[thehip41]

Gleim software:

The auditor learned of the following situations after issuing the audit report on Feb 6. Each is important to users of the financial statements. For which one does the auditor have responsibility for disclosure of the newly discovered facts?

KEY word, DISCLOSURE

a. A conflict of interest involving credit officers and a principal company supplier that existed during the audit year was discovered on March 3rd.

b. A major lawsuit against the company, which was the basis for a modified report, was settled on unfavorable terms on March 1.

c. On Feb 16, a fire destroyed the principal manufacturing plant

d. The client undertook merger negotiations on March 16 and concluded a merger agreement on April 1.

I picked C. This is why it’s wrong: The auditor need not apply any other audit procedures or update the report for occurances after the subsequent events period.

wait, what? Where does it saying anything about more audit procedures in the question? Isn’t it asking me what I’m supposed to be disclosing?

Correct answer A The auditor has a responsibility after the issuance of the report for events that come to his attention for which he would have extended procedures or modified the report. A conflict of interest situation would have been examined by the auditor had he known about it during the audit process. Consequently, the auditor has a responsibility to determine the nature of the event and whether it might affect the fairness of the financial statements and the propriety of the report.

Just don’t get it. Someone explain this to me please.

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[mtaylo24]

You gotta think subsequent events vs subsequent discovery of facts (existed during the engagement, could have caused a different report) . A.) Is a discovery of facts B.) Is a subsequent event. Double check the last sentence of the question.

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[barelystayingsane]

Thanks, clarissa! Good note, mtaylo24! I'm adding that to my notes.

[barelystayingsane]

Thanks, clarissa! Good note, mtaylo24! I'm adding that to my notes.

[thehip41]

@mtay

All four scenarios are NEWLY discovered by the auditor.

However, only one of them existed as of the balance sheet date, so that's the only one the auditor has to disclose.

(since they all happened after the report date)

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[thehip41]

@mtay

All four scenarios are NEWLY discovered by the auditor.

However, only one of them existed as of the balance sheet date, so that's the only one the auditor has to disclose.

(since they all happened after the report date)

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[mtaylo24]

Exactly. A subsequent discovery of facts versus 3 subsequent events

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[mtaylo24]

Exactly. A subsequent discovery of facts versus 3 subsequent events

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

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