The Audit Procedures for the Subsequent Events Review Can Be

question 6

Multiple Choice

The audit procedures for the subsequent events review can be divided into two categories: (1) procedures 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 first category?

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

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Definitions:

Agency Relationship

A legal and fiduciary relationship between two parties, where one (the agent) is authorized to act on behalf of the other (the principal) in business dealings.

Agent

A person who agrees to represent or act for another, called the principal.

Licensed Professional

An individual who has been officially authorized to perform certain specialized services or activities due to meeting specific governmental or professional standards.

Unlicensed Agent

An individual acting in a role that requires licensure, such as real estate or insurance, without possessing the necessary legal authorization.