Which of the following substantive procedures should auditors ordinarily perform regarding subsequent events?

Audit Quiz Chapter 11

Which of the following best describes the role of analytical procedures near the end of the audit engagement?
a. To identify possible deficiencies in the client's internal control over financial reporting
b. To identify accounts that appear to be misstate

d. To provide an overall review of the financial information and assessment of the adequacy of evidence gathered during the audit engagement

A major objective of written representation is to
a. Shift responsibility for financial statements from the management to auditors
b. Provide a substitute source of audit evidence for substantive procedures that auditors would otherwise perform
c. Provide

d. Impress on management its ultimate responsibility for the financial statements and disclosures

Which of these substantive procedures is not used to obtain evidence about contingencies?
a. Scanning expense accounts for credit entries
b. Obtaining a letter from the client's attorney
c. Reading the minutes of the board of directors' meetings
d. Examin

a. Scanning expense accounts for credit entries

Subsequent knowledge of which of the following would cause the entity to adjust its December 31 financial statements?
a. Sale of an issue of new stock for $500,000 on January 30
b. Settlement of a damage lawsuit for a customer's injury sustained February

c. Settlement of litigation in February for $100,000 that had been estimated at $12,000 in the December 31 financial statements

A. Griffin audited the financial statements of Dodger Magnificat Corporation for the year ended December 31, 2014. She completed gathering sufficient appropriate evidence on January 30 and later learned of a stock split voted by the board of directors on

b. January 30, 2015, except as to Note X, which is dated February 5, 2015

Auditors have a responsibility related to management's disclosure of new information related to subsequent events until
a. The date of the financial statements
b. The date of the auditor's report
c. The audit report release date
d. The following year's da

c. The audit report release date

The auditing standards regarding subsequently discovered facts refers to knowledge obtained after
a. The date the fieldwork began
b. The date of the auditor's report
c. The date of the financial statements
d. The date interim audit work was complete

b. The date of the auditor's report

Which of the following is not required by generally accepted auditing standards?
a. Written representations
b. Attorney letter
c. Management letter
d. Engagement letter

Which of these persons generally does not participate in writing the management letter?
a. Client's outside attorneys
b. Client's accounting and production managers
c. Public accounting firm's audit team on the engagement
d. Public accounting firm's consu

a. Client's outside attorneys

Which of the following is ordinarily performed last in the audit examination?
a. Securing a signed engagement letter from the client
b. Performing tests of controls
c. Performing a review of subsequent events
d. Obtaining signed written representations

d. Obtaining signed written representations

Which of the following normally occurs earliest in the audit examination?
a. Discovery of an omitted audit procedure
b. Dual dating the auditor's report on the entity's financial statements for subsequent events that exist at the date of the financial sta

d. Review of audit documentation

Ambrose is auditing the financial statements of Mays (dated December 31, 2014). The date of the auditor's report is February 17, 2015, and the audit report release date is February 20, 2015. For which of the following matters would Ambrose have the least

d. A major loss due to a catastrophe that occurred and was known by Ambrose on March 1, 2015

Which of the following statements is most likely to be included in an attorney letter?
a. "Certain representations in this letter are described as being limited to matters that are material"
b. "If any unasserted claims or assessments are omitted from thi

d. "Please furnish to our auditors such explanations, if any, that you consider necessary to supplement the foregoing information

After the audit report release date, auditors determine that an important auditing procedure was omitted. Which of the following initial courses of actions is most appropriate?
a. Perform the omitted procedure or an alternative procedure
b. Notify the boa

c. Determine whether the omitted procedure is important in supporting the auditors' opinion on the entity's financial statements

Which of the following statements is not true with respect to to written representations?
a. The failure of management to furnish them is a significant scope limitation, resulting in either an adverse opinion or a disclaimer of opinion
b. They should addr

a. The failure of management to furnish them is a significant scope limitation, resulting in either an adverse opinion or a disclaimer of opinion

Hall accepted an engagement to audit the year 1 financial statements of XYZ Company. XYZ completed the preparation of the year 1 financial statements on February 13, year 2, and its auditors began the fieldwork on February 17, year 2. Hall completed gathe

What is an auditor's primary method to corroborate information on litigation, claims, and assessments?
a. Examining legal invoices sent by the client's attorney
b. Verifying attorney-client privilege through interviews
c. Reviewing the response from the c

c. Reviewing the response from the client's lawyer to a letter of audit inquiry

Which of the following substantive procedures should auditors ordinarily perform regarding subsequent events?
a. Compare the latest available interim financial statements with the financial statements being audited
b. Send second requests to the client's

a. Compare the latest available interim financial statements with the financial statements being audited

Which of the following substantive procedures would auditors most likely perform to obtain evidence about the occurrence of subsequent events?
a. Recompute a sample of large-dollar transactions occurring after the date of the financial statements for arit

b. Investigate changes in shareholders' equity occurring after the date of the financial statements

The primary reason auditors request responses to attorney letters is to provide auditors
a. The probable outcome of asserted claims and pending or threatened litigation
b. Corroboration of the information furnished by management about litigation, claims,

b. Corroboration of the information furnished by management about litigation, claims, and assessments

The scope of an audit is not restricted when an attorney letter limits the response to
a. Matters to which the attorney has given substantive attention in the form of legal representation
b. An evaluation of the likelihood of an unfavorable outcome of the

a. Matters to which the attorney has given substantive attention in the form of legal representation

Which of the following procedures would an auditor ordinarily perform first in evaluating the reasonableness of management's accounting estimates?
a. Review transactions occurring prior to the date of the auditor's report that indicate variations from exp

c. Obtain an understanding of how management makes its estimates

Which of the following procedures will most likely assist an auditor in determining whether management has identified all accounting estimates that could be material to the financial statements?
a. Inquire about the existence of related party transactions

d. Review the lawyer's letter for information about litigation

As part of the audit of far value estimates and disclosures, an auditor may need to test the entity's significant assumptions. In these circumstances, the auditor should
a. Verify that the entity has used its own assumptions, not those of marketplace part

c. Evaluate whether the assumptions individually and as a whole form a reasonable basis for the fair value estimates

An auditor concludes that the omission of a substantive procedure considered necessary at the time of the audit may impair the auditor's current ability to support the previously expressed opinion. The auditor need not apply the omitted procedure if
a. Th

b. The results of other procedures that were applied tend to compensate for the procedure omitted

On March 15, year 2, Kent, CPA, expressed an unmodified opinion on a client's audited financial statements for the year ended December 31, Year 1. On May 4, Year 2, Kent's internal inspection program disclosed that engagement personnel failed to observe t

b. Undertake to apply alternative procedures that would provide a satisfactory basis for the unmodified opinion

Which of the following matters is an auditor required to communicate to those in the entity charged with governance?
i. Disagreements with management about matters significant to the entity's financial statements that have been satisfactorily resolved
ii.

Which of the following matters will an auditor most likely communicate to those charged with governance?
a. A list of negative trends that may lead to working capital deficiencies and adverse financial ratios
b. The level of responsibility assumed by mana

d. The effects of significant accounting policies adopted by management in emerging areas for which no authoritative guidance exists

Which of the following matters should an auditor communicate to those charged with governance?
a. The basis for assessing the risks of material misstatement when the auditor intends to rely on controls
b. The process used by management in formulating sens

b. The process used by management in formulating sensitive accounting estimates

An auditor should communicate misstatements to those charged with governance
a. If they were not recorded before the end of the auditor's field work
b. If they are uncorrected
c. If they are immaterial and corrected but frequently recurring
d. Even if the

b. If they are uncorrected

In an audit engagement, should an auditor communicate the following matters to those charged with governance?
a. Yes, Yes
b. Yes, No
c. No, Yes
d. No, No

An auditor is most likely to communicate to those charged with governance that
a. The turnover in the accounting department was unusually high
b. The auditor encountered significant difficulties during the audit
c. The auditor discovered subsequent events

b. The auditor encountered significant difficulties during the audit

The primary reason an auditor requests letters of inquiry be sent to a client's legal counsel is to provide the auditor with
a. The probable outcome of asserted claims and pending or threatened litigation
b. Corroboration of the information furnished by m

b. Corroboration of the information furnished by management about litigation, claims, and assessments

Which of the following is not an audit procedure that the auditor performs with respect to litigation, claims, and assessments?
a. Inquire of and discuss with management the policies and procedures adopted for litigation, claims, and assessments
b. Obtain

d. Confirm directly with the client's legal counsel that all claims have been recorded in the financial statements

The primary source of information to be reported about litigation, claims, and assessments is the
a. Client's legal counsel
b. Court records
c. Client's management
d. Independent auditor

The letter of audit inquiry addressed to the client's external legal counsel will not ordinarily be
a. Sent to legal counsel who was engaged by the audit client during the year and soon thereafter resigned the engagement
b. Used to corroborate the informa

c. Limited to references concerning only pending or threatened litigation in connection with which the legal counsel has been engaged

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 financial statements. Which parties may reach an understanding o

a. The auditor and the client's management

A client is a defendant in a patent infringement lawsuit against a major competitor. Which of the following items would least likely be included in legal counsel's response to the auditor's letter of inquiry?
a. A description of potential litigation in ot

d. An evaluation of the ability of the client to continue as a going concern if the verdict is unfavorable and maximum damages are awarded

The appropriate date for the client to specify as the effective date in the audit inquiry to legal counsel is
a. The balance sheet date
b. Seven working days after the request is received by legal counsel
c. The date of the audit inquiry itself
d. As clos

d. As close to the date of the auditor's report as possible

The refusal of a client's legal counsel to provide a representation on the legality of a particular act committed by the client is ordinarily
a. Sufficient reason to express a "subject to" opinion
b. Considered to be a scope limitation
c. Insufficient rea

b. Considered to be a scope limitation

Which of the following procedures will an auditor most likely perform to obtain evidence about the occurrence of subsequent events?
a. Confirming a sample of material accounts receivable established after year end
b. Comparing the financial statements bei

d. Inquiring as to whether any unusual adjustments were made after year end

Which of the following statements best expresses the auditor's responsibility with respect to events occurring after the balance-sheet date?
a. The auditor has no responsibility for events occurring in the subsequent period unless these events affect tran

d. The auditor is responsible for identifying subsequent events affecting the financial statements

Which of the following procedures can be performed only after the date of the financial statements?
a. Examination of data to determine that a proper cutoff has been made
b. Tests of the details of balances
c. Tests of the details of transactions
d. Readi

a. Examination of data to determine that a proper cutoff has been made

An auditor is concerned with completing various phases of the audit after the balance sheet date. This subsequent period extends to the date of the
a. Auditor's report
b. Final review of the audit documentation
c. Public issuance of the financial statemen

A major customer of an audit client suffers a fire just prior to completion of year-end field work. The audit client believes that this event could have a significant direct effect on the financial statements. The auditor should
a. Advise management to di

a. Advise management to disclose the event in notes to the financial statements

Which of the following audit procedures should auditors ordinarily perform regarding subsequent events?

Which of the following procedures would not be performed by the auditor to identify subsequent events?

What is the auditors role in testing subsequent events?

What substantive audit procedures should be performed?