Evidence - Key Considerations Flashcards
What procedure(s) would assist an auditor to detect a liability omission by management?
Review of purchase contracts and other legal documents
What is the appropriate date for the client to specify as the effective date in the audit inquiry to legal counsel?
As close to the date of the auditor’s report as possible
Whom should an understanding on the limits of materiality for the written representations received by the auditor from management be between?
The auditor and management
What is an example of a statement likely to be included in a representation letter by management of an issuer?
One that states: “No events have occurred subsequent to the balance sheet date that require adjustment to, or disclosure in, the financial statements”
When would an entity be expected to accrue a loss contingency for the period under audit?
When the entity estimated the amount of a claim with a probable adverse outcome before issuance of the audit report.
What is a likely procedure an auditor would perform to obtain evidence about subsequent events?
Comparing the latest subsequent interim financial information with the financial statements being reported upon.
When would an auditor be obligated to make further inquiries with respect to audited financial statements after releasing their auditor’s report?
When new information is discovered concerning undisclosed related party transactions of the previously audited period.
What would be a likely matter included in a management representation letter?
A confirmation that the entity has complied with contractual agreements
How should an auditor handle subsequent events not in existence at the balance sheet date but whose disclosure is required to keep the financial statements from being misleading?
With the use of Pro forma financial statement presentation
i.e. Occasionally, such an event may be so significant that disclosure can best be made by means of pro forma financial data
What is one procedure an auditor could perform to obtain evidence about the occurrence of subsequent events?
Investigating changes in debt recorded after year end
What is a statement that would most likely be included in a management representation letter?
Management’s acknowledgment of its responsibility to detect employee fraud
What would Legal counsel’s response to an auditor’s request for information regarding litigation, claims, and assessments ordinarily contain?
An explanation regarding limitations on the scope of the response.
