An Auditor Identified a Material Weakness in Internal Control in August.The

question 39

Multiple Choice

An auditor identified a material weakness in internal control in August.The client was informed and the client corrected the material weakness prior to year-end (December 31) ; the auditor agrees that the correction eliminates the material weakness prior to year-end.The appropriate audit report on internal control under PCAOB standards on reporting on internal control is:

• A)Adverse.
• B)Unqualified.
• C)Disclaimer.
• D)Qualified.

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Definitions:

Contingent Liability

A potential financial obligation that may occur in the future depending on the outcome of a specific event, not confirmed to exist or be measurable until one or more conditions are fulfilled.

Liability

A financial obligation or debt owed by an individual or company.

Accrual

The accounting method that records revenues and expenses when they are incurred, regardless of when cash transactions occur.

Onerous Contracts

Contracts in which the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received under it.