Exam 15: Ensuring Audit Quality in Completing the Audit

When a subsequent event provides evidence about conditions that did not exist at the balance sheet date,the auditor should do which of the following?

Where would the auditor make mention of issues noted during audit procedures that are not of audit significance?

If subsequent to the issuance of an audit report and financial statements facts comes to the auditor's attention that would have affected the audit report and financial statements had they been known at the time then the auditor can wait and update the audit report the next time that it is issued.

If the auditor concludes that there may be a going-concern problem with the client,the auditor should do which of the following?

An auditor passes on several errors discovered during the audit.Which of the following represents the best reason for the auditor not requesting that the adjustments be made by management?

The culture of an audit firm is likely to provide a positive contribution to audit quality where the leadership of an audit firm creates an environment where achieving high quality is valued,invested in and rewarded.

A letter is sent to the client's attorneys soliciting a response directly to the auditor in order to corroborate management's accounting and disclosure for contingent liabilities.

Management of Megadile,Inc.refuses to sign the management representation letter given to them in the course of the audit on the grounds that it invades the company's privacy.Such actions will be considered by the auditors to be

Management representation letters Describe the purpose of the management representation letter.

Litigation,claims,and assessments Discuss the information management is supposed to provide on litigation,claims and assessments,the purpose of the letter of audit inquiry,who writes it,who it is addressed to,and the important inquiries that are made of the client's lawyer in it.

The auditor must demand that management make all adjustments,no matter how large or small,prior to signing off on the financial statements.

One purpose of the management representation letter is to further acknowledge management's responsibility for the financial statements in writing.

Subsequent events What are the two types of subsequent events identified in the accounting literature and what is required when each occurs? Provide an example of each type of subsequent event.

A quality audit is one performed in accordance with generally accepted auditing standards (GAAS)to provide reasonable assurance that the audited financial statements and related disclosures are presented in accordance with generally accepted accounting principles (GAAP)and are not materially misstated.

Subsequent events may indicate conditions that did not exist at the balance sheet date,and should be considered for footnote disclosure.

Contingent liabilities The auditor will discuss contingencies with the appropriate executives and management of the company.Identify at least five sources of evidence to corroborate management's representations regarding contingencies.

Which one of the following subsequent events will least likely result in an adjustment to the financial statements?

In the letter of audit inquiry concerning a description and evaluation of litigation,claims and assessment provided by management to the auditor,the client's lawyer is not requested to provide information on

When making a client continuance decision the auditor should evaluate a client based upon which of the following?

Testing subsequent events List the audit procedures to be performed to determine if subsequent events have occurred.