive Positive B. Positive Negative C. Negative Positive D. Negative Negative

One reason why the independent auditors perform analytical procedures on the client's operations is to identify:

Which of the following subsequent events might require an adjustment to the client's financial statements?

In the audit of a nonpublic company, the auditors have a responsibility to report on all FASB-required supplementary information.

Which of the following is not correct relating to representation letters?

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

The date the auditor grants the client permission to use the audit report in connection with the financial statements is the:

Specific misstatement in one of a client's 2,000 accounts receivable is referred to as a(n):

An example of an internal control weakness is to assign the payroll department the responsibility for:

The auditors' best course of action with respect to "other information (not including required supplemental information)" included in an annual report containing the auditors' report is to:

A client's previous two years financial statements understated estimated warranty payable by $30,000 and $50,000 respectively, both immaterial amounts. This year, the auditors estimate that the accrual is understated by an additional $60,000. In this year's audit, $55,000 represents a material amount. Assuming that the entire understatement is to be recorded based on SEC SAB 108, the decrease in this year's income due to these understatements is:

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?

An approach that quantifies the total likely misstatement as of the current year-end based on the effects of reflecting all misstatements existing in the balance sheet at the end of the current year, irrespective of whether the misstatements occurred in the current or previous years is referred to as the:

The purpose of segregating the duties of distributing payroll checks and hiring personnel is to: