Question

What is a Type 1 subsequent event?

A. An event that provides evidence of conditions that existed at the date of the financial statements.
B. An event occurring between the date of the financial statements and the date of the auditor's report.
C. An event that provides evidence of conditions that arose after the date of the financial statements.
D. An event that does not require an adjustment to the financial statements but may require disclosure in the notes to the financial statements.

Answer 1

A Type 1 subsequent event is one that provides evidence about conditions that existed at the date of the financial statements and can require the financial statements to be adjusted to reflect this new information.

Step-by-step explanation:

A Type 1 subsequent event refers to A. An event that provides evidence of conditions that existed at the date of the financial statements. These events occur after the balance sheet date but before the financial statements are issued or available to be issued. They provide additional information about conditions that were already present at the balance sheet date. For example, if a lawsuit settlement is decided after the balance sheet date, but relates to events occurring before that date, it is a Type 1 event and the financial statements must be adjusted to reflect the settlement.