The following unrelated events occurred after the balance sheet date but before the audit report was prepared:
Question:
The following unrelated events occurred after the balance sheet date but before the audit report was prepared:
1. The granting of a retrospective pay increase to selected employees.
2. Receipt of a letter from the tax authorities stating that additional income tax is due for a prior year.
3. Filing of an antitrust suit by the federal government.
4. Declaration of a stock dividend.
5. Sale of a fixed asset at a substantial profit.
Required:
A. Define ‘review for subsequent events’ and ‘subsequent events’.
B. Identify what procedure the auditor might have used to identify events and to bring each of these items to the auditor’s attention.
C. Discuss the auditor’s responsibility to recognise each of these in connection with the audit report.
Audit ReportThe audit report is issued by a certified public accountant who is appointed by the shareholders to provide assurance upon the truth and fairness of the financial statements prepared by the managers of the company. Audit report contains the... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
A Subsequent events are transactions and other pertinent events that occurred after the balance sheet date which affect the fair presentation or disclosure of the statements being audited Review for s...View the full answer
Principles of Auditing An Introduction to International Standards on Auditing
ISBN: 978-0273768173
3rd edition
Authors: Rick Hayes, Philip Wallage, Hans Gortemaker
