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FAU Exam Pass Lecture 37 Flashcards | StudBud
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FAU Exam Pass Lecture 37
FAU Exam Pass Lecture 37
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Questions
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Answers
1
Which of the following events would be an adjusting event?
An announcement made by the entity to discontinue the operation
An announcement to declare the dividends made after the year end
The bankruptcy of a customer after the year end
A fall in value after the year end of the investment held by the entity
2
Which of the following is NOT used at the final review stage?
Analytical procedures
Discussion with directors
Accounting policies review
Test of controls
3
The auditors only has to consider adjusting events because non-adjusting events do not need to be reflected in FS.
True
False
4
Final Review: You see the gross profit margin is higher than previous year and your expectation. What is your concern?
Purchases are overstated
Closing inventory is overstated
Opening inventory is overstated
Revenue is understated
5
Who is responsible for signing the written representation letter?
The external auditors
The management
The internal auditor
The audit committee
6
Why does the auditor need to undertake analytical procedures at the final review stage?
To form an overall view about the consistency of the financial statements
To provide evidence to support the financial statement assertions
To identify the risk
To assist in identifying the risk of material misstatements
7
Final Review: you see that current ratio and quick ratio is higher than last year. What is your concern?
Inventory has been understated
Accruals have been understated
Trade receivables have been overstated
No concern
8
A fire in a warehouse in the week immediately after the reporting date destroyed ALL the company's inventory.
This is an adjusting event
This is a non-adjusting event
9
The auditors has a responsibility to consider the appropriateness of management's use of going concern only
True
False
10
Which of the following does not cast doubt on the going concern basis of accounting being reasonable?
Loss of key management without replacement
Changes from credit to cash on delivery transactions with suppliers
The company has replaced its principal supplier
Inability to pay supplier's invoices on due dates
