After the Financial Statements Have Been Issued, If a 'Subsequent

question 14

Multiple Choice

After the financial statements have been issued, if a 'subsequent discovery of facts occurs' (the auditor becomes aware that some information in the statements is materially misleading) , the auditor should ask the client to issue an immediate revision.This is required only if:

• A) management makes the discovery and informs the auditor.
• B) the discovery of facts relates to developments that occurred after the date of the auditor's report.
• C) the facts discovered already existed at the audit report date.
• D) the auditor makes the subsequent discovery of facts himself or herself.

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Definitions:

Rebate

A return of part of the original payment for some service or merchandise, serving as a discount or reduction after the purchase.

Void Contract

refers to an agreement with no legal effect from the beginning due to an illegal purpose or violation of a mandatory statute.

Voidable Contract

A legal agreement that is valid and enforceable on its face, but can be declared void by one or more of the parties for certain legal reasons.

Contract Formation

The process by which parties' agreement reaches the point where a legally binding contract is established.