Which of the Following Procedures Should an Auditor Perform Concerning

question 566

Multiple Choice

Which of the following procedures should an auditor perform concerning litigation, claims, and assessments?

• A) Inspect legal documents in the possession of the client's lawyer that are relevant to pending litigation and unasserted claims and assessments.
• B) Discuss with the client's lawyer its philosophy of defending litigation, claims, and assessments that have a high probability of being resolved unfavorably.
• C) Confirm directly with the client's lawyer that all litigation, claims, and assessments have been properly recorded in the financial statements.
• D) Obtain assurance from management that it has disclosed all unasserted claims that its lawyer has advised are probable of assertion.

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Definitions:

Subsequent Measurement

The re-evaluation of an asset or liability's carrying amount at each reporting date after its initial recognition, considering factors such as depreciation or amortization.

Monetary

Relating to money or currency, often referring to financial strategies or policies involving money supply and interest rates.

Non-monetary

Refers to items or assets that cannot be easily expressed in money terms, such as certain intangible assets and physical items.

AASB 121

The Australian Accounting Standards Board guideline on the effects of changes in foreign exchange rates on financial reporting.