A1 - Events Occurring After Year-end

Question 1

Type (I) vs Type (II) event:

• Before, on or/and after B/S date?
• Require a F/S Adjustment or/and foodnote disclosure?

Answer 1

Type I : On or before B/S Date; Requires a F/S adjustment

Type II: After B/S Date; May require a footnote disclosure

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Question 2

The period between the date of the F/S and the date of the auditor’s report is called ___.

Answer 2

Subsequent period.

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Question 3

During the subsequent period, the auditor should obtain an understanding of the procedures management has established to identify subsequent events and should perform the following procedures:

Answer 3

PRIME

• Post B/S transactions
• Representation letter should be obtained from management
• Inquiry
• Minutes (board)
• Examine latest available interim F/S and examine with the F/S under audit.

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Question 4

The auditor has no active responsibility to make any inquires or to perform any further auditing procedures to discover subsequent events after the original date of the auditor’s report. However, if the auditor becomes of aware of any information relating to subsequent events before the release date, the should__.

Answer 4

Consider whether it is necessary to adjust the F/S or the related disclosures.

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Question 5

If the auditor believes the F/S need to be revised to reflect a subsequent event and management does not make the revision, the auditor should express___.

Answer 5

A qualified or adverse opinion.

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Question 6

If the client refuses to disclose the new information and the impact on the F/S, the auditor should ____.

Additional steps to prevent further reliance include ____.

Answer 6

Notify each member of the board of directors of such refusal, and of the fact that the auditor will take additional steps to prevent further reliance on the auditor’s report and the F/S.

Additional Steps:

• Notify the client that the auditor’s report must no longer be associated with the F/S;
• Notify, if applicable, any regulatory agencies having jurisdiction over the client that the auditor’s report should no longer be relied on; and
• Notify persons known to be relying or likely to rely on the F/S that the auditor’s report should no longer be relied on.

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