An example of a Type I subsequent event is:
A)a tornado that destroys an entity's factory after the balance sheet date.
B)an event after the balance sheet date that confirms the auditor's belief (documented prior to the end of the entity's fiscal year)that a large portion of the entity's inventory is obsolete.
C)notification of an IRS audit after the balance sheet date.
D)the entity's Board of Directors unexpectedly resigns after the balance sheet date.

Question

Quizplus · Accepted Answer

Type I subsequent events provide additional evidence about conditions that existed at the balance sheet date. Choice B, which involves the obsolescence of inventory, is an example of a condition that existed at the balance sheet date and is confirmed by events after that date.

An Example of a Type I Subsequent Event Is