Assume that a major customer of the company that you are auditing files for bankruptcy during the subsequent period because of a deteriorating financial condition.Neither you nor the client becomes aware of the event until the bankruptcy filing is reported.What type of subsequent event would this be?
A)Type I subsequent event
B)Type II subsequent event
C)Neither Type I or Type II
D)Both Type I and Type II

Question

Quizplus · Accepted Answer

This is a Type I subsequent event because it relates to conditions that existed at the balance sheet date. The customer's deteriorating financial condition and eventual bankruptcy are directly related to their financial state at the time of the audit, indicating a condition that existed before the balance sheet date.

Assume That a Major Customer of the Company That You