Management Furnishes the Independent Auditor with Information Concerning Litigation, Claims

question 27

Multiple Choice

Management furnishes the independent auditor with information concerning litigation, claims, and assessments.Which of the following is the auditor's primary means of initiating action to corroborate such information?

• A)Request that client lawyers undertake a reconsideration of matters of litigation, claims, and assessments with which they were consulted during the period under examination.
• B)Request that client management send a letter of inquiry to those lawyers with whom management consulted concerning litigation, claims, and assessments.
• C)Request that client lawyers provide a legal opinion concerning the policies and procedures adopted by management to identify, evaluate, and account for litigation, claims, and assessments.
• D)Request that client management engage outside attorneys to suggest wording for the text of a footnote explaining the nature and probable outcome of existing litigation, claims, and assessments.

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Definitions:

Total Variable Costs

The sum of expenses that vary directly with the level of production or sales volume.

Marginal Cost

The amount of money needed to create an additional unit of a product or service.

Average Total Costs

The total costs of production (fixed and variable) divided by the quantity of output produced.

Total Fixed Costs

The sum of all costs that do not change with the level of production or services provided, such as rent and salaries.