PCAOB AS 2310, the Confirmation Process and AU-C 505 State

question 3

Multiple Choice

PCAOB AS 2310, The Confirmation Process and AU-C 505 state there is a presumption that the auditor will request the confirmation of receivables during an audit unless there are special conditions.Which of the following are among these conditions?

• A)Accounts receivable are immaterial to the financial statements.
• B)The use of confirmations would be ineffective as an audit procedure.
• C)The auditor's assessed level of risk of material misstatement at the relevant assertion level is high.
• D)No other planned substantive procedures address the assessed risk.

---

Definitions:

Earnings Per Share

A company's net profit divided by the number of its shares outstanding, indicating how much money each share of stock earns.

Merger

The combination of two or more companies into a single entity, typically to achieve synergistic benefits, expand market reach, or gain efficiencies.

Purchase Accounting Method

An accounting method used in mergers and acquisitions to consolidate the financial statements of both companies, where the purchaser's statements incorporate the assets and liabilities of the acquired company at their fair market values.

Goodwill

An intangible asset that arises when a company acquires another company for more than the fair market value of its assets.