Which of the Following Events Occurring After the Issuance of a Client's

question 60

Multiple Choice

Which of the following events occurring after the issuance of a client's financial statements and the auditor's report most likely would cause the auditor to make further inquiries about the previously issued financial statements?

• A) An uninsured natural disaster occurs that may affect the entity's ability to continue as a going concern.
• B) A contingency is resolved that had been disclosed in the audited financial statements.
• C) New information is discovered concerning undisclosed lease transactions in the audited period.
• D) A subsidiary that accounts for 25 percent of the entity's consolidated net income is sold.

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Definitions:

Tax-Deferred Savings

Investment accounts, like IRAs and 401(k)s, where contributions and earnings are tax-exempt until withdrawal, typically at retirement.

Flexible Spending Account

A special account you put money into that you use to pay for certain out-of-pocket health care costs, using pre-tax dollars, thus reducing taxable income.

Medical Insurance

A type of insurance coverage that pays for an insured individual's healthcare expenses.

Taxable Income

The amount of income used to determine how much the taxpayer owes in taxes, after deductions and exemptions.