In which of the following circumstances would an auditor most likely meet with the client's legal counsel to discuss the likely outcome of the litigation and claims? I. The auditor determines that the matter is a significant risk II. There is a disagreement between management and the entity's legal counsel. III. The subject matter of the litigation is complex I and II only. II and III only. I and III only. I, II, and III.

In which of the following circumstances would an auditor most likely meet with the client's legal counsel to discuss the likely outcome of the litigation and claims? I. The auditor determines that the matter is a significant risk II. There is a disagreement between management and the entity's legal counsel. III. The subject matter of the litigation is complex I and II only. II and III only. I and III only. I, II, and III.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter5: Professional Auditing Standards And The Audit Opinion Formulation Process

Section: Chapter Questions

Problem 12CYBK

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Statement 1: An entity wherein the client has a nominal interest, is considered a related. Statement 2: lf the auditor performed analytical procedures in the audit completion phase and discovers a previously unrecognized risk, the auditor shall issue an adverse opinion. Statement 3: One of the management's responsibilities regarding related party transactions is to properly account for and disclose such transactions. A. Only one statement is correct B. Only two statements are correct C. All statements are correct D. All statements are incorrect
V2. If a lawyer refuses to furnish corroborating information regarding litigation, claims, and assessments. the auditor should: disclose this fact in a footnote to the financial statements. seek to obtain the corroborating information from management. C) consider the refusal to be a scope limitation. D) honor the confidentiality of the client-lawyer relationship.
The scope of an audit is not restricted when an attorney letter limits the response toa. Matters to which the attorney has given substantive attention in the form of legalrepresentation.b. An evaluation of the likelihood of an unfavorable outcome of the matters disclosed bythe entity.c. The attorney’s opinion of the entity’s historical experience in recent similar litigation.d. The probable outcome of asserted claims and pending or threatened litigation
Which of the following actions would be considered as self-interest threats? Select which two options are correct. Select one or more: A. A member of the assurance team is a director of the client. B. An auditor acts as an advocate on behalf of an assurance client. C. An auditor has potential employment with an assurance client. D. One client provides a high percentage of total audit fees.
Which of the following statements is most likely to be included in an attorney letter?a. “Certain representations in this letter are described as being limited to matters that arematerial.”b. “If any unasserted claims or assessments are omitted from this disclosure, please provide this information directly to our auditors.”c. “Our work enabled us to notice some actions that could enhance the profitability of theCompany.”d. “Please furnish to our auditors such explanation, if any, that you consider necessary tosupplement the foregoing information.”
The primary reason auditors request responses to attorney letters is to provide auditorsa. The probable outcome of asserted claims and pending or threatened litigation.b. Corroboration of the information furnished by management about litigation, claims, and assessments.c. The attorney’s opinions of the client’s historical experiences in recent similar litigation.d. A description and evaluation of litigation, claims, and assessments that existed at the date of the financial statements.
True or False 1. The main source of the auditor's understanding about the status of cases and litigations faced by the entity is the entity's legal counsel 2. Control activities may be applied on either manual system, computerized system, or combination of both 3. Studying the relationship of financial information with another information, whether financial or non-financial, is an example of an analytical procedure 4. To reduce audit risk to an acceptable low level, the auditor should determine overall responses to assessed risks at the assertion level 5. It is necessary for the audit team members to have a collective knowledge needed to carry out the engagement 6. An important responsibility of an auditor is the establishment and maintenance of internal control on an ongoing basis 7. Generally, the more reliable internal controls are, the lesser the substantive test procedures the auditor would need to perform in auditing year-end account balances 8. The industry in which the client…
Sufficient and appropriate evidence is the focus of the third field work standard. * O True O False When the auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern, the auditor should consider the possible effects on the financial statements and the related disclosures. O True False
The primary reason an auditor requests that letters of inquiry be sent to a client's attorney is to provide the auditor with A description and evaluation of litigation, claims, and assessments that existed at the balance sheet date The attorneys' opinions of the client's historical experiences in recent similar litigation, The probable outcome of asserted claims and pending or threatened litigations Corroboration of the information furnished by management about litigation, claims, and assessments
Which of the following factors is an example of a risk relevant to the client continuance decision? a. Client entity characteristics. b. Independence risk factors. c. Third party/due diligence risk factors. d. All of the above.
Which of the following factors is not an example of a risk relevant to the client continuance decision? a. Client entity characteristics. b. Independence risk factors. c. Third-party/due diligence risk factors. d. Advocacy threat.