Which of the following statements extracted from a client's lawyer's letter concerning litigation, claims, and assessments most likely would cause the auditor to request clarification?
a. "I believe that the plaintiff will have problems establishing any liability."
b. "I believe that this action has only a remote chance in establishing any liability."
c. "I believe that the plaintiff's case against the company is without merit."
d. "I believe that the company will be able to defend this action successfully.
Answer: A
CPA Exam
- Under which of the following circumstances would an auditor be most likely to intensify an examination of a $500 imprest petty cash fund?
- A typical objective of an operational audit is for the auditor to
- Jones, CPA, examined the 20X5 financial statements of Ray Corp. and issued an unmodified opinion on March 10, 20X6. On April 2, 20X6, Jones became aware of a 20X5 transaction that may materially affect the 20X5 financial statements. This transaction would have been investigated had it come to Jones' attention during the course of the examination. Jones should
- Which of the following would detect an understatement of a purchase discount?
- Which of the following procedures most likely could assist an auditor in identifying related-party transactions?
- Which of the following steps should an auditor perform first to determine the existence of related parties?
- Which of the following ratios would an engagement partner most likely consider in the overall review stage of an audit?
- Treetop Corporation acquired a building and arranged mortgage financing during the year. Verification of the related mortgage acquisition costs would be least likely to include an examination of the related
- Which of the following statements is correct regarding the predictability of analytical procedures in a financial statement audit?
- Which of the audit procedures listed below would be least likely to disclose the existence of related-party transactions of a client during the period under audit?
- Which of the following is generally included or shown in the auditor's working papers for the audit of a nonpublic company?
- During the first part of the current fiscal year, the client company began dealing with certain customers on a consignment basis. Which of the following audit procedures is least likely to bring this new fact to the auditor's attention?
- An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to
- An example of a transaction which may be indicative of the existence of related parties is
- Which of the following items would most likely require an adjustment to the financial statements for the year ended December 31, year 1?
- When an auditor decides to confirm accounts receivable balances rather than individual invoices, it most likely would be beneficial to include with the confirmations
- The audit working papers often include a client-prepared, aged trial balance of accounts receivable as of the balance sheet date. This aging is best used by the auditor to
- Auditors should request that an audit client send a letter of inquiry to those attorneys who have been consulted concerning litigation, claims, or assessments. The primary reason for this request is to provide
- Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?
- "In connection with an audit of our financial statements, management has prepared, and furnished to our auditors a description and evaluation of certain contingencies." The forgoing passage most likely is from a(n)
- Which of the following analyses appearing in a predecessor's working papers is the successor auditor least likely to be interested in reviewing?
- Which of the following procedures would an auditor most likely perform prior to the balance sheet date?
- A client's procurement system ends with the assumption of a liability and the eventual payment of the liability. Which of the following best describes the auditor's primary concern with respect to liabilities resulting from the procurement system?
- When title to merchandise in transit has passed to the audit client, the auditor examining a vendor's invoices as a purchase cutoff on December 31, the last day of the client's year, will encounter the greatest difficulty in gaining assurance with respect to the