A major customer of an audit client suffers a fire just prior to completion of year end field work. The audit client believes that this event could have a significant direct effect on the financial statements. The auditor should:
Advise management to disclose the event in notes to the financial statements
The statement that best expresses the auditor's responsibility with respect to events occurring between the balance sheet date and the end of field work is that:
The auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period
ASubsequent events for reporting purposes are defined as events which occur subsequent to the:
Balance sheet date but prior to the issuance of the auditor's report
Which of the following material events occurring subsequent to the December 31, 19X3 balance sheet would not ordinarily result in an adjustment to the financial statements before they are issued on March 2, 19X4?
Acquisition of a subsidiary on January 23, 19X4. Negotiations had begun in December of 19X3.
An auditor should obtain evidential matter relevant to all the following factors concerning third party litigation against a client except the:
Jurisdiction in which the matter will be resolved
The auditor's primary means of obtaining corroboration of management=s information concerning litigation is a
Letter of audit inquiry to the client's lawyer
The primary objective of analytical procedures used in the final review stage of an audit is to:
Assist the auditor in assessing the validity of the conclusions reached
An auditor's communication of internal control structure related matters noted in an audit usually should be addressed to the:
When reporting on conditions relating to an entity=s internal control structure observed during an audit of the financial statements, the auditor should include a:
Restriction on the distribution of the report
Which of the following statements concerning material weaknesses and significant deficiencies is correct?
All material weaknesses are significant deficiencies
Which of the following auditing procedures is ordinarily performed last?
Obtaining a management representation letter
A written client representation letter most likely would be an auditor=s best source of corroborative information of a client's plans to
Discontinue a line of business.
A limitation on the scope of an auditor's examination sufficient to preclude an unqualified opinion will always result when management:
Refuses to furnish a management representation letter to the auditor.
AProvision has been made for any material loss that might be sustained as a result of purchase commitments for inventory quantities in excess of normal requirements or at prices in excess of the prevailing market prices.@ The foregoing passage is most likely from:
A management representation letter.
Although there is no professional requirement to do so on audit engagements, CPAs normally issue a formal management letter to their clients. The primary purpose of this letter is to provide:
A written record of discussions between auditor and client concerning the auditor's observations and suggestions for improvements.
After issuance of the auditor's report, the auditor has no obligation to make any further inquiries with respect to audited financial statements covered by that report unless:
New information is discovered concerning undisclosed related party transactions of the previously-audited period
Ajax Company's auditor concludes that the omission of an audit procedure considered necessary at the time of the prior audit impairs the auditor's present ability to support the previously-expressed unqualified opinion. If the auditor believes there are stockholders currently relying on the opinion, the auditor should next:
Undertake to apply the omitted procedure or alternate procedures that would provide a satisfactory basis for the opinion
An auditor concludes that an audit procedure considered necessary at the time of the audit has been omitted. The auditor should assess the importance of the omitted procedure to the ability to support the previously expressed opinion. Which of the following would be least helpful in making that assessment?
Discussion with the client about whether persons are relying on the report.
If an auditor dates the auditor's report on financial statements for the year ended December 31, 19X4, as of February 10, 19X5, except for Note J, as to which the date is March 3, 19X5, the auditor is taking responsibility for:
All subsequent events occurring through February 10, 19X5, and the specific subsequent event referred to in Note J through March 3, 19X5.
Three months subsequent to the date of the audit report, a CPA becomes aware of facts which existed at the date of the report and which affect the reliability of the financial statements of a client whose securities are widely held. If the client refuses to make appropriate disclosure, the CPA should notify:
Regulatory agencies having jurisdiction over the client.All present and potential investors in the company, generally through the requlatory agency.