Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

options:

	Sale of long-term debt or capital stock.
	Loss of a plant as a result of a flood.
	Major purchase of a business which is expected to double the sales volume.
	Settlement of litigation in excess of the recorded liability.

An auditor's decision concerning whether or not to "dual-date" the audit report is based upon the auditor's willingness to:

options:

	Extend auditing procedures.
	Accept responsibility for year-end adjusting entries.
	Permit inclusion of a note captioned: event (unaudited) subsequent to the date of the auditor's report.
	Assume responsibility for resolving all events subsequent to the issuance of the auditor's report.

The auditors' primary means of obtaining corroboration of management's information concerning litigation is a:

options:

	Letter of audit inquiry to the client's lawyer.
	Letter of corroboration from the auditor's lawyer upon review of the legal documentation.
	Confirmation of claims and assessments from the other parties to the litigation.
	Confirmation of claims and assessments from an officer of the court presiding over the litigation.

Which of the following is not correct relating to representation letters?

options:

	They are ordinarily dated as of the date of the audit report.
	They are signed by members of top management.
	They must be obtained for audits.
	They often serve as a substitute for the application of other procedures.

Which of the following is not a procedure that is designed to provide evidence about the existence of loss contingencies?

options:

	Obtaining a lawyers' letter.
	Testing depreciation of fixed assets.
	Reviewing the minutes of board of directors' meetings.
	Review correspondence with banks.

Which of the following types of matters do not generally require disclosure in the financial statements?

 options:

	General risk contingencies.
	Commitments.
	Loss contingencies.
	Liabilities to related parties

Answer rating: 100% (QA)

Settlement of litigation in excess of the recorded liability Explanation A lawsuit faced before the ... View the full answer