CAF-8 · Chapter 10 · Question 8 of 10
An auditor reviews a 'Subsequent Event' where a major debtor went bankrupt 2 weeks after the year-end but before the audit report was signed. How should this be handled?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Adjust the year-end financial statements by recording a bad debt provision for that debtor (Adjusting Event).
Explanation
The bankruptcy of a debtor after the year-end provides evidence of a condition (the debtor's insolvency) that existed at the year-end. This is an 'Adjusting Event' under IAS 10.
More Substantive Procedures: Other Areas MCQs
- Q10Which of the following procedures specifically tests for 'Unrecorded' liabilities (Completeness)?
- Q1When auditing 'Provisions' (e.g., for a pending legal case), the auditor's primary concern under IAS 37 is whether:
- Q2An auditor is reviewing the 'Contingent Liabilities' of a company. A major lawsuit against the company is deemed 'Possible' but not…
- Q3To obtain evidence about a pending legal claim against the client, the auditor should primarily:
- Q4In auditing share capital, which document provides the best evidence of the 'Authorized Share Capital' of a company incorporated in…