After the Balance Sheet Date, but Prior to the Issuance

question 95

Multiple Choice

After the balance sheet date, but prior to the issuance of the audit report, the client suffers an uninsured loss of their inventory as a result of a fire. The amount of the loss is material. The auditor should

• A) adjust the financial statements for the year under audit.
• B) add a paragraph to the audit report.
• C) advise the client to disclose the event in the notes to the financial statements.
• D) advise the client to delay issuing the financial statements until the economic loss can be determined.

Understand how to prepare adjusting entries for prepaid expenses.

Comprehend the adjustment process for unearned revenues.

Understand how to calculate and record depreciation expense using the straight-line method.

Grasp the impact of failing to record adjusting entries on financial statements.

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Definitions:

Protected Class

Groups of people legally protected from discrimination by law, based on characteristics such as race, gender, age, or disability.

Termination

The act of ending an employee's contract of employment with an organization.

Sexual Harassment Claims

Legal allegations made when an individual experiences unwelcome sexual advances, requests for sexual favors, or other verbal or physical harassment of a sexual nature.

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Actions or measures taken by an employer, often for improving workplace policies, compliance, or employee relations.