Chapter 17 – Completing the Audit Engagement
44. Which of the following ratios is least likely to assist the auditor in determining whether the
client is experiencing financial difficulties?
45. As part of an audit, a CPA often requests a representation letter from the client. Which one
of the following is not a valid purpose of such a letter?
Chapter 17 – Completing the Audit Engagement
46. Which of the following expressions is least likely to be included in a client’s representation
letter?
47. “There are no violations or possible violations of laws or regulations whose effects should
be considered for disclosure in the financial statements or as a basis for recording a loss
contingency.” The foregoing passage most likely is from a(an)
Chapter 17 – Completing the Audit Engagement
48. Which of the following matters is an auditor required to communicate to those charged with
governance?
49. “There have been no communications from regulatory agencies concerning noncompliance
with or deficiencies in, financial reporting practices that could have a material effect on the
financial statements.” The foregoing passage is most likely from a
Chapter 17 – Completing the Audit Engagement
50. When considering the use of management’s written representations as audit evidence about
the completeness assertion, an auditor should understand that such representations
51. A written representation from a client’s management that, among other matters,
acknowledges responsibility for the fair presentation of financial statements should normally be
signed by the
Chapter 17 – Completing the Audit Engagement
52. Communications between the auditor and those charged with governance should include all
of the following except:
53. Which of the following events occurring after the issuance of a client’s financial statements
and the auditor’s report most likely would cause the auditor to make further inquiries about the
previously issued financial statements?
Chapter 17 – Completing the Audit Engagement
54. On February 25, a CPA issued an auditor’s report expressing an unqualified opinion on
financial statements for the year ended January 31. On March 2, the CPA learned that, on
February 11, the entity incurred a material loss on an uncollectible trade receivable as a result of
the ongoing deterioration of the financial condition of the entity’s principal customer, which
finally led to the customer’s bankruptcy. Management then refused to adjust the financial
statements for this subsequent event. The CPA determined that the information is reliable and
that there are creditors currently relying on the financial statements. The CPA’s next course of
action most likely would be to
Chapter 17 – Completing the Audit Engagement
55. After an audit report containing an unqualified opinion on a nonpublic client’s financial
statements is issued, the auditor learns that the client has decided to sell the shares of a
subsidiary that accounts for 30 percent of its revenue and 25 percent of its net income. The
56. An auditor’s client has violated a minor requirement of its bond indenture that could result
in the trustee requiring immediate payment of the principal amount due. The client refuses to
seek a waiver from the bond trustee. Request for immediate payment is not considered likely.
Under these circumstances, the auditor must
Chapter 17 – Completing the Audit Engagement
57. Auditors often request that the audit client send a letter of inquiry to those attorneys who
have been consulted with respect to litigation, claims, and/or assessments. The primary reason
for this request is to provide the auditor with
58. The primary reason an auditor requests letters of inquiry be sent to a client’s attorneys is to
provide the auditor with
Chapter 17 – Completing the Audit Engagement
59. Which of the following statements extracted from a client’s lawyer’s letter concerning
litigation, claims, and assessments most likely would cause the auditor to request clarification?
60. An auditor’s decision concerning whether or not to “dual date” the audit report is based upon
the auditor’s willingness to
61. A Type I subsequent event usually requires
Chapter 17 – Completing the Audit Engagement
62. A disclosure of a contingent liability in the footnotes is made rather than adjusting the
financial statement accounts when
63. Which of the following statements ordinarily is included among the written client
representations obtained by the auditor?
Chapter 17 – Completing the Audit Engagement
64. Which of the following statements is correct about an auditor’s required communication
with management and those charged with governance?
65. Which of the following statements is correct concerning an auditor’s required
communication with those charged with governance?