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Auditing 2 Test #4 ch17-18 - 1 Marks 1 As part of an audit...

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1 Marks: 1 As part of an audit, a CPA often requests a representation letter from the client. Which one of the following is not a valid purpose of such a letter? Choose one answer. a. To provide audit evidence b. To emphasize to the client their responsibility for the fairness of the financial statements c. To satisfy himself or herself that a certain account balance is fairly stated when certain customary auditing procedures are not performed d. To provide possible protection to the CPA against a charge of knowledge in cases where fraud is subsequently discovered to have existed in the accounts Incorrect Marks for this submission: 0/1. Question 2 Marks: 1 Auditors often request that the audit client send a letter of inquiry to those attorneys who have been consulted with respect to litigation, claims, or assessments. The primary reason for this request is to provide the auditor with Choose one answer. a. An estimate of the dollar amount of the probable loss b. An expert opinion as to whether a loss is possible, probable, or remote c. Information concerning the progress of cases to
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date d. Corroborative inquiries made of the client by the auditor Correct Marks for this submission: 1/1. Question 3 Marks: 1 Type II subsequent events are conditions that require an adjustment to the account balance shown on the financial statements. Answer: True False Correct Marks for this submission: 1/1. Question 4 Marks: 1 After issuance of the auditor's report, the auditor has no obligation to make any further inquiries with respect to audited financial statements covered by an auditor's report unless Choose one answer. a. A lawsuit in which risk of loss was considered remote is resolved in the company's favor b. A development occurs which may affect the client's ability to continue as a going concern c. A material fraud is initiated by an employee after the report is issued d. Evidence of significant, non-arms-length, related party transactions that happened prior to year-end is discovered Correct Marks for this submission: 1/1.
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Question 5 Marks: 1 When obtaining evidence regarding litigation against a client, the CPA would be least interested in determining Choose one answer. a. An estimate of when the matter will be resolved b. The period in which the underlying cause of the litigation occurred c. The probability of an unfavorable outcome d. An estimate of the potential loss Correct Marks for this submission: 1/1. Question 6 Marks: 1 Who generally signs the legal letter? Choose one answer. a. The board of directors b. The audit partner c. The CEO of the entity being audited d. The entity's attorneys Correct Marks for this submission: 1/1. Question 7 Marks: 1 An example of a Type 1 subsequent event is Choose one answer.
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a. A tornado that destroys a client's factory after the balance sheet date b. An event after the balance sheet date that confirms the auditor's belief (documented prior to the end of the client's fiscal year) that a large portion of the client's inventory is obsolete c. Notification of an IRS audit after the balance sheet
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