Chapter 24: Completing the Audit

Question 1

In phase 4, completing the audit we have to

1) review for ________ _________
2) review for _________ ________
3) accumulate final evidence
4) evaluate ____
5) issue audit report
6) communicate with audit _______ and management

Answer 1

1) contingent liabilities
2) subsequent events
4) results
6) committee

Question 2

A _______ _________ is potential future obligation to an outside party for an unknown amount resulting from activities that have already taken place

Answer 2

contingent liabilities

Question 3

If there is a remote or slight chance of the event, then how is it treated in financial statements?

Answer 3

no disclosure necessary

Question 4

If there is reasonably possible chance of the event occurring, then how is it treated in financial statements?

Answer 4

footnote disclosure necessary

Question 5

if there is probable occurrence of the event, then how is it treated in the financial statements?

Answer 5

adjust financial statements or footnote disclosure

Question 6

How do you find contingencies:

1) inquire of ________ about the possibility of unrecorded contingencies
2) Review current and previous years’ ________ __________ __________ for income tax settlements
3) review the ________ of directors’ and stockholders’ meetings for indications of ______ or other contingencies
4) Analyze legal expenses and review _______ and statements from legal counsel
5) obtain a letter from each major _______ of the client as to the status of pending litigation
6) review audit documentation for any information that may indicate a __________ contingency
7) examine letters of _______ in force

Answer 6

1) management
2) internal revenue reports
3) minutes, lawsuits
4) invoices
5) attorney
6) potential
7) credit

Question 7

if the client has a year end of 12/31, and issues statements on 3/26, when is the period that the auditor can find subsequent events?

Answer 7

12/31-3/11

Question 8

There are two types of subsequent events, those that have a ________ effect on financial statements and require adjustment.

Answer 8

direct

Question 9

There are two types of subsequent events, those that have ____ ______ effect on the financial statements but for which disclosure is advisable.

Answer 9

no direct

Question 10

what are some audit tests for subsequent events:

1) inquire of _________
2) correspond with _____
3) review ________ __________ prepared subsequent to the balance sheet date
4) review records prepared subsequent to balance sheet date
5) examine ______ issued subsequent to the balance sheet date
6) obtain an letter of ______
7) review internal ______ reports

Answer 10

1) management
2) attorneys
3) internal statements
5) minutes
6) representation
7) audit

Question 11

If there is an important subsequent event that happens after audit field work is completed but before the audit report is issued, the report can be _____ ______

Answer 11

dual dated

Question 12

In regards to dual dated:
the first date is the date for the completion of ______ work except for a specific exception. the second date, which is always later, deal with the ________

Answer 12

field

exception

Question 13

In step 3 of completing the audit, accumulating final evidence:

1) perform final ________ procedures
2) evaluate the _______-________ assumption
3) obtain an ________ ___________ letter
4) consider information accompanying the basic financial statements and read other information in the annual report.

Answer 13

1) analytical
2) going- concern
3) management representation

Question 14

Is the management representation letter required?

Answer 14

yes

Question 15

Who is management representation letter from and to?

Answer 15

from management to auditor

Question 16

The purpose of the management representation letter:

1) to impress upon management its ___________ for the assertions in the financial statements
2) to remind management of potential _________ or __________ in the financial statements
3) to document the responses form management to inquiries about various aspects of the audit

Answer 16

1) responsibility

2) misstatements or ommissions

Question 17

there are 5 categories to be included in the management representation letter:
1) Financial statements
2) Completeness of ________
3 Recognition, measurement, and _______
4) ________ _______
5) matters related to reports on _________ ________ required by SOX

Answer 17

2) information
3) disclosure
4) subsequent events
5) internal control

Question 18

The management representation letter of internal control:

1) disclosure of all significant __________
2) management’s acknowledgment of its ________ for internal control
3) knowledge of ________ or suspect fraud
4) management’s conclusion about the _______ of internal control

Answer 18

1) deficiencies
2) responsibility
3) fraud
4) effectiveness

Question 19

In step 4, evaluating the results, the auditor must integrate results into one overall conclusion about the FS:

1) Sufficiency of _______
2) __________ supports auditor’s opinion
3) Financial statement disclosures
4) audit documentation _______
5) _________ review
6) _______ of evidence evaluation

Answer 19

1) evidence
2) evidence
4) review
5) independent
6) summary

Question 20

In step 5, issuing the audit report, the audit report is the only thing most users see in the audit process and the consequences of issuing an ___________ report can be severe.

Answer 20

inappropriate

Question 21

In step 6, communicating with audit committee and management:

1) communicate ____ and ______ acts
2) communicate _______ _____ deficiencies
3) Other communication with the audit committee (such as: auditor’s responsibilities, significant accounting policies, adjusting entries)
4) management letter

Answer 21

1) fraud and illegal

2) internal control

Question 22

who is the management letter to and from?

Answer 22

auditor to client

Question 23

is management letter required

Answer 23

no

Question 24

what is the management letter for?

Answer 24

if auditor finds ways management can save money or make things more efficient they are noted here

Question 25

Once you’ve issued the report, the auditor may become aware that some information in the FS is materially misleading after the FS have been issued. they can:

1) ask client to issue _______ FS with explanation
2) make sure client contacts ______ and other regulatory agencies
3) if client does not cooperate, auditor must inform board of directors and regulatory agencies

Answer 25

1) revised

2) SEC

Question 26

the primary source of authoritative literature for performance of government audits is government auditing standards, which is issued by who?
Because of the color of it’s cover, it is usually referred to as?

Answer 26

GAO

the yellow book