Chapter 17 - CHAPTER 17 COMPLETING THE AUDIT ENGAGEMENT...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 17 COMPLETING THE AUDIT ENGAGEMENT Answers to Multiple-Choice Questions 17-13 c 17-18 a 17-14 d 17-19 a 17-15 c 17-20 a 17-16 b 17-21 b 17-17 a Solutions to Problems 17-22 Since the events or conditions that should be considered in the financial accounting for and reporting of litigation, claims, and assessments are matters within the direct knowledge, and often, control of management of an entity, management is the primary source of information about such matters. Accordingly, Harper's audit procedures with respect to the existence of loss contingencies arising from litigation, claims, and assessments should include the following: Inquire and discuss with management the policies and procedures adopted for identifying, evaluating, and accounting for litigation, claims, and assessments. Obtain from management a description and evaluation of litigation, claims, and assessments that existed at the date of the balance sheet being reported on, and during the period from the balance sheet date to the date the information is furnished, including an identification of those matters referred to legal counsel, and obtain assurances from management, ordinarily in the form of a representation letter, that they have disclosed all such matters required to be disclosed by generally accepted accounting principles (Statement of Financial Accounting Standards No. 5). Examine documents in the client's possession concerning litigation, claims, and assessments, including correspondence and invoices from lawyers. Obtain assurance from management, ordinarily in the form of a representation letter, that they have disclosed all unasserted claims that the lawyer has advised them are probable of assertion and must be disclosed in accordance with generally accepted accounting principles (Statement of Financial Accounting Standards No. 5). The auditor should request the client's management to send a letter of inquiry to those lawyers with whom they consulted concerning litigation, claims, and assessments. Examples of other procedures undertaken for different purposes that might also disclose litigation, claims, and assessments are the following: Read minutes of stockholders, directors, and appropriate committee meetings held during and subsequent to the period being examined. Read contracts, loan agreements, leases, and correspondence from taxing or other governmental agencies, and similar documents. Obtain information concerning guarantees from bank confirmation forms. Inspect other documents for possible guarantees by the client.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
17-23 The omissions, ambiguities, and inappropriate statements and terminology in Cao's letter are as follows: The action that Consolidated intends to take concerning each suit (e.g., to contest the matter vigorously, to seek an out-of-court settlement, or to appeal an adverse decision) is omitted. A description of the progress of each case to date is omitted.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

Chapter 17 - CHAPTER 17 COMPLETING THE AUDIT ENGAGEMENT...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online