Which type of subsequent event requires consideration by management and evaluation by the auditor?
A) Subsequent events that have no direct effect on the financial statements but for which disclosure is advisable
B) Subsequent events that have a direct effect on the financial statements and require adjustment
C) Both A and B
D) Neither A nor B

Question

Quizplus · Accepted Answer

Both types of subsequent events require consideration by management and evaluation by the auditor. Subsequent events that have a direct effect on the financial statements and require adjustment should be recognized and disclosed in the financial statements. Subsequent events that have no direct effect on the financial statements but for which disclosure is advisable should be disclosed in the footnotes to the financial statements. Therefore, both types of subsequent events are important to the financial statements and should be evaluated and disclosed accordingly.

Which Type of Subsequent Event Requires Consideration by Management and Evaluation