AT-5915_other PSAs and PAPSs

AT-5915_other PSAs and PAPSs - Page 1 of 11 CPA REVIEW...

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Page 1 of 11 CPA REVIEW SCHOOL OF THE PHILIPPINES Manila AUDITING THEORY OTHER PSAs and PAPSs Related PSAs/PAPSs: PSA 501, 505, 510, 520, 540, 545, 550, 620, 560 and 580 PAPS 1000, 1005 and 1000Ph PSA 501 – Audit Evidence – Additional Considerations on Specific Items 1. When inventory is material to the financial statements, the auditor should obtain sufficient appropriate audit evidence regarding its existence and condition by attendance at physical inventory counting unless impracticable. Where attendance is impracticable, due to factors such as the nature and location of the inventory, the auditor should a. Take or observe some physical counts on an alternative date and, when necessary, perform tests of intervening transactions. b. Consider whether alternative procedures provide sufficient appropriate audit evidence of existence and condition to conclude that the auditor need not make reference to a scope limitation. c. Issue qualified or disclaimer of opinion. d. Issue qualified or adverse opinion. 2. When litigation or claims have been identified or when the auditor believes they may exist, the auditor should a. Seek direct communication with the entity’s lawyers. b. Disclose the litigation and claims in the auditor’s report. c. Issue unqualified opinion with explanatory paragraph. d. Issue qualified or adverse opinion. 3. The auditor should carry out procedures in order to become aware of any litigation and claims involving the entity which may have a material effect on the financial statements. Such procedures least likely include a. Making appropriate inquiries of management including obtaining representations. b. Reviewing board minutes and correspondence with the entity’s lawyers. c. Examining interest expense accounts. d. Using any information obtained regarding the entity’s business including information obtained from discussions with any in-house legal department. 4. The primary source of information to be reported about litigation, claims, and assessments is the a. Client’s lawyer c. Client’s management b. Court records d. Independent auditor 5. The primary reason an auditor requests that letters of inquiry be sent to a client’s attorneys 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 management about litigation, claims, and assessments. c. The attorneys’ opinions of the client’s historical experiences in recent similar litigation. d. A description and evaluation of litigation, claims, and assessments that existed at the balance sheet date. 6. Which of the following statements concerning litigation, claims, and assessments, which were extracted from a letter from a client’s lawyer, is most likely to cause the auditor to request clarification? a.
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This note was uploaded on 11/22/2010 for the course CAC BSA taught by Professor Kairus during the Spring '10 term at Korea University.

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AT-5915_other PSAs and PAPSs - Page 1 of 11 CPA REVIEW...

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