If the Auditor Concludes That There Are Contingent Liabilities,he or She

question 47

Multiple Choice

If the auditor concludes that there are contingent liabilities,he or she must evaluate the significance of the potential liability and the nature of the disclosure needed in the financial statements.Which of the following statements is not True?

• A)The potential liability is sufficiently well known in some instances to be included in the financial statements as an actual liability.
• B)Disclosure may be unnecessary if the contingency is highly remote or immaterial.
• C)A CPA firm often obtains a separate evaluation of the potential liability from its own legal counsel rather than relying on management or management's attorneys.
• D)The client's attorneys must remain independent when evaluating the likelihood of losing the lawsuit.

---

Definitions:

Check

A written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer or to a specified person or entity.

Issued

Released or distributed officially by an authority, such as documents, currency, or rulings.

Bank Clears

The process by which a bank processes transactions and settles payments between parties.

Negotiability

The quality of a financial instrument that allows it to be transferred or assigned from one party to another in exchange for value.