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Homework answers / question archive / Pay attention to the events below and answer the questions based on those events
Pay attention to the events below and answer the questions based on those events.
a. Feb 28th, BOD authorizes the 2 for 1 stock split.
b. February 10, a fire destroyed the company's warehouse.
c. Jan 31, BOD authorizes the acquisition of a part of a subsidiary.
a. Feb 25th, the lawsuit decided to fight the company for the accident that occurred on Oct 10. Damage was estimated to be 3x higher than reality on Dec 31.
d. Mar 31, court ruled that minority groups are the legal owners of the land where the operational division is located.
e. March 7, foreign governments take over subsidiary companies following the fall of government power.
Questions:
1. Identify the event whether it includes the following options:
(1) type 1 subsequent event for subsequent event periods,
(2) type 2 subsequent events during subsequent event periods,
(3) type 1 subsequent event that occurs after fieldwork but before the publication of the report,
(4) type 2 subsequent events that occur after fieldwork but before the issuance of the report,
(5) post-audit discovery.
2. Explain the audit responsibilities for each incident!
3. Mention the sources needed to identify each incident!
| Type of Event | Options | Audit responsibility | Sources needed to identify |
| Feb 28th, BOD authorizes the 2 for 1 stock split. | type 2 subsequent events during subsequent event periods, | 1. Auditor should review the Board Minutes 2. Ensure disclosure is provided in financials |
1. Board Minutes 2. Discussion with management |
| February 10, a fire destroyed the company's warehouse. | type 2 subsequent events during subsequent event periods, | 1. Auditor should obtain evenidence for assessment of going concern assumptions as on balance sheet date. 2. Ensure disclosure in financials along with loss amount |
1. Insurance claim 2. Board Minutes 3. Discussion with management |
| Jan 31, BOD authorizes the acquisition of a part of a subsidiary | type 2 subsequent events during subsequent event periods, | 1. Auditor should review the Board Minutes 2. Ensure disclosure is provided in financials |
1. Board Minutes 2. Discussion with management |
| Feb 25th, the lawsuit decided to fight the company for the accident that occurred on Oct 10. Damage was estimated to be 3x higher than reality on Dec 31. | type 1 subsequent event for subsequent event periods, | 1. Auditor should ensure that financials has been adjusted for the outcome of the event considering this event existence on balance sheet date and outcome provides additional evidence for same. | 1. Court order copy 2. Board Minutes 3. News publications 4. Discussion with management |
| Mar 31, court ruled that minority groups are the legal owners of the land where the operational division is located. | type 1 subsequent event for subsequent event periods, | 1. Auditor should ensure that financials has been adjusted for the outcome of the event considering this event existence on balance sheet date and outcome provides additional evidence for same. | 1. Court order copy 2. Board Minutes 3. News publications 4. Discussion with management |
| March 7, foreign governments take over subsidiary companies following the fall of government power. | type 1 subsequent event for subsequent event periods, | 1. Auditor should ensure accounting is done considering that going concern assumption may no longer be valid | 1. News publications 2. Notice from govt. 3. Board Minutes 4. Discussion with management |
