If the auditor concludes that there are contingent liabilities,he or she must evaluate the significance of the potential liability and the nature of the disclosure needed in the financial statements.Which of the following statements is not True?
A)The potential liability is sufficiently well known in some instances to be included in the financial statements as an actual liability.
B)Disclosure may be unnecessary if the contingency is highly remote or immaterial.
C)A CPA firm often obtains a separate evaluation of the potential liability from its own legal counsel rather than relying on management or management's attorneys.
D)The client's attorneys must remain independent when evaluating the likelihood of losing the lawsuit.

Question

Quizplus · Accepted Answer

The client's attorneys do not need to remain independent when evaluating the likelihood of losing the lawsuit. In fact, they are advocating for their client's interests and may provide a biased assessment. It is the auditor's responsibility to evaluate the likelihood and potential impact of the contingency.

If the Auditor Concludes That There Are Contingent Liabilities,he or She