Question

The auditor has a responsibility to review transactions and activities occurring after the balance sheet date to determine whether anything occurred that might affect the statements being audited. The procedures required to verify these transactions are commonly referred to as the review for

A) contingent liabilities.
B) subsequent year's transactions.
C) late unusual occurrences.
D) subsequent events.

Answer 1

The auditor reviews transactions after the balance sheet date to determine if they affect financial statements, known as subsequent events.

Step-by-step explanation:

The auditor's responsibility to review transactions and activities that occur after the balance sheet date is referred to as the review for subsequent events. These events might affect the financial statements being audited. For example, auditors might look for new obligations that could impact the company's financial health, such as legal settlements or significant contracts agreed to after the fiscal year-end but before the financial statements are issued. These reviews are essential for ensuring that all relevant information is accounted for to have a true and fair view of the financial position of the entity.