Ch 17 Multiple Choice Questions by T178r0a

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									                                            AC 432
                                   Multiple Choice Questions
                                          Chapter 17


17-13 An auditor would be most likely to identify a contingent liability by obtaining a(n)
      a. Accounts payable confirmation.
      b. Transfer agent confirmation.
      c. Standard bank confirmation.
      d. Related-party transaction confirmation.

17-14 An auditor 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
      a. The opinion of a specialist as to whether loss contingencies are possible, probable, or
         remote.
      b. A description of litigation, claims, and assessments that have a reasonable possibility
         of unfavorable outcome.
      c. An objective appraisal of management’s policies and procedures adopted for
         identifying and evaluating legal matters.
      d. Corroboration of the information furnished by management concerning litigation,
         claims, and assessments.

17-15 An auditor issued an audit report that was dual dated for a subsequent event occurring
      after the completion of field work but before issuance of the auditor's report. The auditor's
      responsibility for events occurring subsequent to the completion of field work was
      a. Extended to subsequent events occurring through the date of issuance of the report.
      b. Extended to include all events occurring since the completion of field work.
      c. Limited to the specific event referenced.
      d. Limited to events occurring up to the date of the last subsequent event referenced.

17-16 Which of the following procedures would an auditor most likely perform to obtain
      evidence about the occurrence of subsequent events?
      a. Recompute a sample of large-dollar transactions occurring after year-end for arithmetic
          accuracy.
      b. Investigate changes in stockholders' equity occurring after year-end.
      c. Inquire of the entity's legal counsel concerning litigation, claims, and assessments
          arising after year-end.
      d. Confirm bank accounts established after year-end.
17-17 Analytical procedures used in the overall review stage of an audit generally include
      a. Considering unusual or unexpected amount balances that were not previously
          identified.
      b. Testing transactions to corroborate management's financial statement assertions.
      c. Gathering evidence concerning account balances that have not changed from the
          prior year.
      d. Retesting control procedures that appeared to be ineffective during the assessment of
          control risk.
Chapter 17 Multiple-Choice Questions                                                               Page 2




17-18 Auditing standards (AU 380) encourages which of the following conversations about
      financial reporting
      a. A conversation with only the audit committee to discuss matters pertaining to financial
         reporting.
      b. A conversation with only management to discuss matters pertaining to financial
         reporting.
      c. A conversation with both management and the audit committee to discuss matters
         pertaining to financial reporting.
      d. A conversation with the audit committee in which the committee reports on
         management's views on matters pertaining to financial reporting.

17-19 Which of the following audit procedures is most likely to assist an auditor in identifying
      conditions and events that may indicate substantial doubt about an entity's ability to
      continue as a going concern?
      a. Review compliance with the terms of debt agreements.
      b. Confirm accounts receivable from principal customers.
      c. Reconcile interest expense with outstanding debt.
      d. Confirm bank balances.

17-20 Which of the following matters is an auditor required to communicate to an entity's audit
      committee?
         Significant Audit Adjustments             Changes in Significant Accounting Policies
      a.             Yes                                             Yes
      b.             Yes                                             No
      c,             No                                              Yes
      d.             No                                              No

7-21      Which of the following events occurring after the issuance of an auditor's report would be
          most likely to cause the auditor to make further inquiries about the previously issued
          financial statements?
          a. A technological development that could affect the entity's future ability to continue as a
             going concern.
          b. The discovery of information regarding a contingency that existed before-the financial
             statements were issued.
          c. The entity's sale of a subsidiary that accounts for 30 percent of the entity's consolidated
             sales.
          d. The final resolution of a lawsuit explained in a separate paragraph of the auditor's
             report.

								
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