Question
In: Accounting
Subsequent Events Facts: You are performing an annual audit of a company with a December 31,...
Subsequent Events Facts:
You are performing an annual audit of a company with a December 31, 20X1 year-end. Your firm is planning to complete the audit on March 1, 20X2 and release the report on March 31, 20X2. On March 15, 20X2, two material subsequent events occur:
• A fire caused extensive damage to the company’s manufacturing plant in New Jersey.
• A large customer went bankrupt. At December 31, 20X1, the Company had a receivable of $2,500,000 from this customer; at December 31, 20X1 the Company had established an allowance for doubtful accounts of $700,000 for this customer.
Required:
1. Explain whether each subsequent event is a Type 1 or Type 2 Subsequent Event.
2. What is the impact of each subsequent event on the company’s audited financial statements for the year ended December 31, 20X1? Be specific as to whether (a) there will be an adjustment which will cause the company’s balance sheet and / or income statement to change plus footnote disclosure, (b) there will only be footnote disclosure, or (c) there will be no impact to either the financial statements or the footnote disclosures.
3. How should your Audit Firm date its audit report?
Solutions
ekkarill92 answered 9 months agoRelated Solutions
Subsequent Events Facts: You are performing an annual audit of a company with a December 31,...
Subsequent Events
Facts:
You are performing an annual audit of a company with a
December 31, 20X1 year-end. Your firm is planning to complete the
audit on March 1, 20X2 and release the report on March 31, 20X2. On
March 15, 20X2, two material subsequent events occur:
A fire caused extensive damage to the company’s
manufacturing plant in New Jersey.
A large customer went bankrupt. At December 31, 20X1,
the Company had a receivable of $2,500,000 from this customer; at...
You are performing an annual audit of a company with a December 31, 20X1 year-end. Your...
You are performing an annual audit of a company with a December
31, 20X1 year-end. Your firm is planning to complete the audit on
March 1, 20X2 and release the report on March 31, 20X2. On March
15, 20X2, two material subsequent events occur: • A fire caused
extensive damage to the company’s manufacturing plant in New
Jersey. • A large customer went bankrupt. At December 31, 20X1, the
Company had a receivable of $2,500,000 from this customer; at
December...
Assume that in an annual audit of Sandhill Inc. at December 31, 2020, you find the...
Assume that in an annual audit of Sandhill Inc. at December 31,
2020, you find the following transactions near the closing date.
Assuming that each of the amounts is material, state whether the
merchandise should be included in the client’s inventory.
Transactions 1. A special machine, fabricated to order for a
customer, was finished and specifically segregated in the back part
of the shipping room on December 31, 2020. The customer was billed
on that date and the machine excluded...
Given the following four subsequent events (unrelated) for the December 31, 2019 year-end: On January 15,...
Given the following four subsequent events (unrelated) for the
December 31, 2019 year-end:
On January 15, 2020, a major customer declared bankruptcy.
On January 25, 2020 a fire destroyed a major suppliers building
that warehouses inventory .
On January 4, 2020, an investment analyst downgraded
the stock of the auditee.
The audit report date is February 15, 2020.
Required:
State
clearly the type of subsequent event (Type I or Type II), if any,
and the required impact on...
What audit procedures should the auditor perform to search for subsequent events ?
What audit procedures should the auditor perform to search for
subsequent events ?
This relates to Subsequent Events for Audit ---- Tanners Ltd is a wholesaler of packaging products...
This relates to Subsequent Events for Audit
----
Tanners Ltd is a wholesaler of packaging products and
you are about to complete the financial report audit for the year
end 30 June 2015. Before you finalise your audit opinion you are
considering some significant events that have recently occurred in
Tanners Ltd.
Denners Ltd and Minners Ltd
Denners Ltd, a customer of Tanners, is suing the company due to
being sold faulty packaging.
Denners is a food manufacturer and has...
In connection with an audit client, for each of the following subsequent events indicate the appropriate...
In connection with an audit client, for each of the following
subsequent events indicate the appropriate treatment from the list
below. Assume your client has a December 31 yearend.
Adjust the year-end financial statements to reflect the
information contained in the event.
Disclose the event in the notes to the financial statements
and/or in the audit report.
3. Neither
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What type of subsequent events may arise on the completion of Audit work? [8 Marks]
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In your audit of Newman Company, you find that a physical inventory on December 31, 2019,...
In your audit of Newman Company, you find that a physical
inventory on December 31, 2019, showed merchandise with a cost of
$399,450 was on hand at that date. You also discover the following
items were all excluded from the $399,450.
1. Merchandise costing $52,310 shipped by a vendor f.o.b.
shipping point on December 31, 2017, and received by Newman on
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In your audit of Chris Anderson Company, you find that a
physical inventory on December 31, 2020, showed merchandise with a
cost of $439,750 was on hand at that date. You also discover the
following items were all excluded from the $439,750.
1.
Merchandise of $63,260 which is held by Anderson on
consignment. The consignor is the Max Suzuki Company.
2.
Merchandise costing $34,870 which was shipped by Anderson
f.o.b. destination to a customer on December 31, 2020. The customer...
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