A Major Customer of an Entity Suffers a Fire After

question 40

Multiple Choice

A major customer of an entity suffers a fire after year-end, but just prior to completion of audit fieldwork. The entity believes that this event could have a significant direct effect on the financial statements. The auditor should:

• A)advise management to disclose the event in the notes to the financial statements.
• B)disclose the event in the auditor's report.
• C)withhold submission of the auditor's report until the extent of the direct effect on the financial statements is known.
• D)advise management to adjust the financial statements.

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Definitions:

Processed Further

Refers to additional operations or enhancements performed on a product after the initial manufacturing or production stage.

Differential Cost

Represents the difference in total cost that will arise from choosing one option over another in business decisions, often used in the evaluation of alternative projects or decisions.

Product P

A placeholder name for a specific product, often used in examples or theoretical scenarios.

Opportunity Cost

The amount of income forgone from an alternative to a proposed use of cash or its equivalent.