Becker AUD 1.5 - Events occur after year end Flashcards Preview

AUD CPA Review - (Becker, Roger, Wiley, NINJA) > Becker AUD 1.5 - Events occur after year end > Flashcards

Flashcards in Becker AUD 1.5 - Events occur after year end Deck (10):
1

There are two types of Subsequent events - what are they?

Type I event: an event that happens on or before balacne sheet date (12/31/xxxx or fiscal date) with an estimate reported on the F/S as of that day. When new information comes in before Issue date, then the estimate is changed to report the actual dollar ($) amount on the face of F/S.

Type II event: an event that happens AFTER balance sheet date (12/31/xxxx or fiscal date). This here, you just do a Footenote in the F/S.

2

General rule: the Auditor (CPA) is resposnible for all audit work up to what date?

Audit Report Date = the date which is the last day of auditor's work. The Auditor does not do any more work after this date.

3

PRIME - what does this stand for during the subsequent period where the auditor does procedures to analzye subsequent events?

P = post balance sheet transactions: review for proper cutoff date and to better evaluate year-end balances

R = representation from management (usually CEO and CFO) regarding any events occurred during the subsequent period that require Adjustments to F/S or disclosures in footnotes to F/S

I = inquire on inquiring the management and those charged with governance (board of directors) about whether any subsequent events have occurred that could effect the financial statements. This includes:

New commitments, borrowings, or guarantees
Sales or acquisitions (buy) assets
increase in capital (working capital) or issue debt (lend loans to others)
Assets appropriated by the government or destroyed
Developments regarding contingencies
Unusual accounting adjustments
Events that call into question the appropriateness of the entity's accounting policies
Events relevant to the measurement of estimates or provisions
Events relevant to the recover-ability of assets

Inquire the client's legal counsel (lawyers) concerning litigation, claims, and assessments.

M = minutes of meetings done with Stockholders, Directors, committees (be read)

E = examine latest (new) interim financial statements and compare them to currently-audited F/S. (Compare new interim financial statements of a later period with current period's F/S)

4

Auditor's report date: No additioanl work/responsibiltiy to should be doen after auditor's report date unless there is a specific subsequent event that needs work.

True or false

True

5

When is dual dating used for?

Duel dating is when add two dates on the auditor's report.

The original date of the auditor's report and a second date (ending date or last day) of doing audit work on a particular subsequent event stated in the auditor's report.

Note: the auditor only does extra work on what is stated in the auditor's report.

6

True or false: the auditor's report date can have one date that does not reflect all subsequent events to that only one designated date.

Example: Original auditor report date is March 15, but it's pused to march 31.

False. When the auditor's report date is pushed to much later, then all subsequent events information and audit work is done to that later date.

Example: Original auditor report date was march 15. By pushing it to March 31, auditor is responsible for all work on subsequent events through March 31 and that's it. No more work to be done after march 31.

7

If auditor believes that F/S nees revision to reflect a subseuent event and MANAGEMENT refuses to revise the F/S and reissue it, then auditor express what opinion?

Qualified or adverse opinion (GAAP issue).

8

Subsequent discovery of facts after Auditor Report Release date, what does the auditor do in this case?

The auditor advises the client (management) revised the F/S and re-issue them (along with new audit report) describing the reasons for revisions.

Advise the client (management) to make necessary disclosures and revisions to any imminent F/S (accompanied by an auditor's report for a subsequent event)

or

If the effect on F/S cannot be determined on a timely basis, providing notification that F/S and auditors' report should not be relied upon. In addition, the client (management should be advised to discuss with the SEC, stock exchanges, and appropriate regulation agencies (where applicable) on the new disclosures or revisions.

9

If client refuses to make revisions to F/S after the auditor discovers facts after releasing the audit report, what should the auditor do then?

Auditor should: (DAR)

Disassociate: Notify the client that the report must no longer be associated with the F/S

Alert agencies: Notify, if applicable, any regulatory agencies having jurisdiction over the client that the auditor's report should no longer be relied on

and

Relying parties: Notify persons who are relying on the F/S that the auditor's report should no longer be relied on.

10

Omitted audited procedures (forgot to do this procedures) after submitting the audit report:

what are the steps to handle in this situation for the auditor?

The Auditor (CPA) should assess the importance of the omitted audit procedures with the already issued audit report (opinion). This can be done via doing other procedures (alternative procedures) to verify that the already released audit report (opinion) is accurate. If so, no further action.

Now, if the omitted audit procedures impair the auditor's opinion to support the already-just issued (previously issued) opinion AND there are people already relying on it (or going to be) then the auditor should:

Do these omitted procedures (or alternative (substantive testing) procedures) to get these audit work done and then get the client (management) to revise the F/S, re-issue the F/S and the auditor released a revised audit opinion.