Which of the Following Events Occurring After the Issuance of an Auditor's

question 1008

Multiple Choice

Which of the following events occurring after the issuance of an auditor's report most likely would cause the auditor to make further inquiries about the previously issued financial statements?

• A) A technological development that could affect the entity's future ability to continue as a going concern.
• B) The discovery of information regarding a contingency that existed before the financial statements were issued.
• C) The entity's sale of a subsidiary that accounts for 30% of the entity's consolidated sales.
• D) The final resolution of a lawsuit explained in a separate paragraph of the auditor's report.

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate overhead costs to products or services, based on a chosen activity base.

Automated Shaper

A machine tool controlled by computers, designed for shaping materials such as metals or wood.

Unused Capacity

The portion of a company's production capability that is not currently being utilized for production.

Job-Order Costing

An accounting methodology that tracks costs individually for each job, rather than on a department or factory-wide basis.