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Page 2 Which of the following events requires adjustment to the financial statements for the year ended December 31, Year 1 ? Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events ? A CPA
has received legal counsel’s letter in which no significant disagreements with the client’s assessments of contingent liabilities were noted. The resignation of the client’s legal counsel shortly after receipt of the letter should alert the auditor that After year end but before completion of the audit, a major investment adviser issued a pessimistic report on Investee Co. ’ s long-term prospects. The market price for its common stock subsequently declined significantly. What is the effect of this event on the
year-end statements ? Harvey, CPA, is preparing an audit plan to determine the occurrence of subsequent events that may require adjustment or disclosure essential to a fair presentation of the financial
statements in accordance with U.S. GAAP. Which one of the following procedures is least appropriate for this purpose ? Which of the following documentation is required for an audit in accordance with generally accepted auditing standards ? Kirk Keller, CPA, was about to express an unmodified opinion on the audit of Lupton Television Broadcasting Company when he received a letter from Lupton’s independent counsel. The letter stated that the Federal Communications Commission has notified Lupton that its broadcasting license will not be renewed because of some alleged fraud in its broadcasting practices. Lupton cannot continue to operate without this license. Keller has also learned that Lupton and its
independent counsel plan to take all necessary legal action to retain the license. The letter from the independent counsel, however, states that a favorable outcome of any legal action is highly uncertain. Based on this information, Keller should Which of the following procedures should an auditor
ordinarily perform regarding subsequent events ? Wilson, CPA, obtained sufficient appropriate audit evidence on which to base the opinion on Abco’s December 31, Year 1, financial statements on March 6, Year 2, the date of the auditor’s report. A subsequently discovered fact requiring revision of the Year 1 financial statements occurred on April 10, Year 2, and
came to Wilson’s attention on April 24, Year 2. If the fact became known prior to the report release date, and the revision is made, Wilson’s report ordinarily should be dated When an auditor concludes there is substantial doubt about a continuing audit client’s ability to continue as a going concern for a reasonable period of time, the auditor’s responsibility is to Under which of the following circumstances would an entity be expected to accrue a loss contingency for the period under audit ? Management should address written representations about a firm’s annual audit to the Which of the following procedures would an auditor most likely perform in obtaining evidence about subsequent events ? To which of the following matters would materiality limits not apply in obtaining written management representations ? Davis, CPA, believes there is substantial doubt about the ability of Hill Co. to continue as a going concern for a reasonable period of time. In evaluating Hill’s plans
for dealing with the adverse effects of future conditions and events, Davis most likely will consider, as a mitigating factor, Hill’s plans to Which of the following statements extracted from entity’s legal counsel’s letter regarding litigation, claims, and assessments most likely would cause the auditor to request clarification ? Which of the following matters will an auditor most likely include in a management representation letter ? If a nonissuer refuses to give permission to the auditor to communicate with its external legal counsel, then the auditor
should modify which of the following ? A written representation from a client’s management that, among other matters, acknowledges responsibility for the fair presentation of financial statements, should normally be signed by the Which of the following expressions most likely would be included in a representation letter by management of an issuer ? No events have occurred subsequent to the balance sheet date that require adjustment to, or disclosure in, the financial statements. AU-C 580 requires that the auditor obtain certain written representations from management. The written representations confirm certain matters ( e. g., oral representations ) or tư vấn other audit evidence. They complement other audit procedures but do not provide sufficient appropriate evidence or affect the other procedures. Information concerning subsequent events is a common matter covered in the letter ( AU-C 580 ) . Which of the following procedures should an auditor ordinarily performed regarding subsequent events?Which of the following procedures should an auditor generally perform regarding subsequent events? Compare the latest available interim financial statements issued after year-end with the financial statements being audited.
What procedures do auditors perform to identify subsequent events?However the following procedures are typical of a subsequent events review: Enquiring into management's procedures/systems for the identification of subsequent events; Inspection of minutes of members' and directors' meetings; Reviewing accounting records including budgets, forecasts and interim information.
What are the auditor's responsibilities regarding subsequent events?The auditor should perform procedures designed to obtain sufficient appropriate audit evidence that all events up to the date of the auditor's report that may require adjustment of, or disclosure in, the financial statements have been identified.
What are the types of subsequent events the auditor should identify?There are two types of subsequent events:. Adjusting events. An event that provides additional information about pre-existing conditions that existed on the balance sheet date.. Non-adjusting events. A subsequent event that provides new information about a condition that did not exist on the balance sheet date.. Which of the following auditing procedures is ordinarily performed last?The correct answer is D. Obtaining a management representation letter. Issuance of a management letter is the last auditing procedure that is carried out by an auditor.
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