ACCT 4301 Chapter 17 Concepts Pt. 1 Questions and Correct Answers

When auditing contingent liabilities, which of the following procedures would be least effective? A. Reading the minutes of the board of directors. B. Reviewing the bank confirmation letter. C. Examining customer confirmation replies. D. Examining invoices for legal services. Examining customer confirmation replies. When obtaining evidence regarding litigation against an entity, the CPA would be least interested in determining A. An estimate of when the matter will be resolved. B. The period in which the underlying cause of the litigation occurred. C. The probability of an unfavorable outcome. D. An estimate of the potential loss. An estimate of when the matter will be resolved. The auditor's primary means of obtaining corroboration of management's information concerning litigation is a A. Letter of audit inquiry to the entity's lawyer. B. Letter of corroboration from the auditor's lawyer upon review of the legal documentation. C. Confirmation of claims and assessments from the other parties to the litigation. D. Confirmation of claims and assessments from an officer of the court presiding over the litigation. Letter of audit inquiry to the entity's lawyer. An auditor should obtain evidential matter relevant to all the following factors concerning third-party litigation against an entity except the: A. Period in which the underlying cause for legal action occurred. B. Probability of an unfavorable outcome. C. Jurisdiction in which the matter will be resolved. D. Existence of a situation indicating an uncertainty as to the possible loss. Jurisdiction in which the matter will be resolved. An auditor will ordinarily examine invoices from lawyers primarily in order to A. Substantiate accruals. B. Assess the legal ramifications of litigation in progress. C. Estimate the dollar amount of contingent liabilities. D. Identify possible unasserted litigation, claims, and assessments. Identify possible unasserted litigation, claims, and assessments. If a lawyer refuses to furnish corroborating information regarding litigation, claims, and assessments, the auditor should