Multiple Choice Questions
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.
(2) Date of the auditor's report.
(3) Balance sheet date but before the 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. 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 will not require disclosure in the financial statements or auditor's report is
(1) Serious damage to the company's plant from a widespread flood.
(2) Issuance of a widely advertised capital stock issue with restrictive covenants.
(3) Settlement of a large liability for considerably less than the amount recorded.
(4) Decreased sales volume resulting from a general business recession.
c. Ruffin has audited the financial statements of Weaver Corporation for the year ended December 31, 2011. The auditor completed the audit work on February 22, 2012 and dated the audit report as of that date. The report was delivered to management for inclusion in its financial statements submitted by Weaver Corporation to its banker on February 27, 2012. Ruffin archived all its working papers for the audit on March 1, 2012. Under the circumstances, Ruffin is responsible for reviewing subsequent events occurring through
(1) December 31, 2011.
(2) February 22, 2012.
(3) February 27, 2012.
(4) March 1, 2012.