Harvey, CPA, Is Preparing an Audit Program for the Purpose

question 28

Multiple Choice

Harvey, CPA, is preparing an audit program for the purpose of ascertaining the occurrence of subsequent events that may require adjustment or disclosure essential to a fair presentation of the financial statements in conformity with generally accepted accounting principles. Which one of the following procedures would be least appropriate for this purpose?

• A)Confirm, as of the completion of fieldwork, accounts receivable that have increased significantly from the year-end date.
• B)Read the minutes of the board of directors.
• C)Inquire of management concerning events that may have occurred.
• D)Ask legal counsel about any developments relating to litigation, claims, or assessments against the company.

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Definitions:

Cognitive Dissonance Theory

The theory that we act to reduce the discomfort (dissonance) we feel when two of our thoughts (cognitions) are inconsistent. For example, when we become aware that our attitudes and our actions clash, we can reduce the resulting dissonance by changing our attitudes.

Leon Festinger

A psychologist best known for his theory of cognitive dissonance, which describes the discomfort experienced when holding conflicting ideas or beliefs.

Fritz Heider

A psychologist known for his work in the development of attribution theory, which tries to explain how people evaluate the causes of others' behavior.

Phillip Zimbardo

An American psychologist best known for his controversial Stanford Prison Experiment, exploring the effects of perceived power and environment on human behavior.