When a subsequent event provides evidence about conditions that did not exist at the balance sheet date,what is the best course of action for the auditor to follow?
A)Ensure that any necessary footnote disclosures be included with the statements.
B)Ensure that the financial statements are adjusted to reflect the information,including any necessary footnote disclosures.
C)Give an inappropriate opinion.
D)Provide management with a new engagement letter to document the terms of the revised arrangement.

Question

Quizplus · Accepted Answer

The best course of action for the auditor in this situation is to ensure that any necessary footnote disclosures be included with the statements. This will provide transparency and clarity to the users of the financial statements regarding the subsequent event and its impact on the financial statements. Adjusting the financial statements without proper documentation or disclosure could result in an inappropriate opinion, and providing management with a new engagement letter is not relevant to addressing the subsequent event.

When a Subsequent Event Provides Evidence About Conditions That Did