Management Determined It Was Probable That a Pending Litigation Claim

question 26

Multiple Choice

Management determined it was probable that a pending litigation claim would result in a material loss. The loss was disclosed in the footnotes to the financial statements but was not accrued in the income statement. If the auditors believe an accrual should be made, what type of report should be issued?

• A)Standard (unmodified)report.
• B)Unmodified opinion with an emphasis-of-matter paragraph.
• C)Qualified opinion based on a circumstance-imposed scope limitation.
• D)Qualified or adverse opinion based on a departure from GAAP.

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Definitions:

Sensory Threshold

The minimum level of stimulus intensity required for a sensory system to detect a stimulus.

Sensory Deprivation

A condition in which one or more of the senses is diminished or eliminated.

Sensory Neglect

A condition where an individual fails to recognize or respond to stimuli on one side of the body, typically resulting from brain damage.

Sensory Adaptation

The process by which sensory receptors change their sensitivity to a stimulus over time, often resulting in a decrease in sensitivity to a constant stimulus.