Question

An auditor's primary purpose in examining a letter received from the bank shortly after the balance sheet date that renews and extends a client's note payable is most likely to obtain evidence concerning management's assertions about

(a) Existence.
(b) Presentation and disclosure-classification.
(c) Accuracy.
(d) Valuation and allocation.

Answer 1

The auditor's primary purpose in examining the letter is to obtain evidence concerning management's assertions about valuation and allocation.

Step-by-step explanation:

An auditor's primary purpose in examining a letter received from the bank shortly after the balance sheet date that renews and extends a client's note payable is most likely to obtain evidence concerning management's assertions about valuation and allocation.

This is because the renewal and extension of a note payable can affect how the loan is valued and allocated on the balance sheet. It is important for the auditor to verify whether the valuation and allocation of the loan as stated by management is accurate and in accordance with accounting standards and regulations.