The Audit Procedures for the Subsequent Events Review Can Be

question 56

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 of the following procedures is in the second category?

• A) Compare the subsequent-period purchase price of inventory with the recorded cost as a test of lower-of-cost-or-market valuation.
• B) Test the collectability of accounts receivable by reviewing subsequent period cash receipts.
• C) Examine subsequent period sales and purchases transactions to determine whether the cutoff is accurate.
• D) Correspond with legal counsel.

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Definitions:

Receivables

Money owed to a company by its customers or others for goods or services that have been delivered or used but not yet paid for.

Cash Realizable Value

The net amount of cash that is expected to be generated from the conversion of assets.

Operating Cycle

The period of time it takes for a company to purchase inventory, sell it, and turn the sales back into cash.

Allowance for Doubtful Accounts

A contra-asset account used to reduce accounts receivable to its net realizable value, anticipating some accounts might not be collected.