Question

b. Organization and assembly of documentation in an orderly fashion c. Headings that include the name and signature of the client representative that the auditor interacted with while performing testing. d. Authenticated identification of the person responsible for completing the procedure and conclusions. ANSWER: 28. The processes used by management in developing estimates include which of the following a. Controls over the process. b. The reliability of underlying data in developing the estimate. c. Use of outside experts by management (for example, how they were used and their expertise). d. All of the above. ANSWER: 29. Which of the following is the primary source for evidence to corroborate the existence of pending litigation? a. Vendor confirmations. b. Disclosures in financial statements. c. Management representation letters. d. Attorney confirmations. ANSWER: 30. Performance of audit procedures at an interim date causes the risk of material misstatement occurring between the interim date and the end of the year to do which of the following? a. Decrease. b. Increase. c. Remain the same. d. Become more difficult to ascertain. ANSWER:

Answer 1

28. The correct answer is D, All of the above.

All the given factors i.e. Controls over the process, Use of an expert, The reliability of the underlying data in making an estimate have to be kept in mind by the management while making an accounting estimate.

Hence, the correct answer is D.

29. The correct answer is D, Attorney confirmations.

The attorney or the legal counsel of a company would be aware of all the legal cases related to the company, whether settled or not. Hence, this is the best way to corroborate the existence of a pending litigation.

Vendor confirmation will not provide any details of litigations. On the other hand, disclosure in financial statements and management representation letters can be used to gain information regarding litigations, false information can also be provided via these means. The integrity of the management will have to be determined before exercising such option. Hence, attorney confirmation would be the primary source to corroborate the existence of any pending litigations.

30. The correct answer is B, Increase.

If the audit is taken place at an interim date i.e before the balance sheet date, it would provide incentive to the company or it's employees to take any unethical activity during the un-audited period i.e the period between interim date audit and the balance sheet date. Apart from that, any un-intentional material misstatement may also go undetected if audit is not conducted for the said period.