Michael, CPA, is examining the financial statements of the Diannah Corporation as of and for the period ended September 30, 19X0. Michael plans to complete the field work and sign the auditor's report on November 15, 19X0. Michael's audit work is primarily designed to obtain evidence that will provide a reasonable degree of assurance that the Diannah Corporation's September 30, 19X0, financial statements present fairly the financial position, results of operations, and changes in financial position of that enterprise in accordance with generally accepted accounting principles consistently applied. Michael is concerned, however, about events and transactions of Diannah Corporation that occur after September 30, 19X0, since Michael does not have the same degree of assurance for such events as for those that occurred in the period ending September 30, 19X0.

Required:

a. Define what is commonly referred to in auditing as a "subsequent event" and describe the two general types of subsequent events that require consideration by the management of Diannah Corporation and evaluation by Michael.

b. Identify those auditing procedures that Michael should follow to obtain the necessary assurances concerning subsequent events.