QUESTION: 143
Six months after issuing an unqualified opinion on audited financial statements, an auditor
discovered that the engagement personnel failed to confirm several of the client's material
accounts receivable balances.
The auditor should first:

A. Request the permission of the client to undertake the confirmation of accounts receivable.
B. Perform alternative procedures to provide a satisfactory basis for the unqualified opinion.
C. Assess the importance of the omitted procedures to the auditor's ability to support the
previously expressed opinion.
D. Inquire whether there are persons currently relying, or likely to rely, on the unqualified
opinion.

Answer(s): C
Explanation:
Choice "c" is correct. When an auditor discovers the omission of an audit procedure related to a
previously issued report, the auditor should first assess the importance of the omitted procedure
to the auditor's ability to support the previously expressed opinion. Choice "a" is incorrect. The
auditor would request the permission of the client to undertake the confirmation of accounts
receivable only after determining that the procedure was necessary to support the previously
expressed opinion and no other alternative procedure had been performed. Choice "b" is
incorrect. Alternative procedures would be performed only after the auditor determined that the
procedure was necessary to support the previously expressed opinion.
Choice "d" is incorrect. The auditor needs to be able to support (or revise) the previously issued
opinion regardless of whether or not there are persons currently relying on it.
QUESTION: 144
Which of the following procedures would an auditor ordinarily perform during the review of
subsequent events?

A. Review the cut-off bank statements for the period after the year-end.
B. Inquire of the client's legal counsel concerning litigation.
C. Investigate significant deficiencies in internal control previously communicated to the client.
D. Analyze related party transactions to discover possible irregularities.

Answer(s): B
Explanation:
Choice "b" is correct. An auditor would most likely obtain a letter from the entity's legal counsel
describing any pending litigation, unasserted claims, or loss contingencies, to obtain evidence
that might impact the year-end financial statements. Choice "a" is incorrect. Reviewing cut-off
bank statements for the period after year-end generally is performed to evaluate the year-end
cash balance, not to identify subsequent events. Choice "c" is incorrect. Investigating significant
deficiencies in internal control previously communicated to the client would be a procedure
performed as part of the planning process and would provide the auditor with information
regarding the internal control structure, not subsequent events. Choice "d" is incorrect.
Analyzing related party transactions to discover possible irregularities generally is performed to
evaluate financial statement disclosure, not to identify subsequent events.
QUESTION: 145

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