An Example of a Type I Subsequent Event Is

question 48

Multiple Choice

An example of a Type I subsequent event is

• A) A tornado that destroys a client's factory after the balance sheet date.
• B) An event after the balance sheet date that confirms the auditor's belief (documented prior to the end of the client's fiscal year) that a large portion of the client's inventory is obsolete.
• C) Notification of an IRS audit after the balance sheet date.
• D) The client's Board of Directors unexpectedly resigns after the balance sheet date.

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Definitions:

Realized Gross Profit

The total earnings a company makes after deducting the direct costs associated with producing its goods or services.

Revenue Recognition

The accounting principle that dictates when revenue is considered earned and can be recorded in the company's financial statements.

IASB And FASB

The International Accounting Standards Board and the Financial Accounting Standards Board, two organizations involved in setting global and U.S. accounting standards, respectively.

Net Liability Contract Position

The net value of obligations exceeding the value of assets held under a contract, indicating a company's financial liability in the context of that contract.