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.

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Definitions:

Holding Period

The duration of time an investor holds onto an asset or investment before selling it.

Asset

A resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide future benefit.

Gain or Loss

The difference in value from when an asset is purchased to when it is sold, determining whether a transaction has resulted in a profit or loss.

Classification

In the context of finance and business, classification refers to the categorization or grouping of items, assets, or transactions based on certain criteria or characteristics, often for reporting, analysis, or regulatory compliance.