7. When there is considerable doubt about the client's ability to continue as a going concern, management's plans to overcome the issue should be: a. Disregarded if the conditions exist as the going concern criteria have not been met. b. Disclosed by the client in the notes to the financial statements. c. Fully documented by the auditor and released to the public in an audit memorandum. d. Voted upon by the auditors in a meeting of the board of directors before the release of an audit opinion. 8. Which of the following approaches for determining fair value of Level 3 assets is used by the auditor? a. Determining appropriate model and sensitivity of model. b. Reviewing contracts to determine if loss is other than temporary. c. Performing an analysis of volume of trading activity. d. Performing an analysis of trades on similar assets. 9. An auditor examining inventory most like would use variables sampling rather than attributes sampling to: A) identify whether inventory items are properly priced. B) estimate whether the dollar amount of inventory is reasonable. C) discover whether misstatements exist in inventory records. D) determine whether discounts for inventory are properly recorded. 10) Property and casualty insurance premiums are examples of estimates found on financial statements. a. True b. False 11. As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses control risk lower than appropriate. The most likely explanation for this situation is that: A) The deviation rates of both the auditor's sample and the population exceed the tolerable rate of deviation. B) The deviation rates of both the auditor's sample and the population are less than the tolerable rate of deviation. C) The deviation rate in the auditor's sample is less than the tolerable rate of deviation, but the deviation rate in the population exceeds the tolerable rate of deviation. D) The deviation rate in the auditor's sample exceeds the tolerable rate of deviation, but the deviation rate in the population is less than the tolerable rate of deviation. 12) Under which of the following circumstances would a disclaimer of opinion on the entity's financial statements not be appropriate? A) The financial statements fail to contain adequate disclosure of related-party transactions. B) The entity refuses to permit its attorney to furnish information requested in an attorney letter. C) The auditors are engaged after the date of the financial statements and are unable to observe physical inventories or apply alternative procedures to verify their balances. D) The auditors are unable to determine the amounts associated with illegal acts committed by the entity's management. 13) Which of the following is false regarding the valuation of goodwill? a. U.S. accounting standards require that goodwill be specifically identified with an operating segment or a reporting unit. b. Acquired parts of the business (or goodwill) must be sufficiently identifiable so that they can be managed as a unit or may be separately identified and sold as a unit. c. Goodwill is tested for impairment quarterly. d. Goodwill is the excess of the purchase price over the fair market value of the acquired companys tangible assets, identifiable intangible assets, and liabilities. 14. Which of the following is not a criterion for using a selection method with statistical sampling? A) The method provides a reasonable likelihood of selecting a representative sample. B) The method allows the probability of selecting sample items to be determined. C) The method specifically identifies each item in the population with a number. D) The method allows the selection process to be replicated