An Auditor Passes on Several Errors Discovered During the Audit

question 5

Multiple Choice

An auditor passes on several errors discovered during the audit.Which of the following represents the best reason for the auditor not requesting that the adjustments be made by management?

• A)management has properly disclosed the extent of the errors in the footnotes to the consolidated financial statements of the year under audit.
• B)the attorney's response to audit inquiry includes the statement that counsel is unaware of any errors and can make no such estimates.
• C)the auditor is not required to discover all material errors in the financial statements under the concept of reasonable assurance.
• D)the errors are not material in aggregate after considering the reversing effects of passed entries from previous periods.

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Definitions:

Lessor

The party in a lease agreement that owns the asset and grants the lessee the right to use the asset in return for lease payments.

Bargain Purchase Option

A lease clause allowing the lessee to purchase the leased asset at a price significantly lower than its expected fair market value at the end of the lease term.

Leased Asset's Useful Life

The expected period over which a leased asset is anticipated to be used by the lessee, often corresponding to the lease term unless a shorter period is more representative.

Minimum Lease Payments

The lowest amount that a lessee is expected to pay over the lease term, including both principal and interest components.