Section--4 1. You are auditing Golden Rams Corporation for the calendar year 201
ID: 2511669 • Letter: S
Question
Section--4 1. You are auditing Golden Rams Corporation for the calendar year 2017. Among other items related to the audit, Golden Rams Corporation was being sued for personal injury resulting from the malfunction on one of their products. The lawsuit in August 2017. Management and the company's outside legal counsel estimated the loss from this suit to range from $300,000 to $700,000. Golden Rams accrued $300,000 and disclosed that this amount could increase to $700,000 in the footnotes to the financial statements. You have no reason to believe that the range estimate is inaccurate You completed your audit and dated your report February 15, 2018. The financial statements were issued on February 20, 2018. On April 05, 2018, you read in The Wall Street Journal that the suit was settled for $1.5 million. What responsibility, if any, do you have regarding the article in The Wall Street Journal on April 05, 2018? Explain. 2. The auditing standards regarding subsequently discovered facts refers to knowledge obtained after A. The date the fieldwork began. B. The date of the auditor's report. C. The date of the financial statements. D. The date interim audit work was complete. 3 Which of the following normally occurs earliest in the audit examination? A. Review of audit documentation. B. Preparation of the management letter C. Discovery of an omitted audit procedure. D. Dual dating the auditor's report on the entity's financial statements for subsequent events that exist at the date of the financial statements Which of the following is ordinary performed last in the audit examination? A. Performed tests of controls. B. Performed a review for subsequent events C. Obtaining a signed written representation letter, D. Securing a signed engagement letter from the client. 4.Explanation / Answer
Answer:
Audit report was dated February 15, 2018 and financial statements were issued on February 20,2018.
Based on estiamates of legal counsel, the company has already accrued $300,000 and disclosed that the amount could increase to $700,000, as required by standards. As of date of audit report, the auditor has no reason to believe that the range estimate is inaccurate.
News of settlement of the suit at a higher amount of $1.5 million was received on April, 5 much after financial statements were issued.
As such, as auditor, I have no responsibility to act on this information.
The auditor has no responsibility to make any inquiry or carry out any auditing procedures for the period after the date of his report.
Answer 2:
Correct answer is:
B. The date of auditor's report.
Subsequently discovered facts are facts that become known to the auditor after the date of the auditor's report; had the facts been known to the auditor at that date, may have caused the auditor to revise the auditor's report.
Answer 3:
Correct answer is:
A. Review of audit documentation.
Preparation of engagement letter is done before start of examination. Discovery of omitted audit procedure could happen during review of audit. Dual dating audit report for subsequent events happens after completion of field work.
Answer 4:
Correct choice is:
C. Obtaining a signed written representation letter.
Written representation letter is obtained on the date of audit report and is dated same as that of audit report.
Choice A and B are done during the audit and choice D is done before start of audit.
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