AICPA CPA-Auditing Exam Dumps

Choice 'd' is correct. The auditor should obtain assurance from management that it has disclosed all unasserted claims that its lawyer has advised are probable of assertion.

Choice 'a' is incorrect. The auditor should examine documents in the client's possession concerning litigation, claims, and assessments, including correspondence and invoices from lawyers. The auditor does not generally examine documents held by the client's lawyer.

Choice 'b' is incorrect. If the lawyer has indicated that there is a high probability of a litigation, claim, or assessment being resolved unfavorably, the auditor would use this information, together with an estimate of the range of potential loss (if available), to evaluate management's financial statement presentation.

The auditor would not generally discuss with the client's lawyer its defense philosophy regarding such matters.

Choice 'c' is incorrect. It is the auditor's responsibility (not the lawyer's) to determine whether litigation, claims, and assessments have been adequately recorded or disclosed in the financial statements.

Choice 'c' is correct. When an auditor qualifies his opinion because of a scope limitation, the wording in the opinion paragraph should indicate that the qualification pertains to the possible effects on the financial statements and not to the scope limitation itself.

Choice 'a' is incorrect. When an auditor qualifies his opinion because of a scope limitation, the wording in the opinion paragraph should indicate that the qualification pertains to the possible effects on the financial statements and not to the scope limitation itself.

Choice 'b' is incorrect. A scope limitation is a departure from generally accepted auditing standards.

However, when an auditor qualifies his opinion because of a scope limitation, the wording in the opinion paragraph should indicate that the qualification pertains to the possible effects on the financial statements and not to the scope limitation itself.

Choice 'd' is incorrect. Inadequate disclosure of necessary information is a departure from GAAP, rather than a scope limitation.

Choice 'd' is correct. Decreasing the acceptable level of risk will result in a larger sample size, which the auditor might not want to do unless the cost and effort of selecting additional sample items is low.

Choice 'a' is incorrect. Decreasing the acceptable level of risk doesn't increase the reliability of a given sample. It does, however, result in selection of a larger sample, which in turn makes it less likely that the auditor will make an incorrect decision.

Choice 'b' is incorrect. The auditor's acceptable level of risk is not affected by the extent to which differences are expected.

Choice 'c' is incorrect. Control risk is not relevant in assessing the acceptable level of risk, which is a factor of substantive testing.