Which type of subsequent event requires consideration by management and evaluation by the auditor?
A) subsequent events that have no direct effect on the financial statements but for which disclosure is advisable
B) subsequent events that have a direct effect on the financial statements and require adjustment
C) both A and B
D) none of the above

Question

Quizplus · Accepted Answer

Management is responsible for identifying and evaluating subsequent events that have occurred after the balance sheet date but before the financial statements are issued. The auditor should evaluate management's assessment of such events and determine if they have a direct effect on the financial statements (requiring adjustment) or no direct effect (but requiring disclosure). Therefore, both types of subsequent events require consideration by management and evaluation by the auditor.

Which Type of Subsequent Event Requires Consideration by Management and Evaluation