Question 1

An auditor should obtain evidential matter relevant to all the following factors concerning third-party litigation against a client except the:

Accepted Answer

The jurisdiction in which the matter will be resolved is less relevant to the auditor compared to the period in which the underlying cause for legal action occurred, the probability of an unfavorable outcome, and the existence of a situation indicating an uncertainty as to the possible loss. These factors directly affect the financial statements and the need for disclosures or reserves, whereas the jurisdiction is more of a legal detail that does not directly impact the financial statement's presentation of the litigation's potential effect.

Question 2

After an auditor has issued an auditor's report on the financial report of an entity, there is no obligation to make any further audit tests or inquiries with respect to the audited financial report covered by that report unless:

Accepted Answer

If new information comes to the auditor's attention concerning an event that occurred prior to the date of the auditor's report that may have affected the auditor's report, further audit tests or inquiries may be necessary to determine the impact of the new information on the auditor's report. Therefore, choice A is the best answer. B, C, and D do not require further audit tests or inquiries unless they involve events or contingencies that occurred before the date of the auditor's report.

Question 3

An auditor is concerned with completing various phases of the examination after the balance date. This 'subsequent period' for audit testing extends to the date of the:

Accepted Answer

The subsequent period for audit testing extends up to the date of the auditor's report. It is important for the auditor to obtain sufficient appropriate audit evidence to support the financial report and ensure that the financial report is free from material misstatement, including those that may arise after the balance date. Therefore, the auditor's report is the most appropriate choice as it represents the end of the auditor's examination and the date by which all relevant audit evidence needs to be obtained.

Question 4

A major customer of an audit client suffers a fire just prior to completion of year-end fieldwork. The audit client believes that this event could have a significant direct effect on the financial report. The auditor should:

Accepted Answer

Advising management to disclose the event in notes to the financial report is the best choice. This will allow the users of the financial report to be aware of the event and its potential impact on the financial statements. Withholding the submission of the auditor's report or advising management to adjust the financial report is premature until the extent of the direct effect is known. Disclosing the event in the auditor's report is not necessary since it should be adequately disclosed in the notes to the financial report.

Question 5

Which of the following procedures would an auditor ordinarily perform during the review of subsequent events?

Accepted Answer

During the review of subsequent events, an auditor would ordinarily perform an inquiry of the client's solicitor concerning litigation. This is done to identify any pending lawsuits or claims that may have an impact on the financial statements. The other options are not related to the review of subsequent events specifically.

Question 6

Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?

Accepted Answer

Inquiring of the entity's solicitor concerning litigation, claims and assessments is the most appropriate procedure to obtain evidence about the occurrence of subsequent events as they would have knowledge of any legal proceedings or claims filed against the entity after the year-end. Investigating changes in shareholders' equity would provide evidence about economic events that occurred during the period covered by the financial statements but not about subsequent events. Recalculating transactions and confirming bank accounts would provide evidence about the accuracy and completeness of transactions during the period covered by the financial statements but not about subsequent events.

Question 7

If a solicitor refuses to furnish corroborating information regarding litigation, claims and assessments, the auditor should:

Accepted Answer

As the solicitor has refused to provide the corroborating information, it constitutes a scope limitation for the auditor. The auditor cannot obtain sufficient evidence to support the amounts and disclosures in the financial statements related to litigation, claims, and assessments. Therefore, option B is the best choice. Option A is not appropriate as the auditor cannot breach the client-solicitor confidentiality. Option C may not be useful as management might also refuse to provide the information, or the auditor might not be able to get sufficient corroborating evidence from the management. Option D is not appropriate as the auditor needs to state the reasons for the scope limitation and its effects on the financial statements, rather than a simple disclosure of the fact that the solicitor refused to provide the information.

Question 8

Which of the following auditing procedures is ordinarily performed last?

Accepted Answer

Obtaining a management representation letter is ordinarily performed last as it provides evidence that management has made all necessary financial disclosures and representations to assist the auditor in issuing an opinion on the financial statements. This procedure usually takes place near the end of the audit process.

Question 9

When obtaining evidence regarding litigation against a client, the auditor would be least interested in determining:

Accepted Answer

While an estimate of when the matter will be resolved is important for planning purposes, it is not directly relevant to the audit or the potential impact on the financial statements. The auditor would be more interested in determining the period in which the underlying cause of the litigation occurred, the probability of an unfavorable outcome, and an estimate of the potential loss in order to assess the potential impact on the financial statements.

Question 10

Promotion Ltd's directors voted immediately after the year-end of 30 June 2010 to double its advertising budget for the coming year and authorised a change in advertising agencies. What is the effect of this event on the
30 June 2010 financial report?

Accepted Answer

The answer of Promotion Ltd's directors voted immediately after the...

Question 11

Management's refusal to furnish a written representation on a matter that the auditor considers essential constitutes:

Accepted Answer

Management's refusal to furnish a written representation on a matter that the auditor considers essential is a scope limitation. A scope limitation is sufficient to preclude an unmodified opinion, as the auditor has been unable to obtain sufficient appropriate audit evidence.

Question 12

The audit inquiry letter to the client's solicitor should be mailed only by the:

Accepted Answer

The auditor's inquiry letter should be prepared by the client and reviewed by the auditor before being mailed. This ensures that the content is accurate and complete and that the letter is properly addressed and mailed to the appropriate parties. Therefore, option B is the best choice.

Question 13

When an audit is made in accordance with the auditing standards, the independent auditor must:

Accepted Answer

Obtaining certain written representations from management is a requirement of audit standards (such as, the requirement to obtain representation letter or management representation letter) and it is a crucial aspect of an audit. Options A, B, and D are not mandatory procedures, but can be used at the auditor's discretion depending on the circumstances.

Question 14

Analytical procedures used in the overall review stage of an audit generally include:

Accepted Answer

Analytical procedures in the overall review stage involve reviewing financial statement amounts and disclosures to identify unusual or unexpected balances that were not previously identified during substantive testing. This step is important to ensure that the financial statements are materially correct and free from misstatements. The other options listed do not accurately describe analytical procedures in the overall review stage.

Question 15

A solicitor's response to an auditor's request for information concerning litigation, claims and assessments will ordinarily contain which of the following?

Accepted Answer

A solicitor's response to an auditor's request for information concerning litigation, claims and assessments may have limitations on the scope of the response based on legal and ethical rules. Therefore, the response may contain an explanation regarding these limitations of the scope of the response.

Question 16

Lisa Tan has audited the financial report of Basalt Ltd for the year ended 30 June 2012. Although Lisa's audit fieldwork was completed on 25 August 2012, her auditor's report was signed on 28 August 2012 and sent to management that
Day) The management of Basalt Ltd advised Lisa that their annual report, which will be mailed to shareholders on
8 October 2012, will also include an unaudited financial report for the first quarter ended 30 September 2012. Under
The circumstances, Lisa is responsible for undertaking subsequent events audit procedures through to:

Accepted Answer

Lisa's responsibility for subsequent events audit procedures extends to the date of her auditor's report, which is 28 August 2012.

Question 17

Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?

Accepted Answer

To obtain evidence about the occurrence of subsequent events, an auditor would typically inquire as to whether any unusual adjustments were made after year-end. This would provide insight into any events or transactions that may have occurred after the balance sheet date but before the financial statements were issued. Comparing financial reports, confirming accounts receivable, and investigating personnel changes may provide other types of evidence but would not be the most likely procedures to obtain evidence about subsequent events.

Question 18

After an auditor has issued an auditor's report on the financial report of a non-public entity, there is no obligation to make any further audit tests or inquiries with respect to the audited financial report covered by that report unless:

Accepted Answer

If new information comes to the auditor's attention concerning an event that occurred prior to the date of the auditor's report that may have affected the auditor's report, the auditor may need to take action to address the impact on the report.

Question 19

The date of the management representation letter should coincide with the:

Accepted Answer

The management representation letter should be dated as of the same date as the auditor's report. This ensures that the information provided in the letter is current and relevant to the auditor's final conclusions about the reliability of the financial statements.

Question 20

The property portfolio of Utopia Pty Ltd is stated at a value of $1 million in excess of its current market value. Utopia Pty Ltd is a non-reporting entity and does not apply the provisions of AASB 1010 in the preparation of its financial
Report. The directors believe that it would be inappropriate to write the properties down to market value as it is their
Intention to hold the properties as a long-term investment and the properties will eventually recover their value. The
Independent valuer agrees that the property will eventually recover its full value. Sufficient appropriate audit evidence
To support the value of the property would include obtaining a letter of representation from management confirming:

Accepted Answer

While the intention to hold the property as a long-term investment and the status of being a non-reporting entity are relevant factors, the statement about the value of the buildings increasing in the long term is not supported by independent evidence and could be subjective. Therefore, option B is the most appropriate choice as it focuses on the relevant information and avoids introducing any potentially misleading statements.

Quiz 12: Completion and Review

An auditor should obtain evidential matter relevant to all the following factors concerning third-party litigation against a client except the:

After an auditor has issued an auditor's report on the financial report of an entity, there is no obligation to make any further audit tests or inquiries with respect to the audited financial report covered by that report unless:

An auditor is concerned with completing various phases of the examination after the balance date. This 'subsequent period' for audit testing extends to the date of the:

A major customer of an audit client suffers a fire just prior to completion of year-end fieldwork. The audit client believes that this event could have a significant direct effect on the financial report. The auditor should:

Which of the following procedures would an auditor ordinarily perform during the review of subsequent events?

Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?

If a solicitor refuses to furnish corroborating information regarding litigation, claims and assessments, the auditor should:

Which of the following auditing procedures is ordinarily performed last?

When obtaining evidence regarding litigation against a client, the auditor would be least interested in determining:

Promotion Ltd's directors voted immediately after the year-end of 30 June 2010 to double its advertising budget for the coming year and authorised a change in advertising agencies. What is the effect of this event on the 30 June 2010 financial report?

Management's refusal to furnish a written representation on a matter that the auditor considers essential constitutes:

The audit inquiry letter to the client's solicitor should be mailed only by the:

When an audit is made in accordance with the auditing standards, the independent auditor must:

Analytical procedures used in the overall review stage of an audit generally include:

A solicitor's response to an auditor's request for information concerning litigation, claims and assessments will ordinarily contain which of the following?

Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?

After an auditor has issued an auditor's report on the financial report of a non-public entity, there is no obligation to make any further audit tests or inquiries with respect to the audited financial report covered by that report unless:

The date of the management representation letter should coincide with the: