Which of the following procedures would an auditor ordinarily perform during the review of subsequent events?
A) An analysis of related party transactions for the discovery of possible irregularities.
B) A review of the cut-off bank statements for the period after the year-end.
C) An inquiry of the client's legal counsel concerning litigation.
D) An investigation of material weaknesses in internal control previously communicated to the client.

Question

Quizplus · Accepted Answer

During the review of subsequent events, an auditor would ordinarily perform an inquiry of the client's legal counsel concerning litigation. This is to determine if any litigation has commenced or is threatened that would have a material effect on the financial statements. This is a requirement of auditing standards. Option A is incorrect because although the analysis of related party transactions is an important procedure, it is not specifically related to the review of subsequent events. Option B is incorrect because the review of cut-off bank statements is conducted during the year-end audit, not during the subsequent events review. Option D is incorrect because the auditor would have already conducted an investigation of material weaknesses in internal control during the year-end audit, and would not repeat this procedure during the subsequent events review.

Which of the Following Procedures Would an Auditor Ordinarily Perform