1. A lawyer's response to an auditor's inquiry concerning litigation, claims, and assessments may be limited to matters that are considered individually or collectively material to the client's financial statements. Which parties should reach an understanding on the limits of materiality for this purpose?
a. The auditor and the client's managements.
b. The client's audit committee and the lawyer.
c. The client's management and the lawyer.
d. The lawyer and the auditor.

2. The primary reason an auditor requests letters of inquiry be sent to a client's attorney is to provide the auditor with
a. The probable outcome of asserted claims and pending or threatened litigation.
b. Corroboration of the information furnished by management about litigation, claims, and assessments.
c. The attorney's opinions of the client's historical experiences in recent similar litigation.
d. A description and evaluation of litigation, claims, and assessments that existed at the balance sheet date.

3. Which of the following procedures should an auditor ordinarily perform regarding subsequent events?
a. Compare the latest available interim financial statements with the financial statements being audited.
b. Send second requests to the client's customers who failed to respond to initial accounts receivable confirmation requests.
c. Communicate material weaknesses in internal control to the client's audit committee.
d. Review the cutoff bank statements for several months after the year-end.

4. Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?
a. Confirming a sample of material accounts receivable established after year-end.
b. Comparing the financial statements being reported on with those of the prior period.
c. Investigating personnel changes in the accounting department occurring after year-end.
d. Inquiring as to whether any unusually adjustments were made after year-end.

5. After the date of the audit report, an auditor has no obligation to make continuing inquiries or perform other procedures concerning the audited financial statements, unless
a. Information that existed at the report date and may affect the report comes to the auditor's attention.
b. Management of the entity requests the auditor to reissue the auditor's report in a document submitted to a third party that contains information in addition to the basic financial statements.
c. Information about an event that occurred after the end of field work comes to the auditor's attention.
d. Final determinations or resolutions are made of contingencies that had been disclosed n the financial statements.

6. Which of the following events occurring after the issuance of the financial statements most likely would cause the auditor to make further inquiries about previously issued financial statements?
a. An uninsured natural disaster occurs that may affect the entity's ability to continue as a going concern.
b. A contingency is resolved that had been disclosed in the audited financial statements.
c. New information is discovered concerning undisclosed lease transactions of the audited period.
d. A subsidiary is sold that accounts for 25% of the entity's consolidated net income.

7. A purpose of a management representation letter is to reduce
a. Audit risk to an aggregate level of misstatement that could be considered material.
b. An auditor's responsibility to detect material misstatement that could be considered material.
c. The possibility of a misunderstanding concerning management's responsibility for the financial statements.
d. The scope of an auditor's procedures concerning related party transactions and subsequent events.

8. Which of the following matters would an auditor most likely include in a management representation letter?
a. Communications with the audit committee concerning weaknesses in internal control.
b. The completeness and availability of minutes of shareholders' and directors' meetings.
c. Plans to acquire or merge with other entities in the subsequent year.
d. Management's acknowledgement of its responsibility to report but not detect employee fraud.

9. For which of the following matters should an auditor obtain written management representations?
a. Management's cost-benefit justifications for not correcting internal control weaknesses.
b. Management's knowledge of future plans that may affect the price of the enti ty's stock.
c. Management's compliance with contractual agreements that may affect the financial statements.
d. Management's acknowledgement of its responsibility for employees' violations of laws.

10. To which of the following matters would materiality limits not apply in obtaining written management representations?
a. The availability of minutes of shareholders' and directors' meetings.
b. Losses from purchase commitments at prices in excess of market value.
c. The disclosure of compensating balance arrangements involving related parties.
d. Reductions of obsolete inventory to net realizable value.