The Audit Procedures for the Subsequent Events Review Can Be

question 22

Multiple Choice

The audit procedures for the subsequent events review can be divided into two categories: (1) procedures normally integrated as a part of the verification of year-end account balances and (2) those performed specifically for the purpose of discovering subsequent events.Which one of the following procedures is in the first category?

• A) Review journals and ledgers of year 2 to determine the existence of any transaction related to year 1.
• B) Obtain a management representation letter written by the client.
• C) Examine subsequent period sales and purchases transactions to determine whether the cutoff is accurate.
• D) Inquire of the client regarding contingent liabilities.

---

Definitions:

Perpetual Inventory System

An inventory management method that records the sale or purchase of inventory immediately through electronic tracking.

Gross Method

An accounting approach for recording purchases at the gross invoice amount before any trade discounts are taken.

Merchandising Transactions

Business activities related to the buying and selling of merchandise, which may involve inventory purchases, sales transactions, and the return of goods.

Journal Entries

Journal entries are the records of financial transactions in the accounting books, marking the initial step in the accounting cycle, detailing debits and credits.