Question

Which of the following is not a procedure that auditors typically perform to search for significant events during the period after year-end but prior to the audit report date?

1) Review minutes of board of directors' meeting.
2) Review the latest available interim financial statements.
3) Inquire about any unusual adjustments made subsequent to the balance sheet date.
4) Review changes in internal control during the period subsequent to the balance sheet date.

Answer 1

Auditors do not typically review changes in internal control during the period after year-end but prior to the audit report date. The correct answer is 4.

Step-by-step explanation:

The procedure that auditors typically do not perform during the search for significant events between year-end and the audit report date is reviewing changes in internal control after the balance sheet date. Auditors focus on reviewing events that could affect the financial statements. They usually review the minutes of the board of directors' meetings, inquire about any unusual adjustments made after year-end, and review the latest available interim financial statements. Such actions ensure that the financial statements they audit are up to date with the most relevant information.

In the context of corporate governance, the board of directors, auditing firm, and outside investors play critical roles in ensuring that a company's financial information is accurate. However, cases like Lehman Brothers illustrate the catastrophic consequences when these governance institutions fail. It is within this framework that auditors perform their duties, which includes diligently looking for significant events that can impact the financial reporting.

Hence, the correct option is 4.