The primary source of information to be reported about litigation, claims, and assessments is the
client's mgmt.
Which of the following procedures would best detect a liability omission by mgmt.?
Review purchase contracts and other legal documents
Legal counsel's response to an auditor's inquiry about litigation, claims, and assessments may be limited to matters that are considered individually or collectively material to the client's FS. Which parties may reach an understanding on the limits of ma
Auditor and client's mgmt.
If the auditor determines that an inquiry of a client's external legal counsel is necessary, who should make the inquiry?
Client's mgmt. (all communication of client letterhead)
The primary reason an auditor requests letters of inquiry to be sent to client's legal counsel is to provide auditor with
Corroboration of information furnished by mgmt. about litigation, claims, and assessments
A client is a defendant in a patent infringement lawsuit agains a major competitor. Which of the following items would be LEAST likely to be included in legal counsel's response to auditor's letter of inquiry?
Evaluation of ability of client to continue as a going concern if verdict is unfavorable and max damages awarded
The refusal of client's legal counsel to provide info requested in an inquiry letter generally is considered
A limitation on the scope of the audit
Which of the following statements about litigation, claims, and assessments extracted from a latter from client's legal counsel is most likely to cause the auditor to request clarification?
I believe that the action can be settled for less than damages claimed ((bc probable and need estimate)
The scope of an audit is NOT restricted when legal counsel's response to an auditor as a result of a client's letter of inquiry limits the response to
Matters to which legal counsel has given substantive attention in the form of legal representation
Which of the following procedures should an auditor ordinarily perform regarding subsequent events?
Read the latest subsequent intern financial statements
(1. inquiry 2. minutes 3. legal letter 4. interim)
An auditor should be aware of subsequent events that provide evidence concerning conditions that did not exist at year end but arose after year end. These events may be important to the auditor because they may
Require disclosure to keep the FS from being misleading (Type II)
Which of the following procedures will an auditor most likely perform to obtain evidence about the occurrence of subsequent events?
Inquiring of entity's legal counsel concerning litigation, claims, and assessments arising after year end
(1. inquiry 2. minutes 3. legal letter 4. interim)
Wilson CPA...
Dual Dating
Zero Corp suffered a loss having a material effect on FS as a result of a customer bankruptcy..
?
Which of the following procedures will an auditor most likely perform to obtain evidence about the occurrence of subsequent events?
Inquiring as to whether any unusual adjustments were made after year end
(1. inquiry 2. min 3. legal letter 4. interim)
After an audit report containing an unmodified opinion on a non-issuer's FS was dated and the FS issued, client decided to sell shares of a sub that accounts for 30% of its rev and 25% of NI. The auditor should
Take no action bc auditor has no obligation to make any further inquiries
After the date of the report, an auditor has no obligation to make continuing inquiries or perform other procedures concerning the audited FS UNLESS
Information, which existed at the report date and may affect the report, comes to auditor's attention
Which of the following events occurring after the date of the report most likely will cause the auditor to make further inquiries about the previously issued FS?
Discovery of information regarding a contingency that existed before the FS issued
On Feb 25.... mgmt. refused to adjust
Notify mgmt. and those charged w governance
Which of the following documentation is required for audit in accordance w generally accepted auditing standards?
Mgmt. representation letter
A purpose of mgmt. representation letter is to reduce
Possibility of misunderstanding concerning mgmt.'s responsibility for FS
Which of the following statements ordinarily is included among written mgmt. representations obtained by auditor in audit of non-issuer?
All transactions have been recorded in the accounting records
To which of the following matters would an auditor NOT apply materiality limits when obtaining specific written mgmt. representation?
Fraud involving....
An auditor finds several misstatements in FS that the client prefers not to correct. The auditor determines that the misstatements are not material in aggregate. Which of the following actions by auditor is most appropriate?
Document all misstatements accumulated during audit and the conclusion about whether uncorrected misstatements are material
Which f the following expressions most likely would be included in representation letter by mgmt. of a non-issuer?
No events have occurred subsequent to BS date that require adjustment to or disclosure in FS
To which of the following matters would materiality limits NOT apply in obtaining written mgmt. representations?
Availability of minutes of SH and BOD meetings
Key Co....
Jan 1 year 1, through May 1 year 3
An auditor has substantial doubt about the entity's ability to continue as a going concern for reasonable period of time because of negative cash flows and working capital deficiencies. Under these circumstances, the auditor would be most concerned about
possible effects on entity's FS (ensure disclosed properly)
Which of the following auditing procedures most likely would assist an auditor in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?
Confirming w 3rd parties the details of arrangements to maintain financial support
Cooper CPA believes there is substantial doubt about ability of Zero Corp to continue as a going concern.... mitigation factor...
Postpone expenditures for research and development projects
When auditor concludes there is substantial doubt about a continuing audit client's ability to continue as a going concern it is auditor's responsibility to
Consider adequacy of disclosure about client's possible inability to continue
An auditor would be most likely to identify a contingent liability by obtaining a
Letter from entity's general legal counsel
An auditor should request that an audited entity send a letter of inquiry to those attorneys who have been consulted concerning litigation, claims, or assessments. The primary reason for this request is to provide
Corroboration of information furnished by mgmt.
An auditor issued an audit report that was dual dated for a subsequent event occurring after date on which auditor has obtained sufficient appropriate audit evidence by before issuance of FS. The auditor's responsibility for events occurring subsequent to
Limited to specific event referenced
Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of any changes in IC that might affect the financial reporting between end of reporting period and date of auditor's report?
Examine relevant internal audit reports issued during subsequent period
Final analytical procedures are generally intended to
Provide the auditor with a final, overall evaluation of relationships among FS balances
Which of the following audit procedures is most likely to assist an auditor in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?
Review compliance w terms of debt agreements
Auditing standard primarily encourage which of the following conversations between auditor and another party about financial reporting?
A conversation w those charged w governance to discuss matters pertaining to financial reporting
Which of the following matters should auditor communicate to those charged w governance
significant audit adjustments, mgmt. consultations w other accountants
Which of the following events occurring after issuance of a set of FS and accompanying auditor's report would be most likely to cause auditor to make further inquiries about FS?
Discovery of info regarding contingency that existed before the FS issued