Exam 18: Advanced Topics Concerning Complex Audit Judgments

According to KPMG's 2008 International Survey of Corporate Responsibility Reporting,about 25 percent of the largest 250 companies in the world now issue reports detailing their sustainability efforts and associated outcomes.

It is a mandate for all companies listed with the NASDAQ stock exchange to maintain an internal audit function.

Which of the following is associated with Level 3 in the FASB hierarchy for ascertaining fair value?

The accumulation of all potential misstatements in a place where the audit team can assess the materiality of misstatements is often based on posting materiality.

Which of the following is an approach to setting posting materiality?

Goodwill has to be evaluated for impairment once a year and not necessarily at the balance sheet date.However,the date for evaluation has to be consistently applied.

In audit considerations,fair value level 1 is broad and applies to financial instruments,property,or lower of cost or market considerations for inventory,loans,or receivables.

Auditor needs to assess disclosures about what lines of business the company may discontinue.

The significant judgments of "Loaned securities" by an auditor are subject to fair value estimates and also must consider the likelihood of securities that will be returned.

Although different audit firms take different approaches,planning materiality could be the same as overall materiality,or could be a percentage of overall materiality,generally ranging from:

Planning materiality helps the auditor determine the extent of audit evidence needed.

Which one of the following general factors should not be considered critical in assessing severity of internal control deficiencies?

Materiality judgments are made in light of the surrounding circumstances but need not necessarily involve both quantitative and qualitative considerations.

A best practice is to have an oversight of the internal audit function as a responsibility of which of the following parties?

At a fair value level 1,while addressing the challenge of determining identical assets,analysis of the volume of trading activity could be one of the sources of audit evidence.

A material misstatement in the financial statements,including those requiring restatements strongly implies a material weakness in which of the following?

Purpose of Materiality Judgments and Common Benchmarks and Thresholds What are the key aspects in materiality judgments? Explain the purpose of materiality judgments,common benchmarks,and thresholds.

The assessment as to whether a misstatement in cash-flow classification is material should remain within the income statement perspective.

If the market value of a company is below book value and a significant amount of goodwill exists,the presumption is that there has been an impairment of goodwill.

Auditors are not responsible for making judgments regarding the fair value of securities for a future time period because they are only concerned about historical cost based values.