In Regard to Identifying and Evaluating Subsequent Events, AU 560

question 17

Multiple Choice

In regard to identifying and evaluating subsequent events, AU 560.12 specifies that the auditor inquires of management having responsibility for financial and accounting matters as to:

• A) any substantial contingent liabilities or commitments existing at the balance sheet date or report date.
• B) any significant changes in capital stock, long-term debt, or working capital to the date of inquiry.
• C) the current status of items previously accounted for on the basis of tentative, preliminary, or conclusive data.
• D) whether any unusual adjustments have been made since the report date.
• E) litigation, claims, and assessments.

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Definitions:

Interest Payments

The amount paid by a borrower to a lender over a period of time for the use of borrowed money, typically expressed as an annual percentage rate.

Earnings Decrease

This term refers to a reduction in a company’s net income or earnings per share (EPS) in comparison to a previous period, indicating a decline in profitability.

Industry Averages

Statistical measures that represent the average or typical performance within a particular industry or sector.

Common-Sized Financial Statements

Financial reports where all line items are presented as a percentage of a significant total, facilitating comparison across different periods or companies.