The scope of an audit is not restricted when an attorney's response to an auditor, as a result of a client's letter of audit inquiry, limits the response to
Matters to which the attorney has given substantive attention in the form of legal representation
A lawyer's response to an auditor's inquiry concerning litigation, claims, and assessments may be limited to matters that are considered individually or collectively material to the client's financial statements. Which parties should reach an understanding on
the limits of materiality for this purpose?
The auditor and the client's management
Which of the following is an audit procedure that an auditor would most likely perform concerning litigation, claims, and assessments
Discuss with management the policies and procedures it has adopted for evaluating and accounting for litigation, claims, and assessments
Which of the following is not an audit procedure that the independent auditor would perform
concerning litigation, claims, and assessments?
Confirm directly with the client's lawyer that all claims have been recorded in the financial statements
Which of the following statements, extracted from a client's lawyer's
letter concerning litigation, claims, and assessments, would be most likely to cause the auditor to request clarification?
"We believe that the action can be settled for less than the damages claimed."
After identifying
related party transactions, an auditor most likely would
Determine whether the transactions were approved by the board of directors or other appropriate officials
When an auditor decides to confirm accounts receivable balances
rather than individual invoices, it most likely would be beneficial to include with the confirmations
Client-prepared statements of account that show the details of the account balances
Which of the following most likely would
give the most assurance concerning the valuation assertion of accounts receivable?
Assessing the allowance for uncollectible accounts for reasonableness
In confirming a client's accounts receivable in prior years, an auditor
found that there were many differences between the recorded account balances and the confirmation replies. These differences, which were not misstatements, required substantial time to resolve. In defining the sampling unit for the current year's audit, the auditor most likely would choose
Individual invoices
Which of the following circumstances most likely would cause an auditor to believe that material misstatements may exist in an entity's financial statements?
Accounts receivable confirmation requests yield significantly fewer responses than expected
An auditor discovered that a client's accounts receivable turnover is substantially lower for the current year than for the prior year
Fictitious credit sales have been recorded during the year
An auditor's tests of controls for completeness for the revenue cycle usually include determining whether
An invoice is prepared for each shipping document
An auditor most likely would inspect loan agreements under which an entity's inventories are pledged to support management's financial statement assertion of
Rights and obligations
Which of the following procedures would
be most appropriate for testing the completeness assertion as it applies to inventory?
Performing cut-off procedures for shipping and receiving
Which of the following auditing procedures most likely would provide assurance about
a manufacturing entity's inventory valuation?
Testing the entity's computation of standard overhead rates
To obtain assurance that all inventory items in a client's inventory listing are valid, an auditor most likely would trace
Items in the inventory listing to inventory tags and the auditor's recorded count sheets
Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is
reflected in the ending inventory balance?
Inventory is complete
In testing long-term investments, an auditor ordinarily would use analytical procedures to ascertain the reasonableness of the
Completeness of recorded investment income
An auditor is testing the reasonableness of dividend income from investments in publicly held companies. The auditor most likely would compute the amount that should have been received and recorded by the
client by
Electronically accessing the details of dividend records on the Internet
To satisfy the valuation assertion when auditing an investment accounted for by the equity method, an auditor most likely would
Examine the audited financial statements of the investee company
Which of the following procedures should an auditor perform concerning litigation claims?
Which of the following procedures should an auditor perform concerning litigation, claims, and assessments? Obtain a list from management that discloses all unasserted claims that it considers to be probable of assertion.
Which of the following procedure would an auditor most likely perform?
Which of the following procedures would an auditor most likely perform in planning a financial statement audit? Comparing the financial statements with anticipated results.
Which of the following audit procedures would most likely assist an auditor?
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 management's plans to dispose of assets. - Consider management's plans to reduce or delay expenditures.
What are the audit procedures that are conducted by the auditors?
Typically, five types of audit procedures are normally used by auditors to obtain audit evidence. Those five audit procedures include Analytical review, inquiry, observation, inspection, and recalculation.