Subsequent Events in Auditing

What is the auditor's primary responsibility when discovering material misstatements in audited financial statements after they have been issued?

Notify the audit committee of the misstatements and await their instructions
Re-issue an audit report with an unqualified opinion
Request the client to immediately revise the financial statements and include an explanation for the revision (correct)
Perform additional audit procedures to verify the accuracy of the financial statements

What is the purpose of the timeline for subsequent discovery of facts, as shown in Figure 24-9?

To provide a framework for the auditor's response to the discovery of misstatements (correct)
To assess the risk of material misstatement
To determine the auditor's liability for the misstatements
To evaluate the effectiveness of internal controls

When is an immediate revision of the financial statements required, according to the text?

When the audit committee requests a revision
When the auditor learns of material misstatements after the financial statements have been issued (correct)
When the auditor identifies a contingent liability
When the auditor discovers material misstatements during the audit process

What is the auditor's primary concern when discovering material misstatements after the financial statements have been issued?

Ensuring that users of the financial statements are informed of the misstatements (C) Signup and view all the answers

What is the implication of the auditor's obligation to inform users of the financial statements when discovering material misstatements after issuance?

The auditor must ensure that users are informed of the misstatements (D) Signup and view all the answers

Which of the following subsequent events would require adjustment to the financial statements?

Declaration of bankruptcy by a customer with an outstanding accounts receivable balance (C) Signup and view all the answers

What type of audit procedure is used to identify subsequent events?

Procedures specifically designed to discover subsequent events (D) Signup and view all the answers

What is the primary purpose of reviewing subsequent events in an audit?

To assess the risk of material misstatement (A) Signup and view all the answers

Which of the following is an example of a subsequent event that may require disclosure but does not have a direct effect on the financial statements?

The issuance of bonds or equity securities (A) Signup and view all the answers

What is the auditor's responsibility regarding subsequent events?

To identify and assess the risk of material misstatement (D) Signup and view all the answers

What is the purpose of cutoff and valuation tests in the audit of subsequent events?

To verify year-end account balances (B) Signup and view all the answers

What is the primary objective of reviewing records prepared subsequent to the balance sheet date?

To obtain information for incorporation into the current year’s account balances or footnotes (D) Signup and view all the answers

What is the purpose of performing final analytical procedures during the completion of the audit?

To identify and correct material misstatements (C) Signup and view all the answers

What is the outcome if an unexpected relationship is found due to client misstatement during final analytical procedures?

The auditor proposes an adjustment if the misstatement is material (A) Signup and view all the answers

What is a key responsibility of the auditor regarding the going-concern assumption?

To evaluate whether there is a substantial doubt about a client’s ability to continue as a going concern (B) Signup and view all the answers

What is the purpose of reviewing minutes issued subsequent to the balance sheet date?

To obtain information for incorporation into the current year’s account balances or footnotes (A) Signup and view all the answers

Who is typically responsible for performing analytical procedures during the final review of the audit documentation?

Partner (B) Signup and view all the answers

Subsequent Events in Auditing

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