If the Auditor Concludes That There Are Contingent Liabilities, He

question 8

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:

CCF

Stands for hundred cubic feet and is a unit of measurement often used for billing natural gas or water usage.

Piecewise Function

A mathematical function defined by multiple sub-functions, each applying to a certain interval of the main function's domain.

Internet Service

A service that provides access to the Internet, including broadband, DSL, fiber-optic, and satellite connections.

Assets

Resources with economic value owned by an individual, corporation, or country, expected to provide future benefits.