As the audit of Faircloth Industries reaches its conclusion, Arthur, the audit partner with overall responsibility for the engagement is discussing the management representation letter with one of his audit staff associates. The audit staff associate asks Arthur to explain a little more about the purpose and content of this letter. Which of the following statements by Arthur are correct? (Select all that apply The letter does not absolve the auditor from his or her responsibility for identifying subsequent events. The letter is delivered to the client's management by the audit firm, and draws attention to all deficiencies noted in the audit. The purpose of the management representation letter is to help the audit firm perform fewer procedures, as the firm can instead rely on the letter. The letter is typically drafted by the auditors and should confirm matters related to the audit. Smithson Compary, a subsidiary of Gladco Corporation, is currently being audited by Greenleaf CPAs. Senior management of Smithson has recently apprised the auditors that there may be a going concern issue with the firm. Which of the following should the auditors consider to determine the severity of this issue? (Select all that opply) Whether Smithson is in a position to raise extra capital in the equities and credit markets, should the need arise. Whether Smithson Company's parent firm, Gladco Corporation will provide liquidity if the need arises. How quickly Smithson can liquidate property, plant and equipment to settle short-term liabilities, should the need arise. What the likelihood of receiving payment for audit services rendered is likely to be. Dave and Charlie are sitting at lunch one day on the premises of one of their large audit clients when the topic of going concern comes up. Dave mentions to Charlie that he vaguely recalls hearing this term in his accounting classes back in college, but doesn't remember what this means or why it is part of the audit. Which of the following responses by Charlie would help Dave to understand this? (Select all that opply.) 0 Going concern deals with the entity's ability to continue operating as an enterprise, and is an important assumption that the auditor should evaluate. The going concern assumption is tested by evaluating management's breach of loan and debt covenants over the past three years. The going concern assumption is required to be evaluated by management each year for the forthcoming year. Going concern really speaks to the client firm's ability to pay its short-term liabilities when they come due, and whether the firm will need to refinance maturing loans to conserve cash. As the audit of Faircloth Industries reaches its conclusion, Arthur, the audit partner with overall responsibility for the engagement is discussing the management representation letter with one of his audit staff associates. The audit staff associate asks Arthur to explain a little more about the purpose and content of this letter. Which of the following statements by Arthur are correct? (Select all that apply The letter does not absolve the auditor from his or her responsibility for identifying subsequent events. The letter is delivered to the client's management by the audit firm, and draws attention to all deficiencies noted in the audit. The purpose of the management representation letter is to help the audit firm perform fewer procedures, as the firm can instead rely on the letter. The letter is typically drafted by the auditors and should confirm matters related to the audit. Smithson Compary, a subsidiary of Gladco Corporation, is currently being audited by Greenleaf CPAs. Senior management of Smithson has recently apprised the auditors that there may be a going concern issue with the firm. Which of the following should the auditors consider to determine the severity of this issue? (Select all that opply) Whether Smithson is in a position to raise extra capital in the equities and credit markets, should the need arise. Whether Smithson Company's parent firm, Gladco Corporation will provide liquidity if the need arises. How quickly Smithson can liquidate property, plant and equipment to settle short-term liabilities, should the need arise. What the likelihood of receiving payment for audit services rendered is likely to be. Dave and Charlie are sitting at lunch one day on the premises of one of their large audit clients when the topic of going concern comes up. Dave mentions to Charlie that he vaguely recalls hearing this term in his accounting classes back in college, but doesn't remember what this means or why it is part of the audit. Which of the following responses by Charlie would help Dave to understand this? (Select all that opply.) 0 Going concern deals with the entity's ability to continue operating as an enterprise, and is an important assumption that the auditor should evaluate. The going concern assumption is tested by evaluating management's breach of loan and debt covenants over the past three years. The going concern assumption is required to be evaluated by management each year for the forthcoming year. Going concern really speaks to the client firm's ability to pay its short-term liabilities when they come due, and whether the firm will need to refinance maturing loans to conserve cash