Question 1

After performing all audit procedures in each area, the auditor must integrate the results into an overall conclusion about the financial statements.

Accepted Answer

A) True 
 B)False

Question 2

Auditing standards require the auditor to communicate all management frauds and illegal acts to the audit committee:

Accepted Answer

A) only if the act is immaterial. 
B) only if the act is material. 
C) only if the act is highly material. 
D) regardless of materiality.

Question 3

Discuss three audit procedures commonly used to search for contingent liabilities.

Accepted Answer

The answer of Discuss three audit procedures commonly used to...

Question 4

Which of the following audit procedures would most likely assist an auditor in identifying conditions and events that may indicate there could be substantial doubt about an entity's ability to continue as a going concern?

Accepted Answer

A) Review compliance with the terms of debt agreements 
B) Confirmation of accounts receivable from principal customers 
C) Reconciliation of interest expense with debt outstanding 
D) Confirmation of bank balances

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Distinguish between contingent liabilities and commitments.

Accepted Answer

The answer of Distinguish between contingent liabilities and commitments....

Question 7

Management furnishes the independent auditor with information concerning litigation, claims, and assessments.Which of the following is the auditor's primary means of initiating action to corroborate such information?

Accepted Answer

A) Request that client lawyers undertake a reconsideration of matters of litigation, claims, and assessments with which they were consulted during the period under examination. 
B) Request that client management send a letter of inquiry to those lawyers with whom management consulted concerning litigation, claims, and assessments. 
C) Request that client lawyers provide a legal opinion concerning the policies and procedures adopted by management to identify, evaluate, and account for litigation, claims, and assessments. 
D) Request that client management engage outside attorneys to suggest wording for the text of a footnote explaining the nature and probable outcome of existing litigation, claims, and assessments.

Question 8

The auditor has a responsibility to review transactions and activities occurring after the balance sheet date to determine whether anything occurred that might affect the statements being audited.The procedures required to verify these transactions are commonly referred to as the review for:

Accepted Answer

A) contingent liabilities. 
B) subsequent year's transactions. 
C) late unusual occurrences. 
D) subsequent events.

Question 9

Which of the following statements is correct?

Accepted Answer

A) A letter of representation is documentation of management's acceptance of responsibility for the financial statements and is deemed to be reliable evidence. 
B) A letter of representation is not deemed to be reliable evidence because of the potential incompetence of management. 
C) A letter of representation is not deemed to be reliable evidence because of the lack of independence of the preparers. 
D) A letter of representation is documentation of the CPA's acceptance of responsibility for the audit of the financial statement and is deemed to be reliable.

Question 10

The auditor is responsible for communicating significant internal control deficiencies to the audit committee, or those charged with governance.This communication:

Accepted Answer

A) may be oral or written. 
B) must be oral. 
C) must be written. 
D) must be oral via direct communication.

Question 11

The letter of representation obtained from an audit client should be:

Accepted Answer

A) dated as of the end of the period under audit. 
B) dated as of the audit report date. 
C) dated as of any date decided upon by the client and auditor. 
D) dated as of the issuance of the financial statement.

Question 12

An attorney is responding to an independent auditor as a result of the client's letter of inquiry.The attorney may appropriately limit the response to:

Accepted Answer

A) asserted claims and litigation. 
B) asserted, overtly threatened, or pending claims and litigation. 
C) items which have an extremely high probability of being resolved to the client's detriment. 
D) matters to which the attorney has given substantive attention in the form of legal consultation or representation.

Question 13

A lawsuit has been filed against your client.If, in the opinion of legal counsel, the likelihood your client will lose the lawsuit is remote, no financial statement accrual or disclosure of the potential loss would generally be required.

Accepted Answer

A) True 
 B)False

Question 14

Many of the audit procedures for finding contingencies are usually performed as an integral part of various segments of the audit rather than as a separate activity near the end of the audit.

Accepted Answer

A) True 
 B)False

Question 15

An auditor must obtain written client representations that might be signed by all but which of the following?

Accepted Answer

A) Treasurer 
B) Chief financial officer 
C) Vice president of operations 
D) Chief executive officer

Question 16

State the three purposes of the client letter of representation.

Accepted Answer

The answer of State the three purposes of the client...

Question 17

When using the probability threshold for contingencies, the likelihood of the occurrence of the event is classified as:

Accepted Answer

A) not likely, likely, or highly likely. 
B) remote, reasonably possible, or probable. 
C) slight, moderate, great. 
D) remote, likely, possible.

Question 18

Which of the following subsequent events is most likely to result in an adjustment to a company's financial statements?

Accepted Answer

A) Merger or acquisition activities 
B) Bankruptcy (due to deteriorating financial condition)of a customer with an outstanding accounts receivable balance 
C) Issuance of common stock 
D) An uninsured loss of inventories due to a fire

Question 19

A commitment is best described as:

Accepted Answer

A) an agreement to commit the firm to a set of fixed conditions in the future. 
B) an agreement to commit the firm to a set of fixed conditions in the future that depends on company profitability. 
C) an agreement to commit the firm to a set of fixed conditions in the future that depends on current market conditions. 
D) a potential future obligation to an outside party for an as yet to be determined amount.

Question 20

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?

Accepted Answer

A) Correspond with attorneys. 
B) Test the collectability of accounts receivable by reviewing subsequent period cash receipts. 
C) Subsequent period sales and purchases transactions are examined to determine whether the cutoff is accurate. 
D) Compare the subsequent-period purchase price of inventory with the recorded cost as a test of lower of cost or market valuation.

Exam 24: Completing the Audit

After performing all audit procedures in each area, the auditor must integrate the results into an overall conclusion about the financial statements.

Auditing standards require the auditor to communicate all management frauds and illegal acts to the audit committee:

Discuss three audit procedures commonly used to search for contingent liabilities.

Which of the following audit procedures would most likely assist an auditor in identifying conditions and events that may indicate there could be substantial doubt about an entity's ability to continue as a going concern?

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

Distinguish between contingent liabilities and commitments.

Management furnishes the independent auditor with information concerning litigation, claims, and assessments.Which of the following is the auditor's primary means of initiating action to corroborate such information?

The auditor has a responsibility to review transactions and activities occurring after the balance sheet date to determine whether anything occurred that might affect the statements being audited.The procedures required to verify these transactions are commonly referred to as the review for:

Which of the following statements is correct?

The auditor is responsible for communicating significant internal control deficiencies to the audit committee, or those charged with governance.This communication:

The letter of representation obtained from an audit client should be:

An attorney is responding to an independent auditor as a result of the client's letter of inquiry.The attorney may appropriately limit the response to:

A lawsuit has been filed against your client.If, in the opinion of legal counsel, the likelihood your client will lose the lawsuit is remote, no financial statement accrual or disclosure of the potential loss would generally be required.

Many of the audit procedures for finding contingencies are usually performed as an integral part of various segments of the audit rather than as a separate activity near the end of the audit.

An auditor must obtain written client representations that might be signed by all but which of the following?

State the three purposes of the client letter of representation.

When using the probability threshold for contingencies, the likelihood of the occurrence of the event is classified as:

Which of the following subsequent events is most likely to result in an adjustment to a company's financial statements?

A commitment is best described as: