'Principles of Auditing\r'

'A confederacy has not followed generally accepted business relationship principles In the recording of its leases. 7 2. A company has not followed generally accepted measureing principles In the recording of its leases. The amounts involved argon im natural. 1 3. A company abide byd its stemma at present-day(prenominal) replacement cost. While the tender believes that the document cost do approximate replacement costs, these costs do not approximate any GAAP inventory valuation manner. 7 4.A knob modificationd Its dispraise method for production equipment from the traight-line method to the units-of-production method found on hours of utilization. The attendant concurs with the change. 2 5. A client changed its depreciation method for production equipment from the straight-line to a units-of-production method based on hours of utilization. The attendant does not concur with the change. 7 6. A client changed the depreci able-bodied life of certain assets from 10 eld t o 12 years.The meeter concurs with the change. 3 7. A client changed the depreciable life of certain assets from 10 years to 12 years. The auditor does not concur with the change. hold in to fixed assets and ccumulated depreciation, the misstatements involved are not considered pervasive. 3 8. A client changed from the method it uses to calculate postemployment benefits from wizard acceptable method to another one. The effect of the change Is Im real(a) this year, but is expected to be material in the future. 1 9.A client changed the salvage value of certain assets from 5 per centum to 10 percent of original cost. The auditor concurs with the change. 1 10, A client uses the specific identification method of accounting for valuable Items in inventory, and LIFO for less valuable items. The auditor concurs that this is a reasonable practice. 1 tOf3 has substantial uncertainty about an entitys ability to continue as a going concern for a reasonable effect of time. The notes to t he pecuniary statements adequately disclose the situation. 12. Due to pass off operating ventes and give waying capital deficiencies, an auditor reasonable period of time. The notes to the pecuniary statements do not adequately disclose the substantial doubt situation, and the auditor believes the omission fundamentally affects the users understanding of the monetary statements. 4 13. An auditor reporting on stem financial statements decides to take responsibility for the work of a serving auditor who audited a 70 percent own subsidiary and issued an unmodified opinion.The natural assets and revenues of the subsidiary are 5 percent and 8 percent, respectively, of the conglomeration assets and revenues of the entity universe audited. 1 14. An auditor reporting on group financial statements decides not to take responsibility for the work of a component auditor who audited a 70 percent owned subsidiary and issued an unqualified opinion. The total assets and revenues of the u bsidiary are 5 percent and 8 percent, respectively, of the total assets and revenues of the entity being audited. 10 15.An auditor was hired afterwards closing and was unable to observe the counting of the closing inventory. She is unable to apply other procedures to determine whether expiry inventory and related information are decently stated. 8 16. An auditor was hired after year-end and was unable to observe the counting of the year-end inventory. However, she was able to apply other procedures and determined that ending inventory and related information are properly stated. 1 17. An auditor discovered that a client make illegal political payoffs toa candidate for president of the get together States.The auditor was unable to determine that amounts associated with the payoffs because of the clients inadequate record- holding policies. The client has added a note to the financial statements to report the illegal payments and has stated that the amounts of the payments are not determinable. 1 18. An auditor discovered that a client make illegal political payoffs toa candidate retention policies, although there is no likelihood that the financial statements are ervasively misstated, they whitethorn be materially misstated.The client refuses to disclose the payoffs in a note to the financial statements. 3 19. In auditing the long-term investments account of a new client, an auditor finds that a large contingent liability exists that is material to the consolidated company. It is probable that this contingent liability result be resolved with a material loss in the future, but the amount is not skilful. Although no adjusting entry has been made, the client has provided a note to the financial statements that describes the matter in etail. 1 20.In auditing the long-term investments account ofa new client, an auditor finds future, and this amount is reasonably estimable as $2,000,000. Although no adjusting entry has been made, the client has provided a note to the financial statements that describes the matter in exposit and includes the $2,000,000 estimate in that note. 7 21. A client is issuing two years of comparative financial statements. The first year was audited by another auditor who is not being asked to reissue her audit report. (Reply as to the successor auditors report.\r\n'