cpa audit ch 14 review 6

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Joens1313
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277168
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cpa audit ch 14 review 6
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2014-06-18 23:38:20
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cpa audit 14 review
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cpa audit ch 14 review 6
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  1. Wilson, CPA, obtained sufficient appropriate audit evidence on which to base the opinion on Abco’s December 31, Year 1, financial statements on March 6, Year 2, the date of the auditor’s report. A subsequently discovered fact requiring revision of the Year 1 financial statements occurred on April 10, Year 2, and came to Wilson’s attention on April 24, Year 2. If the fact became known prior to the report release date, and the revision is made, Wilson’s report ordinarily should be dated using
    Using dual-dating

    A subsequently discovered fact (1) becomes known to the auditor after the report date and (2) may cause the auditor to revise the report. The report date is no earlier than the date when sufficient appropriate evidence is obtained. If such a fact becomes known to the auditor before the report release date, the auditor should (1) discuss the matter with management and (2) determine whether the statements need revision (adjustment or disclosure). If management revises the statements, the auditor should perform the necessary procedures on the revision. The auditor also (1) dates the report as of a later date or (2) dual-dates the report. Dual-dating indicates that the procedures performed subsequent to the original date are limited to the revision. Unless the auditor extends subsequent events procedures to a new date (one presumably later than April 24, Year 2, the date when the subsequently discovered fact became known), the auditor should dual-date the report.
  2. would the following event occurring after the issuance of an auditor’s report most likely would cause the auditor to make further inquiries about the previously issued financial statements?

    New information is discovered concerning undisclosed related-party transactions of the prior year.
    yes --- Subsequently discovered facts become known to the auditor after the date of the auditor’s report. Had they been known to the auditor at that date, they might have caused the auditor to revise the auditor’s report. If a subsequently discovered fact becomes known to the auditor after the report release date, the auditor should (1) discuss the matter with management and, if appropriate, those charged with governance and (2) determine whether the financial statements need revision and, if so, inquire how management intends to respond. Undisclosed related party transactions, if material, could cause the auditor to revise the auditor’s report if the statements are not revised.
  3. An auditor believes there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time. In evaluating the entity’s plans for dealing with the adverse effects of future conditions and events, would the auditor most likely consider, as a mitigating factor, the entity’s plans to postpone expenditures to upgrade its information technology system.
    yes -- Once an auditor has identified conditions and events indicating that substantial doubt exists about an entity’s ability to continue as a going concern, the auditor should consider management’s plans to mitigate their adverse effects. The auditor should consider plans to (1) dispose of assets, (2) borrow money or restructure debt, (3) reduce or delay expenditures, and (4) increase equity.

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