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NEW QUESTION: 1
Which of the following matters would an auditor most likely communicate to those charged with
A. The level of responsibility assumed by management for the preparation of the financial statements.
B. The effects of significant accounting policies adopted by management in emerging areas for which
there is no authoritative guidance.
C. Difficulties encountered in achieving a satisfactory response rate from the entity's customers in
confirming accounts receivables.
D. A list of negative trends that may lead to working capital deficiencies and adverse financial ratios.
Choice "D" is correct. The auditor should communicate the initial selection of, and changes in, significant
accounting policies to those charged with governance.
Choice "A" is incorrect. Negative trends and adverse financial ratios are evaluated by an auditor when
considering an entity's ability to continue as a going concern. These trends and ratios are not required to
be communicated to those charged with governance.
Choice "B" is incorrect. The auditor's communications to those charged with governance include the level
of responsibility that the auditor is assuming regarding matters of interest to those charged with
governance, not the level of responsibility assumed by management.
Choice "C" is incorrect. The auditor is required to inform the audit committee about difficulties encountered
with management during the audit. Difficulties encountered in achieving a satisfactory response rate from
the entity's customers in confirming accounts receivables generally would not be communicated to those
charged with governance, since such difficulties are not related to management.