Question 1

The auditor must perform final analytical procedures before deciding on the appropriate audit report to issue for the entity.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not an audit procedure that the independent auditor would perform with respect to litigation, claims, and assessments?

Accepted Answer

A)  Inquire of and discuss with management the policies and procedures adopted for identifying, evaluating, and accounting for litigation, claims, and assessments. 
B)  Obtain from management a description and evaluation of litigation, claims, and assessments that existed at the balance sheet date. 
C)  Obtain assurance from management that it has disclosed all unasserted claims that the lawyer has advised are likely to be asserted and must be disclosed. 
D)  Confirm directly with the entity's lawyer that all claims have been recorded in the financial statements.

Question 3

An example of a Type II event or condition is an uncollectible account receivable resulting from continued deterioration of a customer's financial condition leading to bankruptcy after the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 4

Harvey, CPA is preparing an audit program for the purpose of ascertaining the occurrence of subsequent events that may require adjustment or disclosure essential to a fair presentation of the financial statements in conformity with generally accepted accounting principles. Which one of the following procedures would be least appropriate for this purpose?

Accepted Answer

A)  Confirm, as of the completion of fieldwork, accounts receivable that have increased significantly from the year-end date. 
B)  Read the minutes of the board of directors. 
C)  Inquire of management concerning events that may have occurred. 
D)  Obtain a lawyer's letter as of the completion of fieldwork.

Question 5

An entity has violated a minor requirement of its bond indenture that could result in the trustee requiring immediate payment of the principal amount due. The entity refuses to seek a waiver from the bond trustee. Request for immediate payment is not considered likely. Under these circumstances, the auditor must

Accepted Answer

A)  Require classification of bonds payable as a current liability. 
B)  Contact the bond trustee directly. 
C)  Disclose the situation in the auditor's report. 
D)  Obtain an opinion from the company's attorney as to the likelihood of the trustee's enforcement of the requirement.

Question 6

An auditor is concerned with completing various phases of the examination after the balance sheet date. This "subsequent period" involving formal audit procedures extends to the date of the

Accepted Answer

A)  Auditor's report. 
B)  Final review of the audit working papers. 
C)  Public issuance of the financial statements. 
D)  Delivery of the auditor's report to the entity.

Question 7

Which of the following matters is an auditor required to communicate to those charged with governance?

Accepted Answer

A)  The basis for assessing control risk at low. 
B)  The process used by management in formulating sensitive accounting estimates. 
C)  The auditor's preliminary judgments about materiality levels. 
D)  The justification for performing substantive procedures at interim dates.

Question 8

The refusal of an entity's attorney to provide a representation on the legality of a particular act committed by the entity is generally

Accepted Answer

A)  Sufficient reason to issue a "subject to" qualified opinion. 
B)  Considered to be a scope limitation. 
C)  Insufficient reason to modify the auditor's report because of the attorney's obligation of confidentiality. 
D)  Proper grounds to withdraw from the engagement without further consideration.

Question 9

Which of the following auditing procedures is ordinarily performed last?

Accepted Answer

A)  Confirming accounts payable. 
B)  Testing the purchasing function. 
C)  Reading the minutes of directors' meetings. 
D)  Obtaining a management representation letter.

Question 10

Pretty People Incorporated, is the defendant in a pending discrimination lawsuit. What information about the lawsuit would you, as an auditor, need to know to decide whether to disclose the litigation in the financial statements?

Accepted Answer

The answer of Pretty People Incorporated, is the defendant in...

Question 11

Discuss the steps used by an auditor to evaluate an entity's ability to continue as a going concern.

Accepted Answer

The answer of Discuss the steps used by an auditor...

Question 12

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

Accepted Answer

A)  Period in which the underlying cause for legal action occurred. 
B)  Probability of an unfavorable outcome. 
C)  Jurisdiction in which the matter will be resolved. 
D)  Existence of a situation indicating an uncertainty as to the possible loss.

Question 13

An example of a contingent liability is an income tax dispute.

Accepted Answer

A) True 
 B)False

Question 14

If a lawyer refuses to furnish corroborating information regarding litigation, claims, and assessments, the auditor should

Accepted Answer

A)  Honor the confidentiality of the client-lawyer relationship. 
B)  Consider the refusal to be a scope limitation. 
C)  Seek to obtain the corroborating information from management. 
D)  Disclose this fact in a footnote to the financial statements.

Question 15

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

Accepted Answer

A)  Culmination of events affecting the realization of accounts receivable owned as of the balance sheet date. 
B)  Culmination of events affecting the realization of inventories owned as of the balance sheet date. 
C)  Material changes in the settlement of liabilities that were estimated as of the balance sheet date. 
D)  Material changes in the quoted market prices of listed investment securities since the balance sheet date.

Question 16

When obtaining evidence regarding litigation against an entity, the CPA would be least interested in determining

Accepted Answer

A)  An estimate of when the matter will be resolved. 
B)  The period in which the underlying cause of the litigation occurred. 
C)  The probability of an unfavorable outcome. 
D)  An estimate of the potential loss.

Question 17

What is an unasserted claim and why would an attorney and/or entity be reluctant to disclose an unasserted claim in the financial statements?

Accepted Answer

The answer of What is an unasserted claim and why...

Question 18

A Type I subsequent event usually requires

Accepted Answer

A)  An adjustment to the financial statements. 
B)  No adjustment to the financial statements. 
C)  Withdrawal from the engagement. 
D)  No action.

Question 19

Which of the following is generally requested in a legal letter?

Accepted Answer

A)  A request that the attorney comment on unasserted claims where his or her views differ from management's evaluation. 
B)  A list of all attorneys that performed any work for the entity during the year. 
C)  A statement indicating that the attorney is responsible for the fair presentation of unasserted claims in the entity's financial statements. 
D)  A request that the attorney provide a copy of all invoices given to the entity during the year.

Question 20

Which of the following expressions is least likely to be included in a management representation letter?

Accepted Answer

A)  No events have occurred subsequent to the balance sheet date that require adjustment to or disclosure in, the financial statements. 
B)  The company has complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance. 
C)  Management acknowledges responsibility for illegal actions committed by its employees. 
D)  Management has made available all financial statements and related data.

Exam 17: Completing the Audit Engagement

The auditor must perform final analytical procedures before deciding on the appropriate audit report to issue for the entity.

Which of the following is not an audit procedure that the independent auditor would perform with respect to litigation, claims, and assessments?

An example of a Type II event or condition is an uncollectible account receivable resulting from continued deterioration of a customer's financial condition leading to bankruptcy after the balance sheet date.

An auditor is concerned with completing various phases of the examination after the balance sheet date. This "subsequent period" involving formal audit procedures extends to the date of the

Which of the following matters is an auditor required to communicate to those charged with governance?

The refusal of an entity's attorney to provide a representation on the legality of a particular act committed by the entity is generally

Which of the following auditing procedures is ordinarily performed last?

Pretty People Incorporated, is the defendant in a pending discrimination lawsuit. What information about the lawsuit would you, as an auditor, need to know to decide whether to disclose the litigation in the financial statements?

Discuss the steps used by an auditor to evaluate an entity's ability to continue as a going concern.

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

An example of a contingent liability is an income tax dispute.

If a lawyer refuses to furnish corroborating information regarding litigation, claims, and assessments, the auditor should

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

When obtaining evidence regarding litigation against an entity, the CPA would be least interested in determining

What is an unasserted claim and why would an attorney and/or entity be reluctant to disclose an unasserted claim in the financial statements?

A Type I subsequent event usually requires

Which of the following is generally requested in a legal letter?

Which of the following expressions is least likely to be included in a management representation letter?