Which of the Following Is the Best Example of a Type

question 73

Multiple Choice

Which of the following is the best example of a Type I subsequent event?

• A)A related-party transaction occurs during fieldwork.
• B)The company defaults on its line-of-credit with the bank subsequent to year end but previous to the release of the audit opinion.
• C)Litigation that was accrued as a liability in the year under audit is settled subsequent to year-end for an amount materially in excess of estimates.
• D)The company initiates an initial public offering subsequent to year-end.

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Definitions:

Cash Control

Methods and procedures that a company uses to monitor, manage, and protect its cash transactions and balances.

Large Companies

Businesses characterized by significant revenue, extensive operational scales, or substantial numbers of employees, often having considerable influence in their respective markets.

Internal Control

A system of policies and procedures implemented by a firm to safeguard its assets, ensure financial reporting accuracy, promote operational efficiency, and encourage adherence to prescribed managerial policies.

Operational Efficiency

The ability of an organization to minimize input and operational costs while maximizing output or productivity.