1.

Audit procedures related to contingent liabilities are initially focused on:

a. accuracy.
b. completeness.
c. existence.
d. occurrence.

2. Which type of subsequent event requires consideration by management and evaluation by the
auditor?
Subsequent events that have a direct Subsequent events that have no direct
effect on the financial statements and effect on the financial statements but for
require adjustment. which disclosure is considered.
a. Yes Yes
b. No No
c. Yes No
d. No Yes

3. Whenever subsequent events are used to evaluate the amounts included in the statements, care
must be taken to distinguish between conditions that existed at the balance sheet date and those
that come into being after the end of the year. The subsequent information should not be
incorporated directly into the statements if the conditions causing the change in valuation:
a. took place before year-end.
b. did not take place until after year-end.
c. occurred both before and after year-end.
d. are reimbursable through insurance policies.

4. Auditors will generally send a standard inquiry letter to:

a. only those attorneys who have devoted substantial time to client matters during the year.
b. every attorney that the client has been involved with in the current or preceding year, plus
any attorney the client engages on occasion.
c. those attorneys whom the client relies on for advice related to substantial legal matters.
d. only the attorney who represent the client in proceeding where the client is defendant.

5. Who may identify matters to be included in a letter of inquiry sent to a client’s legal counsel?

Auditors. Company management.

a. Yes Yes
b. No No
c. Yes No
d. No Yes