Ch. 16

The search for unrecorded liabilities for a public company includes procedures usually performed through the: A. Day the audit report is issued. B. End of the client's year. C. Date of the auditors' report. D. Date the report is filed with the SEC.

C. Date of the auditors' report

An auditor accepted an engagement to audit the 20X8 financial statements of EFG Corporation and began the fieldwork on September 30, 20X8. EFG gave the auditor the 20X8 financial statements on January 17, 20X9. The auditor completed the audit on February 10, 20X9, and delivered the report on February 16, 20X9. The client's representation letter normally would be dated: A. December 31, 20X8. B. January 17, 20X9. C. February 10, 20X9. D. February 16, 20X9.

C. February 10, 20X9

Identify the correct statement regarding analytical procedures used in a final review conducted at the conclusion of an audit. A. The ultimate purpose of analytical procedures used in a review conducted at the conclusion of the audit is to uncover fraud schemes that may have been missed previously during the audit. B. Typically, a junior member of the engagement team will perform the analytical procedures applied at the conclusion of the audit because less precision is required. C. If review analytical procedures suggest the presence of misstated account balances, the auditor may have to perform additional substantive tests of details to satisfactorily complete the audit. D. Analytical procedures used in the review near the conclusion of the audit are not required.

C. If review analytical procedures suggest the presence of misstated account balances, the auditor may have to perform additional substantive tests of details to satisfactorily complete the audit.

The aggregated misstatement in the financial statements is made up of: (Can be more than one) A. Known Misstatements B. Projected Misstatements C. Other Misstatements

A, B, & C Known, Projected, and Other

Type 1 subsequent events require ______________ of the financial statements. A. Adjustment B. Consideration C. Disclosure D. Documentation E. Duplication

A. Adjustment

Type 2 subsequent events come into existence ______________ the balance sheet date. A. After B. Before C. Between D. Close to E. Near F. On

A. After

When auditing the statement of cash flows, which of the following would an auditor not expect to be a source of receipts and payments? A. Capitalization. B. Financing. C. Investing. D. Operations.

A. Capitalization

Type 1 subsequent events involve events that existed ______________ the balance sheet date. A. After B. Before C. Between D. Close to E. Near F. On

B. Before

Type 1 subsequent events come into existence due to new ___________ becoming available. A. Auditors B. Clients C. Documentation D. Evidence E. Judgement

D. Evidence

Which of the following procedures is most likely to be included near completion of an audit? A. Obtain an understanding of internal control. B. Confirmation of receivables. C. Observation of inventory. D. Perform analytical procedures.

D. Perform analytical procedures

Type 2 subsequent events occur after the balance sheet date but __________ the completion of fieldwork. A. After B. Close to C. Near to D. Prior to E. Subsequent to

D. Prior to

T/F Dual-dating of an audit report occurs when the auditors are not able to complete an audit engagement as of a particular date and should return to complete the audit work on a later date.

False

T/F The representations letter from management should be dated and signed on the balance sheet date.

False

A possible loss, stemming from past events that will be resolved as to existence and amounts, is referred to as a(n): A. Analytical process. B. Loss contingency. C. Probable loss. D. Unasserted claim.

B. Loss contingency

Communicating which of the following to the audit committee is not typically required of an auditor? A. Any disagreements with management. B. Any significant reclassifying journal entries proposed as adjustments by the auditor. C. The auditor's judgment of management integrity. D. The process used by management to make accounting estimates.

C. The auditor's judgement of management integrity

Subsequent to the issuance of the auditor's report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should next: A. Notify the board of directors that the auditor's report must no longer be associated with the financial statements. B. Determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information. C. Request that management disclose the effects of the newly discovered information by adding a footnote to subsequently issued financial statements. D. Issue revised pro forma financial statements taking into consideration the newly discovered information.

B. Determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information

Which of the following events occurring on January 5, 20X2, is most likely to result in an adjusting entry to the 20X1 financial statements? A. A business combination. B. Early retirement of bonds payable. C. Settlement of litigation. D. Plant closure due to a strike.

C. Settlement of litigation

Management's written representations should be in the form of a letter addressed to: A. The audit committee of the board of directors. B. The stockholders of the entity. C. The auditor. D. The board of directors.

C. The auditor

T/F The auditors perform an analysis of professional fees in part to determine that they have considered obtaining a lawyer's letter from all attorneys that are handling litigation for the client.

True

T/F When a second partner review of an audit engagement is to be performed, it should occur prior to issuance of the audit report.

True

Which of the following is most likely to be considered a Type 1 subsequent event? A. A business combination completed after year-end, but for which negotiations began prior to year-end. B. A strike subsequent to year-end due to employee complaints about working conditions which originated two years ago. C. Customer checks deposited prior to year-end, but determined to be uncollectible after year-end. D. Introduction of a new line of products after year-end for which major research had been completed prior to year-end.

C. Customer checks deposited prior to year-end, but determined to be uncollectible after year-end

T/F Amounts included in the statement of cash flows are audited in conjunction with the audit of balance sheet and income statement accounts.

True