ExpertMedium1 markMultiple Choice
CPA · Question 61 · Area III: Performing Procedures
An auditor is testing the completeness of the liability for claims and assessments. Which of the following procedures is MOST appropriate?
An auditor is testing the completeness of the liability for claims and assessments. Which of the following procedures is MOST appropriate?
Answer options:
A.
Confirming the claims with the insurance company.
B.
Reviewing the minutes of the board of directors meetings.
C.
Vouching recorded claims to the legal invoices.
D.
Recalculating the estimated liability.
How to approach this question
Completeness of Litigation = Look for discussions of 'bad news'. Board Minutes, Legal Letters, Legal Expense accounts.
Full Answer
B.Reviewing the minutes of the board of directors meetings.✓ Correct
To identify unrecorded claims (completeness), the auditor reviews the minutes of meetings of those charged with governance, where such significant matters are discussed. The auditor also reviews legal expense accounts and sends letters of inquiry to counsel.
Common mistakes
Vouching (Existence) instead of Tracing/Scanning Minutes (Completeness).
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