Question

A Type II subsequent event_____________.

A. Provides evidence of conditions that arose after the date of the financial statements
B. Provides evidence of conditions that arose before the date of the financial statements
C. Provides evidence of conditions that arose after the date of the auditor's report
D. Provides evidence of conditions that arose before the date of the auditor's report

Answer 1

A Type II subsequent event provides evidence about conditions that arose after the date of the financial statements and does not require adjustments to the statements themselves. The option (B) is correct.

Step-by-step explanation:

A Type II subsequent event provides evidence of conditions that arose after the date of the financial statements. This type of event does not relate to conditions that existed at the balance sheet date and does not affect the accuracy of the financial statements already issued.

However, if the event provides additional information about conditions that existed at the balance sheet date, it would then be classified as a Type I subsequent event, and the financial statements might need to be adjusted. Therefore, option (B) is correct.