The auditor has completed her assessment of subsequent events.The proper accounting for subsequent events that have a direct effect on the financial statements is to
A)adjust the financial statements for the year under audit.
B)disclose in the notes to financial statement the amount of the adjustment.
C)duly note in the audit workpapers that next year's financial statements need to be adjusted.
D)make no adjustment of the financial statements for the year under audit.

Question

Quizplus · Accepted Answer

The proper accounting for subsequent events that have a direct effect on the financial statements is to adjust the financial statements for the year under audit. This ensures that the financial statements accurately reflect the financial position and performance of the company as of the end of the reporting period. Disclosure in the notes to financial statements is not sufficient on its own, and making no adjustment would result in material misstatements in the financial statements. Noting in the audit workpapers that next year's financial statements need to be adjusted does not address the need to adjust the financial statements for the year under audit.

The Auditor Has Completed Her Assessment of Subsequent Events