In planning an audit, an auditor established materiality at $40,000. The auditor received an attorney's letter indicating
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Question:
In planning an audit, an auditor established materiality at $40,000. The auditor received an attorney's letter indicating that it was probable that each of three lawsuits would be settled for $30,000. Which of the following actions should the auditor take?
A. Add a separate paragraph to the audit report disclosing the contingencies and their amounts.
B. Ask the client to disclose the contingencies in the notes to the financial statements.
C. Ask the client to record the liability for the three contingencies.
D. Add a paragraph to the auditor's opinion disclosing a scope limitation.
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Business Law The Ethical Global and E-Commerce Environment
ISBN: 978-0071317658
15th edition
Authors: Jane Mallor, James Barnes, Thomas Bowers, Arlen Langvardt
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