ACCT 470 Chapter 24 Homework- ACCT 470 (Franklin University). All Answers Explained.

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Chapter 24 Homework The following questions deal with contingent liabilities and the review for subsequent events. Choose the best response. When a contingency is resolved subsequent to the issuan... ce of audited financial statements, which correctly contained disclosure of the contingency in the footnotes based on information available at the date of issuance, the auditor should Which of the following would be least likely to be included in a standard inquiry to the client's attorney? An audit report was dual-dated for a subsequent event disclosed in the financial statements, which occurred after the completion of the evidence collection process but before the issuance of the financial statements. The auditor's responsibility for events occurring subsequent to the completion of the evidence collection process was An example of an event occurring in the period between the end of the year being audited and the date of the auditor's report that normally will not require disclosure in the financial statements or auditor's report is The following questions concern communications between management, those charged with governance, and the auditor. Choose the best response. Which of the following is not a required item to be communicated by the auditor to the audit committee or others charged with governance? Written management representations obtained by the auditor in connection with a financial statement audit should include a A management letter The following questions concern information accompanying basic financial statements. Choose the best response. The Form 10-K filed by management of a public company includes a section on management's discussion and analysis (MD&A) in addition to the annual financial statements. Which of the following best describes the auditor's responsibility for the MD&A information? Management of Thurman Corporation included additional supplementary information in documents that include the audited financial statements for the year ended December 31, 2016. Management has asked its audit firm, Wally, CPAs, whether they can report on the supplementary information. Which of the following conditions would preclude Wally, CPAs from conducting this engagement? Investment and property schedules are presented for purposes of additional analysis in a document outside the basic financial statements. The schedules are not required supplementary information. When the auditor is engaged to report on whether the supplementary information is fairly stated in relation to the audited financial statements as a whole, the measurement of materiality is the The following questions concern contingencies, subsequent events, and communications with those charged with governance. Choose the best response. A client acquired 25% of its outstanding capital stock after year-end but prior to the date of the auditor's report. The auditor should Which of the following statements is correct about an auditor's required communication with those charged with governance? In addition to making management inquiries, an auditor should perform the following procedures to identify client contingencies with the exception of Identify and describe the four presentation and disclosure audit objectives. Explain how many of the procedures to test presentation and disclosure audit objectives are integrated with tests performed in earlier stages of the audit. Identify and describe the four presentation and disclosure audit objectives. (Select the four choices that accurately state and describe the presentation and disclosure audit objectives.) Explain how many of the procedures to test presentation and disclosure audit objectives are integrated with tests performed in earlier stages of the audit. The auditor performs many of the procedures to address presentation and disclosure-related audit objectives in conjunction with other tests. Forexample, information that must be disclosed related to fixed assets, such as classes of assets, asset lives, and depreciation methods is obtained during tests of balances for fixed assets. Distinguish between a contingent liability and an actual liability and give three examples of each. Give three examples of each type of liabilities associated with each account listed. EXAMPLE Type of Liability? Accrued salaries and wages Income tax disputes Accounts payable Income tax payable Guarantees of obligations of others Unused balances of outstanding letters of credit In the audit of the James Mobley Company, you are concerned about the possibility of contingent liabilities resulting from a patent dispute. Discuss the procedures you could use for an extensive investigation in this area. (Select all that apply.) Explain why the analysis of legal expense is an essential part of every audit. During the audit of the Merrill Manufacturing Company, Ralph Pyson, CPA, has become aware of four lawsuits against the client through discussions with theclient, reading corporate minutes, and reviewing correspondence files. How should Pyson determine the materiality of the lawsuits and the proper disclosure in the financial statements? Distinguish between an asserted and an unasserted claim. Explain why a client's attorney may not reveal an unasserted claim. Describe the action that an auditor should take if an attorney refuses to provide information that is within the attorney's jurisdiction and may directly affect the fair presentation of the financial statements. What major considerations should the auditor take into account in determining how extensive the review of subsequent events should be? (Select all thatapply.) Identify five audit procedures normally done as a part of the review for subsequent events. Five months after issuing an unqualified audit opinion and an unqualified opinion on internal controls for the audit of the year ended December 31, 2016, for a large publicly traded client, the client and the auditor become aware of a material misstatement in sales revenue for the year in question, which was the result of a material weakness in internal controls. Is this a subsequent event or a subsequent discovery of facts? What are the auditor's responsibilities related to the audit opinion and the opinion on internal controls? Miles Lawson, CPA, believes that the final summarization is the easiest part of the audit if careful planning is followed throughout the audit. He makes sure that each segment of the audit is completed before he goes on to the next. When the last segment of the audit is completed, he is finished with the audit. He believes this may cause each part of the audit to take a little longer, but he makes up for it by not having to do the final summarization. Evaluate Lawson's approach. Compare and contrast the accumulation of audit evidence and the evaluation of the adequacy of the disclosures in the financial statements. Give two examples in which adequate disclosure could depend heavily on the accumulation of evidence and two others in which audit evidence does not normally significantly affect the adequacy of the disclosure. Give two examples in which adequate disclosure could depend heavily on the accumulation of evidence and two others in which audit evidence does not normally significantly affect the adequacy of the disclosure. Distinguish between a management letter and a letter about significant deficiencies in internal control. Give examples of items that might be included in a management letter. Give examples of items that might be included in a management letter. Recommendations: Explain what is meant by information accompanying basic financial statements. Provide two examples of such information. What levels of assurance may the CPA offer for this information? Distinguish between regular audit documentation review and independent review and state the purpose of each. Give two examples of potential findings in each of these two types of review. . Regular audit documentation review Independent review Describe matters that the auditor must communicate to audit committees of public companies. 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