[CPA2BEE]

I am getting different answers from different sources for the same question. Someone help!

Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?

a. Investigating changes in stockholders’ equity occurring after year-end.

b. Confirming bank accounts established after year-end.

c. Inquiring of the entity’s legal counsel concerning litigation, claims, and assessments arising after year-end.

d. Recomputing a sample of large-dollar transactions occurring after year-end for arithmetic accuracy.

Becker says C, NINJA says A. WHICH ONE IS IT!?!?!?! I think A is more correct.

 

 

CA CPA - est. Dec 2016

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[Anonymous]

I like C better because of the word “inquiry.” For the auditor to investigate subsequent events I think they have to ask management if there are any subsequent events they need to be aware of. So they would always perform C. Meanwhile I don't think they would perform A unless they had inquired already. If they inquired management and they said there's no changes in stockholder's equity they would probably be less likely to investigate it. The question is what is what would the auditor “most likely perform.”

B and D are just substantive procedures so no to those.

This is an example of why Audit is effing stupid. But yea if this test was only 3 questions and C wasn't available I would pick A too.

[lswang]

The answer is C for me as well, and I agree with chrislo's reasoning. The question says “most likely.” You would always inquire before you investigate further, so the chances of inquiry > chances of investigation.

FAR | 81 - July 21 15
REG | 66 - Oct 1 15 | 87 - Jan 7 16
AUD | 90 - Oct 29 15
BEC | 86 - Nov 25 15

[CPA2BEE]

Thanks for your posts guys. And after thinking about it (probably for too long) – both A and C are actually used to obtain evidence about subsequent events, but the difference lies in the subtlety between “Inquiry” and “Investigation”. An auditor is more likely to inquire about subsequent events, rather than actively investigate it; at least in the context of this question.

OH AUDIT, HOW I HATE YOU.

CA CPA - est. Dec 2016

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[lswang]

You know how in life in general, people tell you to not overthink things? Well the opposite is true for AUD. Every single word is important. 😉

FAR | 81 - July 21 15
REG | 66 - Oct 1 15 | 87 - Jan 7 16
AUD | 90 - Oct 29 15
BEC | 86 - Nov 25 15

[Author]

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