A Client Acquires a Company on January 12, 20X1 While

question 68

Multiple Choice

A client acquires a company on January 12, 20X1 while its auditor is preparing the audit report for 20X0. Plans for this acquisition began in late December, 20X0, although the auditor was unaware of them. GAAS requires the auditor to:

• A) include the purchase transaction in its audit work.
• B) include the purchase transaction in the footnotes.
• C) disclose the purchase transaction in the audit report.
• D) depending on the circumstances, the auditor may choose any of the above.

---

Definitions:

Cash Sales

Transactions in which the buyer pays the seller immediately with cash or other forms of immediate payment.

Average Collection Period

The average number of days it takes for a company to receive payments owed by its customers.

Accounts Receivable

Money owed to a business by its clients or customers for goods or services delivered but not yet paid for.

Sales

The total revenue a company generates from selling goods, services, or both, within a specific period.