Auditing and assurance services UPDATED
ACTUAL Exam Questions and CORRECT
Answers
An existing condition or set of circumstances involving uncertainty about a possible loss that will
ultimately be resolved when some future event occurs or fails to occur is a - CORRECT
ANSWER - contingent liability
Contingent liabilities judged to be remote are ______. - CORRECT ANSWER - not
disclosed in the footnotes, not accrued
Contingent liabilities include ______. - CORRECT ANSWER - product warranties,
income tax disputes
The primary purpose of a legal letter is to ______. - CORRECT ANSWER - corroborate
information provided by management about litigation, claims and assessments
Refusal by an entity's attorney to furnish information in a legal letter is ______. - CORRECT
ANSWER - limit scope
Which of the following are characteristics of a contingent liability? - CORRECT
ANSWER - Ultimate resolution when some future event occurs or fails to occur, An
existing condition or set of circumstances., uncertanty about the amount of loss
When a contingent liability exists, the likelihood that the future event will result in a loss is
assessed using the categories ______. - CORRECT ANSWER - probable, remote,
reasonably possible
Pending or threated litigation is an example of a - CORRECT ANSWER - contingent
liability
, Inquiry of entity personnel during the audit of the revenue and purchasing processes and a
review of the minutes of the board of directors meetings is usually done to identify long-term -
CORRECT ANSWER - commitments
A letter of audit inquiry sent to the entity's attorneys is often referred to as a - CORRECT
ANSWER - legal letter
Transactions that occur after the balance sheet date but before the issuance of the financial
statements are called - CORRECT ANSWER - subsequent events
True or false: Refusal by an entity's attorney to furnish information in a legal letter is a limitation
on the scope of the audit, but not sufficient to preclude an unqualified opinion. - CORRECT
ANSWER -f
An existing condition or set of circumstances involving uncertainty about a possible loss that will
ultimately be resolved when some future event occurs or fails to occur is a(n) - CORRECT
ANSWER - contingent liability
A Type I subsequent event ______. - CORRECT ANSWER - quires adjustment of the
numbers in the financial statements
When an auditor reviews the minutes of the board of directors meetings and makes inquiries of
entity personnel during the audit of the revenue and purchasing processes, (sh)he is most likely
trying to - CORRECT ANSWER - identify lt commitments
The entity's balance sheet date is December 31, 2018, the date of the auditor's report is February
8, 2019, and the financial statements are issued on March 2, 2019. Regarding the period between
February 8, 2019 and March 2, 2019, the auditor ______ - CORRECT ANSWER - is not
responsible for making any inquiries or conducting any audit procedures
Transactions that occur after the balance sheet date but before the issuance of the financial
statements are called ____ - CORRECT ANSWER - subsequent events
ACTUAL Exam Questions and CORRECT
Answers
An existing condition or set of circumstances involving uncertainty about a possible loss that will
ultimately be resolved when some future event occurs or fails to occur is a - CORRECT
ANSWER - contingent liability
Contingent liabilities judged to be remote are ______. - CORRECT ANSWER - not
disclosed in the footnotes, not accrued
Contingent liabilities include ______. - CORRECT ANSWER - product warranties,
income tax disputes
The primary purpose of a legal letter is to ______. - CORRECT ANSWER - corroborate
information provided by management about litigation, claims and assessments
Refusal by an entity's attorney to furnish information in a legal letter is ______. - CORRECT
ANSWER - limit scope
Which of the following are characteristics of a contingent liability? - CORRECT
ANSWER - Ultimate resolution when some future event occurs or fails to occur, An
existing condition or set of circumstances., uncertanty about the amount of loss
When a contingent liability exists, the likelihood that the future event will result in a loss is
assessed using the categories ______. - CORRECT ANSWER - probable, remote,
reasonably possible
Pending or threated litigation is an example of a - CORRECT ANSWER - contingent
liability
, Inquiry of entity personnel during the audit of the revenue and purchasing processes and a
review of the minutes of the board of directors meetings is usually done to identify long-term -
CORRECT ANSWER - commitments
A letter of audit inquiry sent to the entity's attorneys is often referred to as a - CORRECT
ANSWER - legal letter
Transactions that occur after the balance sheet date but before the issuance of the financial
statements are called - CORRECT ANSWER - subsequent events
True or false: Refusal by an entity's attorney to furnish information in a legal letter is a limitation
on the scope of the audit, but not sufficient to preclude an unqualified opinion. - CORRECT
ANSWER -f
An existing condition or set of circumstances involving uncertainty about a possible loss that will
ultimately be resolved when some future event occurs or fails to occur is a(n) - CORRECT
ANSWER - contingent liability
A Type I subsequent event ______. - CORRECT ANSWER - quires adjustment of the
numbers in the financial statements
When an auditor reviews the minutes of the board of directors meetings and makes inquiries of
entity personnel during the audit of the revenue and purchasing processes, (sh)he is most likely
trying to - CORRECT ANSWER - identify lt commitments
The entity's balance sheet date is December 31, 2018, the date of the auditor's report is February
8, 2019, and the financial statements are issued on March 2, 2019. Regarding the period between
February 8, 2019 and March 2, 2019, the auditor ______ - CORRECT ANSWER - is not
responsible for making any inquiries or conducting any audit procedures
Transactions that occur after the balance sheet date but before the issuance of the financial
statements are called ____ - CORRECT ANSWER - subsequent events
