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.

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Definitions:

Large Quantities

Refers to the purchasing or production of goods in bulk amounts, often at a reduced cost per unit.

Low-Cost Goods

Products that are sold at relatively low prices compared to other similar products in the market.

Consignor

The one who consigns merchandise to the consignee.

FIFO Method

First-In, First-Out method; an inventory valuation approach where goods first purchased or produced are the first to be sold.