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Questions and Answers
What step do auditors take during phase IV of the audit regarding financial statements?
What step do auditors take during phase IV of the audit regarding financial statements?
When an auditor reviews asset classification, which audit objective is not being satisfied?
When an auditor reviews asset classification, which audit objective is not being satisfied?
In which phase do auditors determine the need for additional procedures for presentation and disclosure-related objectives?
In which phase do auditors determine the need for additional procedures for presentation and disclosure-related objectives?
How does obtaining evidence for presentation objectives differ from transaction-related objectives?
How does obtaining evidence for presentation objectives differ from transaction-related objectives?
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What misconception may arise about auditors' control tests when control risk is below maximum?
What misconception may arise about auditors' control tests when control risk is below maximum?
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Which of the following concepts is true regarding the auditor's evaluation of evidence in phase IV?
Which of the following concepts is true regarding the auditor's evaluation of evidence in phase IV?
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What is typically integrated with the auditor's tests for transaction-related objectives?
What is typically integrated with the auditor's tests for transaction-related objectives?
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Which statement is true regarding auditors' risk assessment concerning footnote disclosure?
Which statement is true regarding auditors' risk assessment concerning footnote disclosure?
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What is the first condition required for a contingent liability to exist?
What is the first condition required for a contingent liability to exist?
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Which term describes a situation where the chance of occurrence is slight?
Which term describes a situation where the chance of occurrence is slight?
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What action is required if an amount related to a probable contingent liability cannot be reasonably estimated?
What action is required if an amount related to a probable contingent liability cannot be reasonably estimated?
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Which of the following is NOT a type of contingency an auditor might be concerned with?
Which of the following is NOT a type of contingency an auditor might be concerned with?
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In the context of contingent liabilities, what does the term 'reasonably possible' signify?
In the context of contingent liabilities, what does the term 'reasonably possible' signify?
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Which of the following is an example of a contingency that would require footnote disclosure?
Which of the following is an example of a contingency that would require footnote disclosure?
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When determining the proper accounting treatment for an environmental clean-up lawsuit, what is the auditor's first step?
When determining the proper accounting treatment for an environmental clean-up lawsuit, what is the auditor's first step?
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What describes the likelihood of occurrence that necessitates no disclosure in financial statements?
What describes the likelihood of occurrence that necessitates no disclosure in financial statements?
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What is one of the main reasons an attorney may refuse to provide auditors with complete information about contingent liabilities?
What is one of the main reasons an attorney may refuse to provide auditors with complete information about contingent liabilities?
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What opinion must an auditor give if they cannot determine the effect of a subsequent event on internal control effectiveness?
What opinion must an auditor give if they cannot determine the effect of a subsequent event on internal control effectiveness?
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An attorney is aware of a violation of a patent agreement that could result in significant loss to the client. What does this scenario illustrate?
An attorney is aware of a violation of a patent agreement that could result in significant loss to the client. What does this scenario illustrate?
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Which action should an auditor primarily take to corroborate information regarding litigation provided by management?
Which action should an auditor primarily take to corroborate information regarding litigation provided by management?
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Which of the following is an example of a nonrecognized subsequent event that may require disclosure?
Which of the following is an example of a nonrecognized subsequent event that may require disclosure?
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In response to a major customer's bankruptcy declared on March 1, 2019, what action should the auditor take regarding the December 31, 2018 financial statements?
In response to a major customer's bankruptcy declared on March 1, 2019, what action should the auditor take regarding the December 31, 2018 financial statements?
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What is a potential consequence if an attorney withholds information regarding a contingent liability?
What is a potential consequence if an attorney withholds information regarding a contingent liability?
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What action is appropriate for the sale of machinery at book value on February 17, 2019?
What action is appropriate for the sale of machinery at book value on February 17, 2019?
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Which of the following describes a situation where a client is unaware of a potential legal claim that could arise in the future?
Which of the following describes a situation where a client is unaware of a potential legal claim that could arise in the future?
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How should the loss of uninsured inventory in a flood on February 20, 2019 be reported?
How should the loss of uninsured inventory in a flood on February 20, 2019 be reported?
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What is the auditor's primary concern when reviewing claims and litigation disclosed by management?
What is the auditor's primary concern when reviewing claims and litigation disclosed by management?
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What type of event is characterized by a situation that has occurred and is disclosed after the balance sheet date?
What type of event is characterized by a situation that has occurred and is disclosed after the balance sheet date?
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What should be done regarding the significant decline in market value of securities held for resale after January 5, 2019?
What should be done regarding the significant decline in market value of securities held for resale after January 5, 2019?
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If management has provided complete information on potential lawsuits, what should the auditor ensure next?
If management has provided complete information on potential lawsuits, what should the auditor ensure next?
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What course of action is necessary when a company settles a lawsuit for a higher amount than previously recorded on March 10, 2019?
What course of action is necessary when a company settles a lawsuit for a higher amount than previously recorded on March 10, 2019?
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If an event occurs after the balance sheet date that reflects a material weakness in internal control, what must an auditor evaluate?
If an event occurs after the balance sheet date that reflects a material weakness in internal control, what must an auditor evaluate?
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Auditors of public companies must obtain certain representations from management regarding what aspect of financial reporting?
Auditors of public companies must obtain certain representations from management regarding what aspect of financial reporting?
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At the completion of an audit, management is typically asked to make a written statement regarding:
At the completion of an audit, management is typically asked to make a written statement regarding:
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Which statement about the letter of representation is accurate?
Which statement about the letter of representation is accurate?
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What is the implication if a client refuses to sign the letter of representation?
What is the implication if a client refuses to sign the letter of representation?
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Why is a management representation letter considered unreliable evidence?
Why is a management representation letter considered unreliable evidence?
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Data analytics at the end of the audit helps auditors to identify:
Data analytics at the end of the audit helps auditors to identify:
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What must the letter of representation typically include regarding internal control?
What must the letter of representation typically include regarding internal control?
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Which of the following is NOT a typical consequence if a management representation letter is not signed?
Which of the following is NOT a typical consequence if a management representation letter is not signed?
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Who is primarily responsible for identifying and deciding the appropriate accounting treatment for contingent liabilities?
Who is primarily responsible for identifying and deciding the appropriate accounting treatment for contingent liabilities?
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What is the appropriate financial statement treatment for a potential loss with a 40% probability of resulting in a $10 million payment?
What is the appropriate financial statement treatment for a potential loss with a 40% probability of resulting in a $10 million payment?
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Which of the following is a contingent liability that auditors are particularly concerned about?
Which of the following is a contingent liability that auditors are particularly concerned about?
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Audit procedures concerning contingent liabilities are initially focused on which aspect?
Audit procedures concerning contingent liabilities are initially focused on which aspect?
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If management assesses that a contingent liability has a 30% chance of occurrence, what should be the treatment in financial statements?
If management assesses that a contingent liability has a 30% chance of occurrence, what should be the treatment in financial statements?
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In assessing planned audit procedures related to contingent liabilities, which factor plays a significant role?
In assessing planned audit procedures related to contingent liabilities, which factor plays a significant role?
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Which statement best describes a contingent liability?
Which statement best describes a contingent liability?
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What happens if the chance of occurrence for a contingent liability is deemed remote?
What happens if the chance of occurrence for a contingent liability is deemed remote?
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