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NEW QUESTION: 1
An entity has been sued for US $100 million for producing and selling an unsafe product.
Attorneys for the entity cannot reliably predict the outcome of the litigation. In its financial statements, the entity should:
A. Make the following journal entry, and disclose the existence of the lawsuit in a note. Estimated loss from litigation US $100,000,000 Estimated provision for litigation loss US $100,000,000
B. Neither make a journal entry nor disclose the lawsuits in a note because bad publicity will hurt the entity.
C. Make the following journal entry, and disclose the existence of the lawsuit in a note. Cost of goods sold US $100,000,000 Estimated provision for litigation loss US $100,000,000
D. Disclose the existence of the lawsuit in a note without making a journal entry.
Answer: D
Explanation:
In the very rare case in which a reliable estimate of an obligation that otherwise qualifies for treatment as a provision cannot be determined, no liability is recognized. Instead, the existing liability is disclosed as a contingent liability unless the possibility of any outflow in settlement is remote).

NEW QUESTION: 2
Which design quality is concerned with creating an architecture that is easy to maintain and operate?
A. Recoverability
B. Manageability
C. Availability
D. Security
Answer: B
Explanation:
When a system is manageable, the infrastructure is easy to maintain and operate.

NEW QUESTION: 3

A. Option B
B. Option D
C. Option C
D. Option A
Answer: C,D

NEW QUESTION: 4
The scope of audits of recipients of federal financial assistance in accordance with federal audit
regulations varies. Which of the following elements do these audits have in common?
A. The accounts should be 100% verified by substantive tests because certain statistical sampling
applications are not permitted.
B. The materiality levels are higher and are determined by the government entities that provide the federal
financial assistance to the recipients.
C. The auditor is required to document an understanding of internal control established to ensure
compliance with the applicable laws and regulations.
D. The auditor is required to disclose all situations and transactions that could be indicative of fraud,
abuse, and illegal acts to the federal inspector general.
Answer: C
Explanation:
Explanation/Reference:
Explanation:
Choice "C" is correct. Auditors engaged to perform audits of federal financial assistance (generally under
the provisions of the Single Audit Act) must perform procedures to obtain an understanding of internal
control pertaining to compliance, and should document this understanding of internal control.
Choice "A" is incorrect. The auditor is required to disclose actual instances of fraud and illegal acts, not all
situations that could be indicative of fraud, abuse, or illegal acts.
Choice "B" is incorrect. Materiality levels of organizations receiving federal financial assistance are set by
the auditor, not the government. Materiality levels depend upon auditor judgment and will not fall or rise
purely as a result of federal participation.
Choice "D" is incorrect. Statistical sampling applications are permitted, and 100% verification of accounts
is not required.