After Issuance of the Auditor's Report, the Auditor Has No

question 5

Multiple Choice

After issuance of the auditor's report, the auditor has no obligation to make any further inquiries with respect to audited financial statements covered by an auditor's report unless

• A) A lawsuit in which risk of loss was considered remote is resolved in the company's favor.
• B) A development occurs that may affect the entity's ability to continue as a going concern.
• C) A material fraud is initiated by an employee after the report is issued.
• D) Evidence of significant, non-arms-length, related party transactions that happened prior to year-end is discovered.

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Definitions:

Customer Refunds Payable

A liability account for estimated refunds and allowances that will be paid or granted to customers in the future.

Estimated Returns Inventory

A current asset account for the estimated amount of merchandise that will be returned by customers.

Customer Refunds Payable

Liabilities owed to customers for products or services that were sold but later returned or found unacceptable.

Perpetual Inventory

An inventory tracking system that records the sale or purchase of inventory immediately through the use of computerized systems.