Testbank
Testbank
Testbank
A)
Yes Yes
B)
No No
C)
Yes No
D)
Answer: D
Diff: Easy
Objective: LO 24-1
2) The auditor's primary concern relative to presentation and disclosure-related objectives is:
A) accuracy.
B) existence.
C) completeness.
D) occurrence.
Answer: C
Diff: Easy
Objective: LO 24-1
D) disclosed in the auditor's report but not disclosed on the financial statements.
Answer: B
Diff: Easy
Objective: LO 24-2
B) an agreement to commit the firm to a set of fixed conditions in the future that depends on
company profitability.
C) an agreement to commit the firm to a set of fixed conditions in the future that depends on
current market conditions.
Answer: A
Terms: Commitments
Diff: Easy
Objective: LO 24-2
3) Which of the following groups has the responsibility for identifying and deciding the
appropriate accounting treatment for recording or disclosing contingent liabilities?
A) Auditors
B) Legal counsel
C) Management
Answer: C
Diff: Easy
Objective: LO 24-2
4) You are auditing Rodgers and Company. You are aware of a potential loss due to
non-compliance with environmental regulations. Management has assessed that there is a 40%
chance that a $10M payment could result from the non-compliance. The appropriate financial
statement treatment is to:
D) since there is greater that a remote chance of occurrence, accrue the $10 million.
Answer: B
Diff: Moderate
Objective: LO 24-2
A)
Yes Yes
B)
No No
C)
Yes No
D)
Answer: A
Diff: Easy
Objective: LO 24-2
A) accuracy.
B) completeness.
C) existence.
D) occurrence.
Answer: D
Diff: Easy
Objective: LO 24-2
7) With which of the following client personnel would it generally not be appropriate to inquire
about commitments or contingent liabilities?
A) Controller
B) President
Answer: C
Diff: Easy
Objective: LO 24-2
A)
Yes Yes
B)
C)
Yes No
D)
No Yes
Answer: D
Diff: Easy
Objective: LO 24-2
B) Pension plans
Answer: D
Terms: Commitments
Diff: Moderate
Objective: LO 24-2
10) If an auditor concludes there are contingent liabilities, then he or she must evaluate the:
A)
Yes Yes
B)
No No
C)
Yes No
D)
No Yes
Answer: A
Diff: Moderate
Objective: LO 24-2
AACSB: Reflective thinking skills
11) One of the primary approaches in dealing with uncertainties in loss contingencies uses a
________ threshold.
A) monetary
B) materiality
C) probability
D) analytical
Answer: C
Diff: Moderate
Objective: LO 24-2