The following questions deal with review of subsequent events. Choose the best response.

a. Subsequent events for reporting purposes are defined as events that occur subsequent to the

(1) balance sheet date but prior to the date of the auditor's report.

(2) balance sheet date.

(3) date of the auditor's report.

(4)date of the auditor's report and concern contingencies that are not reflected in the financial statements.

b. A major customer of an audit client suffers a fire just prior to completion of year-end field work. The audit client believes that this event could have a significant direct effect on the financial statements. The auditor should

(1) advise management to adjust the financial statements.

(2) advise management to disclose the event in notes to the financial statements.

(3) disclose the event in the auditor's report.

(4) withhold submission of the auditor's report until the extent of the direct effect on the financial statements is known.

c. An example of an event occurring in the period of the auditor's field work subsequent to the end of the year being audited that normally would not require disclosure in the financial statements or the auditor's report would be

(1) issuance of a widely advertised capital stock issue with restrictive covenants.

(2) decreased sales volume resulting from a general business recession.

(3) serious damage to the company's plant from a wide¬ spread flood.

(4) settlement of a large liability for considerably less than the amount recorded.

d. With respect to issuance of an auditor's report that is dual dated for a subsequent event occurring after the completion of field work but before issuance of the auditor's report, the auditor's responsibility for events occur¬ ring subsequent to the completion of field work is

(1) limited to the specific event referred to in the auditor's report.

(2) limited to all events occurring up to the date of issuance of the report.

(3) extended to include all events occurring until the date of the last subsequent event referred to in the auditor's report.

(4) extended to include all events occurring up to the date of submission of the report to the client.

e. Shona Karr has examined the financial statements of Lurch Corporation for the year ended December 31, 2001. Although Karr's field work was completed on February 27, 2002, Karr's auditor's report was dated February 28, 2002, and was received by the management of Lurch on March 5, 2002. On April 4, 2002, the management of Lurch asked that Karr approve inclusion of this report in its annual report to shareholders, which will include unaudited financial statements for the first quarter ended March 31,2002. Karr approved the inclusion of this auditor's report in the annual report to shareholders. Under the circumstances, Karr is responsible for inquiring as to subsequent events occurring through

(1) February 27, 2002.

(2) February 28, 2002.

(3) March 31,2002.

(4) April 4, 2002.