Question

In: Accounting

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.

  1. Adjust the year-end financial statements to reflect the information contained in the event.

  1. Disclose the event in the notes to the financial statements and/or in the audit report.

3.         Neither adjustment nor disclosure is necessary.

  1. At 11:45 PM on December 31 (the last day of the fiscal year), a cruise ship owned by your client is struck by an iceberg. On January 1, the ship sinks. Luckily, in case you were wondering, all passengers and crew were safely rescued.

  1. After year-end, the Vice President for Human Resources resigned to take a job elsewhere.

  1. After year-end, a lawsuit is filed regarding a defect in one of your client’s products that the client was not previously aware of. It seems likely that this will be a costly lawsuit to defend and/or settle.

Solutions

Expert Solution

Appropriate treatment for Subsequent events:

  1. At 11:45 PM on December 31 (the last day of the fiscal year), a cruise ship owned by your client is struck by an iceberg. On January 1, the ship sinks. Luckily, in case you were wondering, all passengers and crew were safely rescued - As the information about the sink of the cruise ship is not known as on the date of balance sheet it is not an adjusting event. If the client is a significiant customer & the sales of the company effects significantly than it needs to be disclosed in the  notes to the financial statements.
  2. After year-end, the Vice President for Human Resources resigned to take a job elsewhere - there is no indication as on the balance sheet date about the resignation of the VP for HR. So, it is a non-adjusting event.  Neither adjustment nor disclosure is necessary.
  3. After year-end, a lawsuit is filed regarding a defect in one of your client’s products that the client was not previously aware of. It seems likely that this will be a costly lawsuit to defend and/or settle - As it was costly law suit(material), the event needs to be disclosed in the notes to the financial statements.

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

For each of the following subsequent (post-balance-sheet) events, indicate whether a company should adjust the financial...
For each of the following subsequent (post-balance-sheet) events, indicate whether a company should adjust the financial statements, disclose in notes to the financial statements, or neither adjust nor disclose. Sr. No. Subsequent (Post-Balance-Sheet) Events 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end. Adjust the Financial Statements Disclose in Notes to the Financial Statements Neither Adjust nor Disclose. 2. Introduction of a new product line. Adjust the Financial Statements Disclose in...
Identify the two types of subsequent events and indicate how each of them would affect the...
Identify the two types of subsequent events and indicate how each of them would affect the financial statements or the audit report.
3- For each of the following situations, indicate what type of audit report is most appropriate:...
3- For each of the following situations, indicate what type of audit report is most appropriate: a. The auditor lacks independence in fact, but not necessarily in appearance. b. There is a scope limitation and it is material but the overall financial statements are still presented fairly. c. The uncorrected misstatements are immaterial. d. There is a departure from GAAP and it is pervasively material. ( Accounting Auditing)
The following are independent situations for which you will recommend an appropriate audit report: 1. Subsequent...
The following are independent situations for which you will recommend an appropriate audit report: 1. Subsequent to the date of the financial statements as part of his post-balance sheet date audit procedures, a CPA learned that a recent fire caused heavy damage to one of a client’s two plants; the loss will not be reimbursed by insurance. The newspapers described the event in detail. The financial statements and footnotes as prepared by the client did not disclose the loss caused...
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...
For each of the following specific audit procedures, indicate the type of audit evidence it is...
For each of the following specific audit procedures, indicate the type of audit evidence it is gathering: (1) inspection of records or documents, (2) inspection of tangible assets, (3) observation, (4) inquiry, (5) confirmation, (6) recalculation, (7) reperformance, (8) analytical procedures, and (9) scanning. The audit evidences can be used more than once. a. Discussing the recording of sales discounts in the fourth quarter with the accounts receivable manager. b. Examining sales invoices for supporting customer order and shipping documents....
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...
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...
For each of the following situations, indicate whether ANOVA is appropriate; if not appropriate, the reason...
For each of the following situations, indicate whether ANOVA is appropriate; if not appropriate, the reason why not; and, if appropriate, the type of ANOVA that would be used (i.e., one-way, repeated measures, etc.): The independent variable (IV) is age group –people in their 60s, 70s, and 80s; the dependent variable (DV) is health-related hardiness, as measured on a 20-item scale. The IVs are ethnicity (white, African American, Hispanic, Asian) and birthweight status (<2,500 grams vs 2,500 grams); the DV...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT