The term existed on balance sheet can be explained as follows.
Eg a company failed to record its AP during the year under review, this will require an adjustment to the FS once the auditors attention is drawn to it
There are two types of subsequent events.
Type 1.. is an event that existed between the balance sheet date and the date of the auditors report.
Eg if a company is being sued on Dec 30 and the attorney can estimate the loss amount, this will require adjustment and disclosure.
Or if a company is being sued on Dec 30 but the attorney cannot estimate reasonable loss, it will only require disclosure.
Type 2 occurs after the auditor report….it may require either disclosure or adjustment
Eg.. an event that existed during the balance sheet date was not recognised or was hidden from the auditor during the audit.
This might require adjustment or disclosure depending on what the situation is.
Let's say you accrue liability expenses of $30, but you ended up paying $20 after the auditors report. This will require adjustment.
This is my small token, hope it helps.
REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!
Mass-CPA
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