ACREV 426 – COMPLETING THE AUDIT AT-06

PSA 501 – Audit Evidence-Specific Considerations for Selected Items, PSA 550- Related Parties, PSA
560- Subsequent Events, PSA 570(Revised) – Going Concern, PSA 580-Written Representations

1. Which of the following procedures is not among the characteristics of the procedures
performed to complete the audit?
A. They involve many subjective judgements by the auditor
B. They are performed after the balance sheet date
C. They are typically carried out by the audit managers or other senior members of the audit
team with substantial client audit experience
D. They are optional since they only have a minor impact on the opinion to be expressed.

SUBSEQUENT EVENTS

2. An auditor has the responsibility to search for subsequent events that occur subsequent to
which of the following?
A. Balance sheet date
B. Date of auditor’s report
C. Date of the management representation letter
D. Balance sheet date but prior to the date of auditor’s report
3. Which type of subsequent event requires consideration by management and evaluation by the
auditor?

Subsequent events requiring adjustments Subsequent events requiring disclosures

A. Yes Yes
B. Yes No
C. No No
D. No Yes

4. Whenever subsequent events are used to evaluate the amounts included in the financial
statements, care must be exercised in distinguishing 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 financial 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
5. Which of the following subsequent events is mot likely to result in an adjustment to a
company’s financial statements?
A. Bankruptcy (due to deteriorating financial condition) of a customer with an outstanding
accounts receivable balance
B. Merger or acquisition
C. Issuance of ordinary shares
D. An uninsured loss of inventories due to a fire.
6. Which of the following procedures would auditors most likely perform to obtain evidence about
the occurrence of subsequent events?

1
ACREV 426 – COMPLETING THE AUDIT AT-06

A. Confirming a sample of material accounts receivable established after year-end

B. Comparing the financial statements being reported on with those of the prior period.
C. Reading minutes of meetings of owners, management, or those charged with governance
held after the date of the financial statements.
D. Inquiring as to whether any unusual adjustments were made just before year-end.
7. The Rock Corporation was audited for the year ended December 31. The audit was completed
on February 28; prior to the release of the report, the auditor leaned of an issuance of client’s
new ordinary shares on March 15. If dual dating is used, what are the proper dates for the
auditor’s report?
A. December 31 and February 28
B. February 28 and February 28
C. February 28 and March 15
D. March 15 and March 15
8. An auditor’s decision concerning whether to “dual date” the audit report or not is based upon
the auditor’s willingness to
A. Extend auditing procedures
B. Accept responsibility for subsequent events
C. Assume responsibility for events subsequent to the issuance of the auditor’s report
D. All of these
9. With respect to issuance of an audit report which is dual-dated for a subsequent event occurring
after the completion of fieldwork but before issuance of the auditor’s report, the auditor’s
responsibility for events occurring subsequent to the completion of fieldwork is
A. Limited to the specific event referred to
B. Limited to all events occurring through the date of issuance of the report
C. Extended to include all events occurring until the date of the last subsequent event referred
to
D. Extended to include all events occurring through the date of submission of the report to the
client.
10. An auditor completed fieldwork on February 28, 2022 for a December 31, 2021 year-end client.
A significant subsequent event occurred on March 8, 2022. In this case, which of the following
report dates would be inappropriate?
A. December 31, 2021
B. February 28, 2022
C. February 28, except Note 1, March 8, 2022
D. March 8, 2022

LITIGATION AND CLAIMS

11. The primary source of information auditors use to obtain information about litigation, claims,
and assessments is the
A. Client’s management
B. Client’s attorney
C. Court records
D. Independent auditors

2
ACREV 426 – COMPLETING THE AUDIT AT-06

12. When obtaining evidence regarding litigation against the audit client, the auditor would be least
interested in determining which of the following?
A. The period in which the underlying cause of the litigation occurred
B. The probability of an unfavorable outcome
C. An estimate of the potential loss
D. An estimate of when the matter will be resolved
13. Which of the following is an important method used by auditors in identifying material
contingencies?
A. Verifying accounts receivable with the client’s customers
B. Examining documents in the client’s possession concerning contingencies
C. Inquiring and discussing them with management
D. Obtaining responses to an attorney letter
14. Which of the following is typically not included in the inquiry letter sent to the audit client’s
attorneys?
A. A listing of pending or threatened litigation, claims, or assessments.
B. An evaluation of the likelihood of an unfavorable outcome.
C. An estimate of the range of potential loss
D. A disclaimer regarding the likelihood of settlement of pending litigation

MANAGEMENT REPRESENTATION LETTER

15. Which of the following is the primary purpose of obtaining written management
representations?
A. To provide auditors with substantive evidence of important assertions.
B. To impress upon management its primary responsibility for the financial statements
C. To allow auditors to communicate important internal control deficiencies to management.
D. To allow auditors to communicate important suggestions for improvement to management.
16. To whom should written representations be addressed?
A. To the auditor
B. To the board of directors
C. To the client
D. To the stockholders
17. Which of the following is not one of the categories of items included in the management
representation letter?
A. Subsequent events
B. Completeness of information
C. Recognition, measurement, and disclosure
D. Materiality
18. Management’s refusal to furnish a written representation letter on a matter which the auditor
considers essential constitutes which of the following?
A. An illegal act
B. An uncertainty
C. A scope limitation ****qualified or disclaimer
D. Prima facie evidence that the financial statements are not presented fairly
19. The date of the management representation letter should coincide with the date of the

3
ACREV 426 – COMPLETING THE AUDIT AT-06

A. Auditor’s report
B. Financial statements
C. Latest interim financial statements
D. Deadline for tax returns

ANALYTICAL PROCEDURES

20. Which of the following procedures is most likely to be included in the final review stage of an
audit?
A. Obtain an understanding of internal control
B. Confirmation of receivables
C. Observation of inventory
D. Perform analytical procedures
21. The use of analytical procedures at the end of an audit is
A. Encouraged by auditing standards
B. Required by auditing standards
C. Ineffective because thorough substantive procedures have already been performed
D. Not mentioned by auditing standards
22. The primary objective of analytical procedures used near the end of an audit is to
A. Identify areas that represent specific risks relevant to the audit
B. Obtain evidence on the validity of the assessment of control risk
C. Obtain evidence from details tested to corroborate management assertions
D. Assist the auditor in evaluating the overall financial statement presentation
23. Where an unusual fluctuation is indicated by analytical procedures and management is unable
to provide a satisfactory explanation, the auditor must assume that there is a high probability
that an error or irregularity exists. In this case, the auditor must do which of the following?
A. Design other appropriate audit procedures to determine if such errors do exist.
B. Withdraw from the audit engagement
C. Issue either a qualified or an adverse opinion
D. Issue either a qualified or a disclaimer opinion

GOING CONCERN

24. PSA 570 requires the auditor to evaluate whether there is a substantial doubt about client’s
ability to continue as a going concern for at least
A. One year beyond the balance sheet date
B. One year beyond the date of the auditor’s report
C. Three years beyond the balance sheet date
D. Three years beyond the date of the auditor’s report
25. Which of the following conditions or events most likely would cause an auditor to have
substantial doubt about an entity’s ability to continue as a going concern?
A. Cash flows from operating activities are negative
B. Research and development projects are delayed
C. Significant related party transactions are pervasive
D. Stock dividends replace annual cash dividends.

4
ACREV 426 – COMPLETING THE AUDIT AT-06

26. Which of the following conditions or group of events is unlikely to raise doubts about the
entity’s capacity to continue as a going concern?
A. Breach of debt covenants
B. Earnings per share forecasts are not met
C. Legal actions that have the potential to have major negative impact on the entity
D. Negative cash flow from operations for each of the last three years
27. If, on the basis of the additional procedures carried out and the information obtained, including
the effect of mitigating circumstances, the auditor’s judgement is that the entity will not be able
to continue as a going concern, the financial statements should be prepared using an
appropriate basis, otherwise the auditor will issue a/an
A. Unmodified opinion with emphasis of matter paragraph
B. Qualified opinion
C. Disclaimer of opinion
D. Adverse opinion

POST-AUDIT RESPONSIBILITIES

28. When an investigation of the discovery of facts existing at the report date confirms the
existence of the fact and the auditor believes the information is important to those relying or
likely to rely on the financial statements, the auditor should immediately
A. Take steps to prevent future reliance on the audit report
B. Notify the SEC or other regulatory agency
C. Resign from the engagement
D. Take no action since the auditor is not responsible for such matters
29. After the audit report was released, the auditor learned of facts that existed at the time of the
report and would have affected the report if the auditor had known them at that time. What is
the most suitable line of action for the auditor to take first?
A. Request that management issue amended financial statements to disclose the newly
discovered facts.
B. Prepare revised pro forma financial statements based on the newly discovered facts.
C. Determine whether or not there are people who rely on or are likely to rely on the financial
statements and would value the information.
D. Notify the public that the auditor is no longer be involved in the financial statements
30. After issuing a report an auditor concludes that an auditing procedure considered necessary at
the time of the examination was omitted from the examination. The auditor should first
A. Undertake to apply the omitted procedure or alternative procedures that would provide a
satisfactory basis for the auditor’s opinion
B. Assess the importance of the omitted procedure to the auditor’s ability to support the
opinion expressed on the financial statements taken as a whole
C. Notify the audit committee or the board of director’s that the auditor’s opinion can no
longer be relied upon
D. Review the results of other procedures that were applied to compensate for the one
omitted or to make its omission less important.