Chapter 24 - Chapter 24 Multiple-Choice Questions 1. easy d...

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Chapter 24 Multiple-Choice Questions 1. easy d Which of the following is not a condition for a contingent liability to exist? a. There is a potential future payment to an outside party that would result from a current condition. b. There is uncertainty about the amount of the future payment. c. The outcome of an uncertainty will be resolved by some future event. d. The amount of the future payment is reasonably estimable. 2. easy d Auditors often integrate procedures for presentation and disclosure objectives with: Tests for planning objectives Tests for balance-related objectives a. Yes Yes b. No No c. Yes No d. No Yes 3. easy b If a potential loss on a contingent liability is remote, the liability usually is: a. disclosed in footnotes, but not accrued. b. neither accrued nor disclosed in footnotes. c. accrued and indicated in the body of the financial statements. d. disclosed in the auditor’s report but not disclosed on the financial statements. 4. easy c Which of the following is an incorrect combination of the “likelihood of occurrence” and financial statement treatment? a. Remote: no disclosure. b. Probable (amount is estimable): financial statements are adjusted. c. Reasonably possible (amount is estimable): financial statements are adjusted. d. Probable (amount is not estimable): footnote disclosure is required. 5. easy c One of the auditor’s primary concerns relative to presentation and disclosure-related objectives is: a. accuracy. b. existence. c. completeness. d. occurrence. 6. easy d At the completion of the audit, management is asked to make a written statement that it is not aware of any undisclosed contingent liabilities. This statement would appear in the: a. management letter. b. letter of inquiry. c. letters testamentary. d. letter of representation. 7. easy c The responsibility for identifying and deciding the appropriate accounting treatment for contingent liabilities rests with a company’s _____. a. auditors. b. legal counsel. c. management. d. management and the auditors. Arens/Elder/Beasley
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8. easy c SFAS 5 describes _____ levels of likelihood of occurrence. a. one b. two c. three d. four 9. easy d The auditor has a responsibility to review transactions and activities occurring after the year-end to determine whether anything occurred that might affect the statements being audited. The procedures required to verify these transactions are commonly referred to as the review for: a. contingent liabilities. b. subsequent year’s transactions. c. late unusual occurrences. d. subsequent events. 10. easy a Which of the following is not a contingent liability with which an auditor is particularly concerned? Notes receivable discounted Product warranties a. Yes Yes b. No No c. Yes No d. No Yes 11. easy
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This note was uploaded on 08/27/2011 for the course AC555 AC555 taught by Professor Tarbet during the Spring '10 term at Keller Graduate School of Management.

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Chapter 24 - Chapter 24 Multiple-Choice Questions 1. easy d...

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