A1- M10 Subsequent Events

Question 1

What is a subsequent event?

Answer 1

An event or transaction that occurs after the balance sheet date (Dec 31) but before the financial statements are issued

Question 2

A recognized subsequent event is an event that ______ at the balance sheet date

Answer 2

Existed

Question 3

A non recognized subsequent event is an event that ______ at the balance sheet date

Answer 3

Did not exist

Question 4

Two examples of a recognized subsequent event include:

Answer 4

Settlement of litigation and loss on uncollectible receivable

Question 5

Entities should not recognize non-recognized subsequent events in the financial statements. These should be noted where?

Answer 5

Footnotes

Question 6

Who is responsible for evaluating subsequent events up to the date financials are issued?

Answer 6

Management

Question 7

When financials are reissued, the entity should______ that occurred between the date of the original f.statements and the date of reisuance, unless required by GAAP

Answer 7

Should not recognize events

Question 8

What is the period between the date of the financial statements and the date of the auditors report called ?

Answer 8

Subsequent Period

Question 9

Post Balance Sheet Transactions

Answer 9

The auditor should review post balance sheet transactions for proper cutoff and to better evaluate year-end balances

Question 10

What should the auditor obtain from management regarding whether any events occurred during the subsequent period that require adjustments to or disclosure in the financial statements

Answer 10

A representation letter

Question 11

The auditor should inquire of clients ____ regarding litigation, claims and assessments

Answer 11

legal council

Question 12

T/F: The auditor should review the minutes of stockholders, directors, and other committee meetings during the subsequent period

Answer 12

True

Question 13

T/F: The auditor should not examine the latest available interim f. statements and compare them with the financial statements under audit

Answer 13

False; they should

Question 14

Although the auditor has no active responsibility after the original date of the auditor’s report to discover subsequent events, if the auditor r does become aware before the report release date, what should they do?

Answer 14

Adjust the financials

Question 15

What should the auditor do if material information is discovered after the report is issued?

Answer 15

1) Advise the client to revise the financials
2) Advise the client to make the necessary disclosures
3) Auditors report should not be relied upon