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Auditing and Assurance Services, 14e (Arens)
Chapter 24 Completing the Audit
Learning Objective 24-1
1)Auditors often integrate procedures for presentation and disclosure objectives with: A)
Tests for balance-related
Tests for planning objectives objectives
Yes Yes
B)
Tests for balance-related
Tests for planning objectives objectives
No No
C)
Tests for balance-related
Tests for planning objectives objectives
Yes No
D)
Tests for balance-related
Tests for planning objectives objectives
No Yes
Answer: D
Terms: Procedures for presentation and disclosure objectives
Diff: Easy
Objective: LO 24-1
AACSB: Reflective thinking skills
2)The auditor's primary concerns relative to presentation and disclosure-related
objectives is: A) accuracy.
B) existence.
C)
completeness.
D) occurrence.
Answer: B
Terms: Presentation and disclosure-related objectives
Diff: Easy
Objective: LO 24-1
AACSB: Reflective thinking skills
1
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Learning Objective 24-2
1)If a potential loss on a contingent liability is remote, the liability
usually is: A) disclosed in footnotes, but not accrued.
B) neither accrued nor disclosed in footnotes.
C) accrued and indicated in the body of the financial statements.
D) disclosed in the auditor's report but not disclosed on the financial
statements. Answer: B
Terms: Contingent liability; remote
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
2)A commitment is best described as:
A) an agreement to commit the firm to a set of fixed conditions in the future.
B)an agreement to commit the firm to a set of fixed conditions in the future that
depends on company profitability.
C) an agreement to commit the firm to a set of fixed conditions in the future that
depends on current market conditions.
D) a potential future obligation to an outside party for an as yet to be determined amount.
Answer: A
Terms: Commitments
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
3)At the completion of the audit, management is asked to make a written statement that it
is not aware of any undisclosed contingent liabilities. This statement would appear in the:
A) management
letter. B) letter of
inquiry.
C) letters testamentary.
D) management letter of
representation. Answer: D
Terms: Completion of audit; written statement by management
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
4)Which of the following groups has the responsibility for identifying and deciding the
appropriate accounting treatment for recording or disclosing contingent liabilities?
A) auditors
B) legal
counsel C)
management
D) management and the
auditors Answer: C
Terms: Recording or disclosing contingent liabilities
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
2
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5)You are auditing Rodgers and Company. You are aware of a potential loss due to non-
compliance with
environmental regulations. Management has assessed that there is a 40% chance that a
$10M payment could result from the non-compliance. The appropriate financial
statement treatment is to:
A) accrue a $4 million liability.
B) disclose a liability and provide a range of outcomes.
C) since there is less than a 50% chance of occurrence, ignore.
D) since there is greater that a remote chance of occurrence, accrue
the $10 million. Answer: B
Terms: Potential loss for noncompliance
Diff: Moderate
Objective: LO 24-2
AACSB: Analytic skills
6)Which of the following is not a contingent liability with which an auditor is
particularly concerned? A)
Notes receivable discounted Product warranties
Yes Yes
B)
Notes receivable discounted Product warranties
No No
C)
Notes receivable discounted Product warranties
Yes No
D)
Notes receivable discounted Product warranties
No Yes
Answer: A
Terms: Contingent liability; auditor particularly concerned
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
7)Audit procedures related to contingent liabilities are initially
focused on: A) accuracy.
B)
completeness.
C) existence.
D)
occurrence.
Answer: D
Terms: Audit procedures related to contingent liabilities
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
3
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8)With which of the following client personnel would it generally not be appropriate to
inquire about commitments or contingent liabilities?
A)
Controller
B)
President
C) Accounts receivable
clerk D) Vice president
of sales Answer: C
Terms: Inquire for commitments or contingent liabilities
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
9)Inquiries of management regarding the possibility of unrecorded contingencies
will be useful in uncovering:
A)
When management does not
Management's intentional failure to comprehend
disclose existing contingencies. accounting disclosure requirements.
Yes Yes
B)
When management does not
Management's intentional failure to comprehend
disclose existing contingencies. accounting disclosure requirements.
No No
C)
When management does not
Management's intentional failure to comprehend
disclose existing contingencies. accounting disclosure requirements.
Yes No
D)
When management does not
Management's intentional failure to comprehend
disclose existing contingencies. accounting disclosure requirements.
No Yes
Answer: D
Terms: Inquiries of management; Unrecorded contingencies
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
4
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Auditing and Assurance Services, 14e (Arens)
Chapter 24 Completing the Audit
Learning Objective 24-1
1)Auditors often integrate procedures for presentation and disclosure objectives with: A)
Tests for balance-related
Tests for planning objectives objectives
Yes Yes
B)
Tests for balance-related
Tests for planning objectives objectives
No No
C)
Tests for balance-related
Tests for planning objectives objectives
Yes No
D)
Tests for balance-related
Tests for planning objectives objectives
No Yes
Answer: D
Terms: Procedures for presentation and disclosure objectives
Diff: Easy
Objective: LO 24-1
AACSB: Reflective thinking skills
2)The auditor's primary concerns relative to presentation and disclosure-related
objectives is: A) accuracy.
B) existence.
C)
completeness.
D) occurrence.
Answer: B
Terms: Presentation and disclosure-related objectives
Diff: Easy
Objective: LO 24-1
AACSB: Reflective thinking skills
1
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Learning Objective 24-2
1)If a potential loss on a contingent liability is remote, the liability
usually is: A) disclosed in footnotes, but not accrued.
B) neither accrued nor disclosed in footnotes.
C) accrued and indicated in the body of the financial statements.
D) disclosed in the auditor's report but not disclosed on the financial
statements. Answer: B
Terms: Contingent liability; remote
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
2)A commitment is best described as:
A) an agreement to commit the firm to a set of fixed conditions in the future.
B)an agreement to commit the firm to a set of fixed conditions in the future that
depends on company profitability.
C) an agreement to commit the firm to a set of fixed conditions in the future that
depends on current market conditions.
D) a potential future obligation to an outside party for an as yet to be determined amount.
Answer: A
Terms: Commitments
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
3)At the completion of the audit, management is asked to make a written statement that it
is not aware of any undisclosed contingent liabilities. This statement would appear in the:
A) management
letter. B) letter of
inquiry.
C) letters testamentary.
D) management letter of
representation. Answer: D
Terms: Completion of audit; written statement by management
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
4)Which of the following groups has the responsibility for identifying and deciding the
appropriate accounting treatment for recording or disclosing contingent liabilities?
A) auditors
B) legal
counsel C)
management
D) management and the
auditors Answer: C
Terms: Recording or disclosing contingent liabilities
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
2
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
, To
To downloaddownload moremore ebooks,ebooks, slides,slides, SMSM andand TBTB visit:visit: http://testbanklancerhtp:/testbanklancer..blogspotblogspot..comcom
5)You are auditing Rodgers and Company. You are aware of a potential loss due to non-
compliance with
environmental regulations. Management has assessed that there is a 40% chance that a
$10M payment could result from the non-compliance. The appropriate financial
statement treatment is to:
A) accrue a $4 million liability.
B) disclose a liability and provide a range of outcomes.
C) since there is less than a 50% chance of occurrence, ignore.
D) since there is greater that a remote chance of occurrence, accrue
the $10 million. Answer: B
Terms: Potential loss for noncompliance
Diff: Moderate
Objective: LO 24-2
AACSB: Analytic skills
6)Which of the following is not a contingent liability with which an auditor is
particularly concerned? A)
Notes receivable discounted Product warranties
Yes Yes
B)
Notes receivable discounted Product warranties
No No
C)
Notes receivable discounted Product warranties
Yes No
D)
Notes receivable discounted Product warranties
No Yes
Answer: A
Terms: Contingent liability; auditor particularly concerned
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
7)Audit procedures related to contingent liabilities are initially
focused on: A) accuracy.
B)
completeness.
C) existence.
D)
occurrence.
Answer: D
Terms: Audit procedures related to contingent liabilities
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
3
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
, To
To downloaddownload moremore ebooks,ebooks, slides,slides, SMSM andand TBTB visit:visit: http://testbanklancerhtp:/testbanklancer..blogspotblogspot..comcom
8)With which of the following client personnel would it generally not be appropriate to
inquire about commitments or contingent liabilities?
A)
Controller
B)
President
C) Accounts receivable
clerk D) Vice president
of sales Answer: C
Terms: Inquire for commitments or contingent liabilities
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
9)Inquiries of management regarding the possibility of unrecorded contingencies
will be useful in uncovering:
A)
When management does not
Management's intentional failure to comprehend
disclose existing contingencies. accounting disclosure requirements.
Yes Yes
B)
When management does not
Management's intentional failure to comprehend
disclose existing contingencies. accounting disclosure requirements.
No No
C)
When management does not
Management's intentional failure to comprehend
disclose existing contingencies. accounting disclosure requirements.
Yes No
D)
When management does not
Management's intentional failure to comprehend
disclose existing contingencies. accounting disclosure requirements.
No Yes
Answer: D
Terms: Inquiries of management; Unrecorded contingencies
Diff: Easy
Objective: LO 24-2
AACSB: Reflective thinking skills
4
