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:

Marginal Cost

The financial outlay required to produce an additional unit of a product or service.

Average Total Cost

The total cost of production (fixed and variable costs combined) divided by the quantity of output produced, reflecting the cost per unit of output.

Time

A continuous measurement that exists uniformly and independently from everything else, used to sequence events and compare the durations of events and the intervals between them.

Marginal Output

The additional output that is produced by using one more unit of a particular input.