2. A stockholder has filed a lawsuit against Fischer Corporation. Fischer's attorneys have reviewed the facts of the case. Their review revealed that similar lawsuits have never resulted in a cash award and it is highly unlikely that this lawsuit will either. Please indicate the treatment of this situation. A) Record an accounts receivable on the balance sheet. B) Record an accounts payable on the balance sheet. c) Record a contingent liability on the balance sheet and disclose the liability in a financial statement footnote D) Neither record nor disclose any liability. Your answer is

2. A stockholder has filed a lawsuit against Fischer Corporation. Fischer's attorneys have reviewed the facts of the case. Their review revealed that similar lawsuits have never resulted in a cash award and it is highly unlikely that this lawsuit will either. Please indicate the treatment of this situation. A) Record an accounts receivable on the balance sheet. B) Record an accounts payable on the balance sheet. c) Record a contingent liability on the balance sheet and disclose the liability in a financial statement footnote D) Neither record nor disclose any liability. Your answer is

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Completing A Quality Audit

Section: Chapter Questions

Problem 27CYBK

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use legal basis in answering 1. If your company would suffer financial liquidity problems but is not yet insolvent, although the management foresees its inability to pay its obligations as they fall due, what do you propose to be done, and how it would be done? In outline form, please provide the steps/procedures to be undertaken. 2. In case your company is insolvent, can the - (1) individual stockholders, (2) creditors, or (3) any officer of the company- file an insolvency petition? 3. Assuming that there are pending suits against your company, what would be the effect of filing an insolvency proceeding on such pending suits?
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1. Of the following, choose the one that describes a situation where liabilities and expenses are manipulated to make a company appear less profitable? A. Liabilities are capitalized to increase revenues. B. Failure to record insurance expense for the period. C. Failure to record employee payroll earned but not paid as of period end. D. Failure to record warranty costs when the facts suggest that disclosure is more appropriate accounting treatment. E. None of the above.
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Statement 1: After an audit report containing an unqualified opinion on a non-public client's financial statements was issued, the client decided to sell the shares of a subsidiary that accounts for 30% of its revenue and 25% of its net income. The auditor should take no action because the auditor has no obligation to make any further inquiries, Statement 2: After an audit report containing an unqualified opinion on a non-public client's financial statements was issued, the client decided to sell the shares of a subsidiary that accounts for 30% of its revenue and 25% of its net income. The auditor should notify the entity that the auditor's report may no longer be associated with the financial statements. Statement 3: After an audit report containing an unqualified opinion on a non-public client's financial statements was issued, the client decided to sell the shares of a subsidiary that accounts for 30% of its revenue and 25% of its net income. The auditor should describe the effect…