Determining the Likelihood of a Loss Contingency Occurring and Trying

question 79

Multiple Choice

Determining the likelihood of a loss contingency occurring and trying to estimate a reasonable amount for a future loss _______.

• A)should be determined by the client's legal counsel
• B)should be determined solely by the external auditor
• C)should be determined solely by the internal auditor
• D)involves significant judgment by management

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Definitions:

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities or equity on a company's balance sheet.

Credit

An accounting entry that increases liabilities or equity or represents a decrease in assets, also refers to the provision of resources based on trust.

Owner's Capital

The amount of equity a proprietor has in the business, representing the difference between the business's assets and liabilities.