151. In the audit of revenue and expense accounts, extensive tests of details rather than analytical
procedures are appropriate when:
A. control risk is below maximum. C. transaction volume is high.
B. analytical procedures reveal nothing unusual. D. an account requires special attention.
152. Which of the following circumstances would qualify as subsequent discovery of facts that
existed at the date of the auditor's report?
A. A material lawsuit against the client, properly accounted for in the financial statements,
concluded with a judgment in the client's favor ten days after the date of the auditor's report.
B. The client entered into negotiations to acquire another company five days after the date of
the auditor's report. The acquisition was completed 45 days later.
C. Related party transactions in the year under audit involving the client and a major customer
were discovered 15 days after the date of the auditor's report.
D. A tornado destroyed client's headquarters building two days after the date of the auditor's
report.
153. "As described in Note 5 to the financial statements, General Express changed its statistical
method of computing product warranty expense for the year ended December 31, 2007..." is an
illustration of a
A. consistency change requiring a qualified opinion.
B. scope limitation.
C. departure from GAAP.
D. report with a consistency modification.
154. If the auditor believes that there is minimal likelihood that resolution of an uncertainty will have a
material effect on the financial statements, the auditor would issue a(n)
A. "Except for" opinion. C. Adverse opinion.
B. Unqualified opinion. D. Disclaimer of opinion
155. When a question arises about an entity's continued existence, the auditor should consider
factors tending to mitigate the significance of contrary information concerning the entity's alternative
means for maintaining adequate cash flow. An example of such a factor is the
A. Possibility of purchasing certain assets rather than leasing them.
B. Capability of extending the due dates of existing loans.
C. Feasibility of operating at increased levels of production.
D. Marketability of property and equipment that management plans to keep.