A company must do which of the following, if a company maintains a material compensating balance of cash?
a. Disclose the compensating account arrangement in financial statements.
b. Close out the balance prior to year-end.
c. Tie balances to debt covenants.
d. Provide a lockbox for appropriate line-of-credit draws.
Answer: A
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- In which of the following situations would a disclaimer of opinion not be appropriate?
- When disclaiming an opinion because of a client-imposed scope limitation, which of the following is false regarding changes that would be made to the audit report?
- When an auditor issues an adverse opinion, which of the following should be included in the opinion paragraph?
- In which of the following circumstances would an auditor be most likely to express an adverse opinion on a company's financial statements?
- Which of the following phrases should not be used when the auditor is qualifying the audit opinion?
- Tech Company has an uncertainty because of pending litigation. The auditor's decision to issue a qualified opinion rather than an unqualified opinion most likely would be determined by which of the following?
- Eagle Company's financial statements contain a departure from GAAP because, due to unusual circumstances, the statements would otherwise be misleading. Which of the following audit opinions should the auditor provide?
- In which of the following situations would an auditor typically issue an unqualified opinion, but include explanatory language?
- Which of the following describes a situation when an auditor cannot typically issue a standard unqualified audit opinion?
- In which of the following situations would an auditor ordinarily issue an unqualified audit opinion without an explanatory paragraph?
- Which of the following statements is true regarding the auditor's responsibilities related to reporting?
- Which of the following statements is false regarding audit reporting?
- Which of the following is not a typical communication between the auditor and the audit committee?
- Which of the following is the best example of a Type II subsequent event?
- The date of the audit opinion of Upton Industries, Inc. reads: March 7, 2014 except for Note D, as to which the date is March 12, 2014. What is this an example of?
- Management of AllTech, Inc. refuses to sign the management representation letter given to them in the course of the audit on the grounds that it invades the company's privacy. What does this refusal constitute?
- Which of the following statements is false regarding analytical procedures that help auditors assess the overall final presentation of the financial statements?
- Which of the following is not a typical analytical procedure for the completion of the audit?
- If the auditor concludes that there may be a going-concern problem with the client, which of the following is the best course of action for the auditor to follow?
- Which one of the following is false regarding the adequacy of disclosures in a financial statement audit?
- Which of the following is not true regarding accounting estimates?
- When responding to the auditor as a result of the audit client's letter of inquiry, how might the attorney limit the response?
- During the course of an audit, misstatements that are individually immaterial may be detected. What should the auditor do with these?
- An audit firm culture that emphasizes "doing the right thing" does not incorporate which of the following to enhance audit quality?
- Which of the following items does the auditor ask the client to send to its legal counsel requesting information about asserted claims?
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