A Major Customer of an Audit Client Suffers a Fire

question 54

Multiple Choice

A major customer of an audit client suffers a fire after year-end,but just prior to completion of audit field work.The audit client 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:

Identification

Defense mechanism in which a person tries to become like someone else to deal with anxiety.

Oedipus Complex

A psychoanalytic theory in which a child has an unconscious sexual desire for the parent of the opposite sex and hostility toward the same-sex parent.

Freudian Concept

Refers to the theories and ideas proposed by Sigmund Freud that emphasize the influence of the unconscious mind, childhood experiences, and sexuality on personality and behavior.

Anal Stage

A phase in Freudian psychosexual development occurring from approximately 18 months to 3 years, characterized by pleasure in controlling bowel and bladder movements.