Guess everyone's taking a break. The answer is C.
For each event discovered subsequent to the end of the year under audit but before the audit report has been issued, the auditor would ask, “Does this event provide additional evidence with respect to conditions that existed at the balance sheet date?†Only one of the answer choices meets this criterion. The loss on an uncollectible trade receivable recorded in Year 1 from a customer bankruptcy declared in Year 2 would be indicative of conditions existing at the balance sheet date (the customer's financial condition would have been deteriorating at the end of Year 1) and would require an adjustment so that the financial statements are not misleading.
The other three answer choices provide evidence with respect to conditions that did not exist at the balance sheet date but arose subsequent to that date. Each of these events would require disclosure, but not adjustment, in the financial statements.
If I can do it, you can do it too!
Certified CPA, 2016
Licensed CPA since Apr 16
Order in sequence of passing
FAR-71,71,79
BEC-80
REG-72,77
AUD-56,72,72,72,80! Thank you, thank you, thank you Lord!
FAR/BEC/AUD: Becker & Yaeger lectures (Wiley & Ninja MCQs). REG: Becker lectures (Ninja MCQs).
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