Which of the Following Procedures Might Be Useful in Discovering

question 66

Multiple Choice

Which of the following procedures might be useful in discovering a contingent liability for a lawsuit that management is intentionally neglecting to disclose?

• A)inquiries (orally and in writing)of management
• B)analyzing legal expense and reviewing invoices and statements from outside legal counsel
• C)reviewing current and previous years' Canada Revenue Agency correspondence
• D)obtaining a letter of representation from management that it is not aware of any undisclosed contingent liabilities

---

Definitions:

Net Cash Flow

The difference between a company's cash inflows and outflows in a given period, indicating how much cash is generated or spent.

Income Taxes

Taxes levied by the government on earnings generated by businesses and individuals within their jurisdiction.

Capital Budgeting Decisions

The process of evaluating and selecting long-term investments that are in line with the firm's goal of maximizing shareholder value.

Future Outcomes

Possible events or results that have not yet occurred and may be influenced by current actions or decisions.