An example of a Type I subsequent event is
A) A tornado that destroys a client's factory after the balance sheet date.
B) An event after the balance sheet date that confirms the auditor's belief (documented prior to the end of the client's fiscal year) that a large portion of the client's inventory is obsolete.
C) Notification of an IRS audit after the balance sheet date.
D) The client's Board of Directors unexpectedly resigns after the balance sheet date.

Question

Quizplus · Accepted Answer

A Type I subsequent event provides additional evidence about conditions that existed at the balance sheet date and affects the estimates inherent in the process of preparing financial statements. Option B describes an event that confirms a condition (inventory obsolescence) that existed at the balance sheet date.

An Example of a Type I Subsequent Event Is