statements. An example is new information discovered about undisclosed lease transactions of
the audited period. As a result, the auditor should make further inquiry to determine whether the
information is reliable and whether the facts existed at the date of the report. Choice "a" is
incorrect. The natural disaster is an example of a subsequent event occurring after the date of
the auditor's report that the auditor has no obligation to investigate. Choice "b" is incorrect. The
resolution of a disclosed contingency is an example of a subsequent event occurring after the
date of the auditor's report that the auditor has no obligation to investigate. Choice "d" is
incorrect. Sale of a subsidiary occurring after the date of the auditor's report is an example of a
subsequent event that the auditor has no obligation to investigate.
QUESTION: 89
Which of the following procedures would an auditor most likely perform in obtaining evidence
about subsequent events?

A. Determine that changes in employee pay rates after year-end were properly authorized.
B. Recompute depreciation charges for plant assets sold after year-end.
C. Inquire about payroll checks that were recorded before year-end but cashed after year-end.
D. Investigate changes in long-term debt occurring after year-end.

Answer(s): D
Explanation:
Choice "d" is correct. In obtaining evidence about subsequent events, an auditor would
investigate changes in long-term debt occurring after year-end to determine if there was an
unrecorded liability as of the end of the year. In addition, subsequent sales of LT debt require
footnote disclosure. Choice "a" is incorrect. Changes in employee pay rates occurring after
year-end would have no effect on the year under audit. Choice "b" is incorrect. Plant assets sold
after the end of the year (that were not related to a current year transaction such as a
discontinued operation) have no impact on the current year's financial statements. Choice "c" is
incorrect. Fol owing up on payroll checks that were cashed after year-end is generally not the
most effective way to audit accrued payroll and would provide little evidence about subsequent
events.
QUESTION: 90
An auditor is considering whether the omission of a substantive procedure considered
necessary at the time of an audit may impair the auditor's present ability to support the
previously expressed opinion. The auditor need not apply the omitted procedure if the:

A. Financial statements and auditor's report were not distributed beyond management and the
board of directors.
B. Auditor's previously expressed opinion was qualified because of a departure from GAAP.
C. Results of other procedures that were applied tend to compensate for the procedure omitted.
D. Omission is due to unreasonable delays by client personnel in providing data on a timely
basis.

Answer(s): C
Explanation:
Choice "c" is correct. When the auditor concludes that an auditing procedure considered
necessary at the time of the audit was omitted, the auditor should assess the importance of the
procedure to the present ability to support the previously issued opinion. The results of other

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