A client acquires a company on January 12, 20X1 while its auditor is preparing the audit report for 20X0. Plans for this acquisition began in late December, 20X0, although the auditor was unaware of them. GAAS requires the auditor to:
A) include the purchase transaction in its audit work.
B) include the purchase transaction in the footnotes.
C) disclose the purchase transaction in the audit report.
D) depending on the circumstances, the auditor may choose any of the above.

Question

Quizplus · Accepted Answer

GAAS requires the auditor to include the purchase transaction in its audit work since it occurred before the end of the reporting period, and it may have an impact on the financial statements of that period. Including the transaction in the footnotes or disclosing it in the audit report would not be sufficient to comply with GAAS.

A Client Acquires a Company on January 12, 20X1 While