Question 1

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 2

Which of the following is not one of the categories of items included in the client letter of representation?

Accepted Answer

A)  subsequent events 
B)  Completeness of information 
C)  recognition, measurement, and disclosure 
D)  materiality

Question 3

List at least 3 types of information normally contained in a legal letter to the client's attorneys.

Accepted Answer

The answer of List at least 3 types of information...

Question 4

If the client refuses to prepare and sign a letter of representation, the auditor would be required to issue either a qualified opinion or a disclaimer of opinion.

Accepted Answer

A) True 
 B)False

Question 5

While there is no professional requirement to do so on audit engagements, CPAs frequently issue a formal "management" letter to clients. The primary purpose of this letter is to provide:

Accepted Answer

A)  evidence indicating whether the auditor is reasonably certain that internal accounting control is operating as prescribed. 
B)  a permanent record of the internal accounting control work performed by the auditor during the course of the engagement. 
C)  a written record of discussions between auditor and client concerning the auditor's observations and suggestions for improvements. 
D)  a summary of the auditor's observations that resulted from the auditor's special study of internal control.

Question 6

Auditing standards (SAS No. 99 and SAS No. 54) 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 7

Distinguish between contingent liabilities and commitments.

Accepted Answer

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

Question 8

Define the term contingent liability and discuss the criteria accountants and auditors use to classify these accounting events.

Accepted Answer

The answer of Define the term contingent liability and discuss...

Question 9

State three lists or requests that should be included in a standard "inquiry of attorney" letter.

Accepted Answer

The answer of State three lists or requests that should...

Question 10

The auditor has a responsibility to review transactions and activities occurring after the year-end 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 11

Subsequent events affecting the realization of assets ordinarily will require adjustments of the financial statements under examination because such events typically represent the:

Accepted Answer

A)  culmination of conditions that existed at the balance sheet date. 
B)  discovery of new conditions occurring in the subsequent events period. 
C)  final estimates of losses relating to casualties occurring in the subsequent events period. 
D)  preliminary estimate of losses relating to new events that occurred subsequent to the balance sheet date.

Question 12

An auditor's decision concerning whether or not to "dual date" the audit report is based upon the auditor's willingness to:

Accepted Answer

A)  extend auditing procedures and assume responsibility for a greater period of time. 
B)  accept responsibility for subsequent events. 
C)  permit inclusion of a footnote captioned: event (unaudited) subsequent to the date of the auditor's report. 
D)  assume responsibility for events subsequent to the issuance of the auditor's report.

Question 13

Commitments include all but which of the following?

Accepted Answer

A)  agreements to purchase raw materials 
B)  pension plans 
C)  agreements to lease facilities at set prices 
D)  Each of the above is a commitment.

Question 14

At the completion of the audit, management is typically asked to make a written statement as a part of the engagement letter that it is aware of no undisclosed contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 15

State the three purposes of the client letter of representation.

Accepted Answer

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

Question 16

With which of the following client personnel would it generally not be appropriate to inquire about commitments or contingent liabilities?

Accepted Answer

A)  Controller 
B)  President 
C)  Accounts receivable clerk 
D)  Vice president of sales

Question 17

A significant customer of the firm suffers a large economic loss after year end, but prior to completion of field work. The audit client believes this event will have material effect on the financial statements. The auditor should:

Accepted Answer

A)  adjust the financial statements for the year under audit. 
B)  add a paragraph to the audit report. 
C)  advise the client to disclose the event in the notes to the financial statements. 
D)  advise the client to delay issuing the financial statements until the economic loss can be determined.

Question 18

Auditors of public companies must obtain certain representations from management regarding internal control over financial reporting.

Accepted Answer

A) True 
 B)False

Question 19

Elise-Greer, LLP is an affiliate of the audit client and is audited by another firm of auditors. Which of the following is most likely to be used by the auditor to obtain assurance that all guarantees of the affiliate's indebtedness have been detected?

Accepted Answer

A)  Send the standard bank confirmation request to all of the client's lender banks. 
B)  Review client minutes and obtain a representation letter. 
C)  Examine supporting documents for all entries in intercompany accounts. 
D)  Obtain written confirmation of indebtedness from the auditor of the affiliate.

Question 20

What two steps must an auditor do if they have reservations about the audit client continuing as a going concern?

Accepted Answer

The answer of What two steps must an auditor do...

Exam 24: Completing the Audit

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:

Which of the following is not one of the categories of items included in the client letter of representation?

List at least 3 types of information normally contained in a legal letter to the client's attorneys.

If the client refuses to prepare and sign a letter of representation, the auditor would be required to issue either a qualified opinion or a disclaimer of opinion.

While there is no professional requirement to do so on audit engagements, CPAs frequently issue a formal "management" letter to clients. The primary purpose of this letter is to provide:

Auditing standards (SAS No. 99 and SAS No. 54) require the auditor to communicate all management frauds and illegal acts to the audit committee:

Distinguish between contingent liabilities and commitments.

Define the term contingent liability and discuss the criteria accountants and auditors use to classify these accounting events.

State three lists or requests that should be included in a standard "inquiry of attorney" letter.

The auditor has a responsibility to review transactions and activities occurring after the year-end 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:

Subsequent events affecting the realization of assets ordinarily will require adjustments of the financial statements under examination because such events typically represent the:

An auditor's decision concerning whether or not to "dual date" the audit report is based upon the auditor's willingness to:

Commitments include all but which of the following?

At the completion of the audit, management is typically asked to make a written statement as a part of the engagement letter that it is aware of no undisclosed contingent liabilities.

State the three purposes of the client letter of representation.

With which of the following client personnel would it generally not be appropriate to inquire about commitments or contingent liabilities?

A significant customer of the firm suffers a large economic loss after year end, but prior to completion of field work. The audit client believes this event will have material effect on the financial statements. The auditor should:

Auditors of public companies must obtain certain representations from management regarding internal control over financial reporting.

Elise-Greer, LLP is an affiliate of the audit client and is audited by another firm of auditors. Which of the following is most likely to be used by the auditor to obtain assurance that all guarantees of the affiliate's indebtedness have been detected?

What two steps must an auditor do if they have reservations about the audit client continuing as a going concern?