is incorrect. Inspecting title documents to verify whether any assets are pledged as collateral
provides information regarding presentation and disclosure, but would not provide evidence of
going concern issues.
QUESTION: 73
Which of the following procedures most likely would assist an auditor in identifying conditions
and events that may indicate substantial doubt about an entity's ability to continue as a going
concern?

A. Performing cutoff tests of sales transactions with customers with long-standing receivable
balances.
B. Evaluating the entity's procedures for identifying and recording related party transactions.
C. Inspecting title documents to verify whether any real property is pledged as collateral.
D. Inquiring of the entity's legal counsel about litigation, claims, and assessments.

Answer(s): D
Explanation:
Choice "d" is correct. If a liability is significant enough, it may give rise to a situation in which
there is substantial doubt about an entity's ability to continue as a going concern. Inquiring of an
entity's legal counsel about litigation, claims, and assessments is one way to determine whether
such a liability exists. Choice "a" is incorrect. Cutoff tests are used to determine whether sales
are recorded in the proper period.
Applying such tests to customer accounts with long-standing receivable balances would not
provide information about the entity's ability to continue a as a going concern. Choice "b" is
incorrect. Evaluating the entity's procedures for identifying and recording related party
transactions is a means for the auditor to evaluate financial statement presentation and
disclosure, but it does not provide information about going concern issues. Choice "c" is
incorrect. Identifying situations in which real property is pledged as collateral is a means for the
auditor to evaluate financial statement presentation and disclosure, but it does not provide
information about going concern issues.
QUESTION: 74
A CPA's standard report on audited financial statements would be inappropriate if it referred to:

A. Management's responsibility for the financial statements.
B. An assessment of the entity's accounting principles.
C. Significant estimates made by management.
D. The CPA's assessment of sampling risk factors.

Answer(s): D
Explanation:
Choice "d" is correct. The CPA's standard report on audited financial statements does not
include matters related to the auditor's assessment of specific risk factors. Choice "a" is
incorrect. The CPA's standard report on audited financial statements states that, "These
financial statements are the responsibility of the Company's management." Choices "b" and "c"
are incorrect. The CPA's standard report on audited financial statements states that, "An audit
also includes assessing the accounting principles used and significant estimates made by
management."
https://Free-Braindumps.com

Free AICPA CPA-Auditing Exam Braindumps (page: 35)

CPA-Auditing Exam Discussions & Posts