Fir each of the following brief scrnarios, addume that you are reporting on a client's financial statements
17. An aucitor discovered that a chent made illegal political payotis to a candidate for president of the Unifed Slates. The auditor was unable to determine the amounts associated with the payolfs because of the chent's inadequate record-retention policies. The chent has added a note to the financial sfatements to doscribe the illegal payments and has statod that the amounts of the payments are not doteminable. An auditor discovered that a client made illegal political payolls to a candidate for president of the United States. The auditor was unable to determine the amounis associated with the payofis because of tho 18 client's inadequate record-retention policies. Although there is no likelihood that the financial statements are pervasivoly misstated, they may be materially misstated. The client refuses to disclose the payoffs in a note to the financiai statements. In auditing the long-ferm investments account of a new client, an auditor finds that a large contingent liabiity exists that is material to the consolidated company. It is probable that this contingent liability will 19. be resolved with a material loss in the future, but the amount is not estimable. Although no adjusting entry has been made, the client has providod a note to the financial statements that describes the. matter in detail. In auditing the long-term investments account of a now client, an auditor finds that a targe contingent liability exists that is material to the consolidated company it is probable that this contingent liability will 20 be cesolved with a matorial loss in the future, and this amount is reasonably estimable as $2,000,000 Although no adjusting entry has been made, the client has provided a note to the financial statements that describes the matter in detail and includes the $2,000,000 estimate in that note. 21 A client is issuing two yoars of comparative finarical statements. The first year was audited by another auditor who is nof being asked to reissue her audit report. (Reply as to the successor auditors' report) 22. A client is issaing two yoars of comparative financial statements. The first year was audited by anothen audito who is being asked to roissue her audit report. (Roply as to the successor auditors report.) 23 A client's financial statoments follow GAAP, but the auditor wistves to emphasize in his audit report a Fignificant rolated party transacton that is adequatoly described in the notes to the financial statoments 24 A ctents lirancial statements follow GAAP except that they do not include a nole on a significant rolated paity vanpoction During the audit of a pubic company the auditors identified a crifical audit matior. Sufficient appropriate 25 audit evitence was gathered to indicate the rolated account was properly stated the audit roport to bo issued includes a Critical Audit Matters section that properly describes the matter. Reply as to additionat modifications requifod
