The audit procedures for the subsequent events review can be divided into two categories: (1) procedures integrated as a part of the verification of year-end account balances, and
(2) those performed specifically for the purpose of discovering subsequent events. Which of the following procedures is in the first category?
A) Inquire of client regarding contingent liabilities.
B) Obtain a letter of representation written by client.
C) Subsequent period sales and purchase transactions are examined to determine whether the cutoff is accurate.
D) Review journals and ledgers of year 2 to determine the existence of any transactions related to year 1.

Question

Quizplus · Accepted Answer

Subsequent period sales and purchase transactions are part of the verification of year-end account balances, as they help to determine the accuracy of the cutoff of sales and expenses between the old and new accounting periods. Inquiring about contingent liabilities and obtaining a letter of representation are procedures that are specifically performed for the purpose of discovering subsequent events. Reviewing journals and ledgers of year 2 also pertains to discovering subsequent events and would be in the second category of procedures.

The Audit Procedures for the Subsequent Events Review Can Be