Ch. 19 - Subsequent Events

Question 1

Procedures relating to subsequent events:

Answer 1

1. obtain an understanding of mgmts procedures to identify subsequent events
2. inquire of mgmt and TCWG as to whether events have occurred
3. reviewing interim FS
4. assess compliance w/ covenants / borrowings
5. obtain written representation from mgmt that any subsequent events have been disclosed
6. inquire with legal counsel
7. review meeting minutes

Question 2

two types of subsequent events:

Answer 2

1. adjusting / Type 1: evidence of conditions at the FS date

2. non-adjusting / Type 2: evidence of conditions after the FS date

Question 3

subsequent events - if found before auditor report date

Answer 3

ensure it is reflected in the FS before auditor’s report is issued

Question 4

subsequent events - if found after report date but before FS are issued

Answer 4

1. If pervasive: new audit report, amended FS, emphasis of matter paragraph
2. isolated: amend FS, double date audit report

Question 5

subsequent events - after FS are issued

Answer 5

1. notify those with FS that there is a change
2. pervasive: new audit report, amend FS, emphasis of matter
3. isolated: double date report, amend FS