17. The client was concerned that customers with significant of accounts receiva

Question

17. The client was concerned that customers with significant of accounts receivable would be upset if they balances ceived letters about their balances. Accordingly, the re client told the auditor NOT to send accounts receivable confirmations to customers whose balances are a material part of the accounts receivable balance. The auditor is not able o verify these balances in any other way. This would most likely result in what type of auditors' report? What type of situation is involvedp a. Qualified or ad verse: Accounting problem Qualified or disclaimer; Accounting problenm Adver se or disclaimer: Accounting problem d. Qualified or adverse; e. Qual ified or disclaimer: Scope problem, lack of evidence Adverse or disclaimer: Scope problem, lack of evidence There are various types of degrees of negligence under which an auditor might be sued. Which type "constitutes a lack of minimum care" in performing professional duties? 18. a. Fraud. b. Gross. c. Ordinary d. Privity 19. The partner of ABC CPA firm doing the audit of EmilyAnne Company owns a few shares of EmilyAnne Company common stock (worth about $20) Thus ABC CPA firm would not be considered independent of EmilyAnne Company. What concept is most likely involved? a. Independence in appearance b. Independence in attitude c. Independence in exercise d. Independence in fact 20. Which was an early court case which established: 1. "Auditors are liable to the client for ordinary Negligence"; and Negligence". 2. "Auditors may be liable to a third party for gross a. Ultramares Corporation vs. Touche. b. CIT Financial. c. Rusch Factors Inc v. Levin. d. 1136 Tenants' Corp vs. Max Rothenberg&Co.; Answer

Explanation / Answer

17.) The answer is option e) Qualified or Disclaimer; Scope problem, lack of evidence. This is because the auditor is not able to check the significant balance of Accounts receivable by confirmation from customers because there is a limitation is imposed on scope by the company's management. The reason goven by the management for not conformimg the account receivables also seems to be reasonable and the auditor is not able to verify these balances in any other way. Therefore it is a situation of lack of evidence also. As the balances are material, the auditor can either issue a Qualified or Disclaimer opinion describing the scope of limitation in his report.

18) The correct option is b) Gross Negligence because lack of even slight care that can be expected from a person or lack of minimal care is considered as gross negligence.

19) The most likely concept involved is Independence in attitude because independence in mental attitude may be affected due to CPA's share in EmilyAnne company. The ownership is not so significant but may affect independence.

20) The correct option is a) Ultramares corporation Vs. Touche, Because it is the early court case of year 1931 in which auditor is held liable to third party for gross negligence.

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