Identify and describe the transaction-related and balance-related presentation audit objectives. Explain how many of the procedures to test presentation objectives are integrated with tests performed in earlier stages of the audit.
24-2 (OBJECTIVE 24-2) Explain why an auditor is interested in a client’s future commitments to purchase raw materials at a fixed price.
24-3 (OBJECTIVE 24-2) Distinguish between a contingent liability and an actual liability and give three examples of each.
24-4 (OBJECTIVE 24-2) In the audit of the James Mobley Company, you are concerned about the possibility of contingent liabilities resulting from a patent dispute. Discuss the procedures you could use for an extensive investigation in this area.
24-5 (OBJECTIVE 24-3) Explain why the analysis of legal expense is essential in every audit.
24-6 (OBJECTIVES 24-2, 24-3) During the audit of the Merrill Manufacturing Company, Ralph Pyson, CPA, has become aware of four lawsuits against the client through discussing them with the client, reading corporate minutes, and reviewing correspondence files. How
should Pyson determine the materiality of the lawsuits and the proper disclosure in the
financial statements?
24-7 (OBJECTIVE 24-3) Distinguish between an asserted and an unasserted claim. Explain why a client’s attorney may not reveal an unasserted claim.
24-8 (OBJECTIVE 24-3) Describe the action that an auditor should take if an attorney refuses to provide information that is within the attorney’s jurisdiction and may directly affect the fair presentation of the financial statements.
24-9 (OBJECTIVE 24-4) What major considerations should the auditor take into account in determining how extensive the review of subsequent events should be?
24-10 (OBJECTIVE 24-4) Identify five audit procedures normally done as a part of the review for subsequent events.
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