ACCT 422 Auditing Theory and Practice Homework 7 Answers
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question (10 points each). (30 points)
1) All of the following are correct statements regarding business risk and financial instruments except for:
2) The audit step most likely to reveal the existence of contingent liabilities is
3) A management letter
ESSAY. Write your answer in the space provided or on a separate sheet of paper (10 points each).
1) Distinguish between a client letter of representation and a management letter.
2) Discuss the procedures the auditor should perform before using the findings determined by a Specialist
3) Discuss the functions that audit documentation serves.
Problem (40 points). The field work for the June 30, 2014, audit of a company was finished August 30, 2014, and the completed financial statements, accompanied by the signed audit reports, were mailed September 15, 2015. In each of the highly material independent events (a through e), state the appropriate action (1 through 4) for the situation and justify your response. The alternative actions are as follows:
1. Adjust the June 30, 2014, financial statements.
2. Disclose the information in a footnote in the June 30, 2015, financial statements
3. Request the client to recall the June 30, 2014
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