When a Subsequent Event Provides Evidence About Conditions That Existed

question 21

Multiple Choice

When a subsequent event provides evidence about conditions that existed at the balance sheet date,what is the best course of action for the auditor to follow?

• A)Assign a specialist.
• B)Ensure that the financial statements are adjusted to reflect the information,including any necessary footnote disclosures.
• C)Shop for an opinion that fits the desired type of event.
• D)Provide management with a new engagement letter to document the terms of the revised arrangement.

---

Definitions:

Mixed Cost

A cost composed of a fixed and variable component, changing with the level of output or activity.

Variable Cost

A cost that varies in direct proportion to changes in the level of activity or production volume.

Fixed Cost

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance.

Total Miles Driven

The cumulative distance that a vehicle has traveled, often used for business accounting or to monitor vehicle performance and maintenance needs.