AU1_Q1 - Question 1 Question Student Answer(TCO...

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Question 1. Question : (TCO E) (CPA-05849.B) Which of the following procedures would an auditor most likely perform in obtaining evidence about subsequent events? Student Answer: Examine changes in the quoted market prices of investments purchased since the year-end Compare the latest available interim financial information with the financial statements being reported upon Apply analytical procedures to the details of the balance sheet accounts that were tested at interim dates Inquire about payroll checks that were recorded before the year- end but cashed after the year-end Instructor Explanation: Choice "b" is correct. In obtaining evidence about subsequent events, the auditor should examine the latest available interim financial information, and compare them with the financial statements under audit. Question 2. Question : (TCO E) (CPA-03186.B) What is an auditor's responsibility for supplementary information that is outside the basic financial statements but required by the FASB? Student Answer: The auditor has no responsibility for required supplementary information as long as it is outside the basic financial statements. The auditor's only responsibility for required supplementary information is to determine that such information has not been omitted.
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The auditor should apply certain limited procedures to the required supplementary information and add an other-matter paragraph to the financial statement audit report. The auditor should apply tests of details of transactions and balances to the required supplementary information and report any material misstatements in such information. Instructor Explanation: Choice "c" is correct. For additional supplementary information required by the FASB, the auditor should apply certain limited procedures to the information and add an other-matter paragraph to the financial statement audit report. Question 3. Question : (TCO E) (CPA-02494.B) March, CPA, is engaged by Monday Corp., a client, to audit the financial statements of Wall Corp., a company that is not March's client. Monday expects to present Wall's audited financial statements with March's auditor's report to 1st Federal Bank to obtain financing in Monday's attempt to purchase Wall. In these circumstances, March's auditor's report would usually be addressed to Student Answer: Monday Corp., the client that engaged March.
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