Which of the following procedures should an auditor generally perform regarding subsequent
events?

A. Compare the latest available interim financial statements with the financial statements being
audited.
B. Send second requests to the client's customers who failed to respond to initial accounts
receivable confirmation requests.
C. Communicate material weaknesses in the internal control structure to those charged with
governance.
D. Review the cut-off bank statements for several months after the year-end.

Answer(s): A
Explanation:
Choice "a" is correct. When performing procedures regarding subsequent events, the auditor
generally will compare the latest available interim financial statements with the financial
statements being audited to determine if any significant subsequent event occurred that would
need to be reflected in the statements being audited. Choice "b" is incorrect. Sending second
requests to the client's customers who failed to respond to initial A/R confirmation requests is a
substantive procedure that provides evidence about receivables existing at year end, not about
subsequent events. Choice "c" is incorrect. Internal control weaknesses should be
communicated to those charged with governance, but this communication provides no evidence
about subsequent events. Choice "d" is incorrect. Bank cut-off statements generally are
reviewed for only a week to ten days subsequent to year-end. Reviewing them for a longer
period such as "several months" would provide little additional audit evidence regarding the YE
FS and thus would not be a cost beneficial procedure.
QUESTION: 131
An auditor's report contains the following sentences:
We did not audit the financial statements of JK Co., a whol y owned subsidiary, which
statements reflect total assets and revenues constituting 17 percent and 19 percent,
respectively, of the related consolidated totals. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to the amounts
included for JK Co., is based solely on the report of the other auditors.
These sentences:

A. Are an improper form of reporting.
B. Divide responsibility.
C. Disclaim an opinion.
D. Qualify the opinion.

Answer(s): B
Explanation:
Choice "b" is correct. The report indicates a division of responsibility. Choice "a" is incorrect.
Words describing the percentages of revenues and assets audited by other auditors are proper
in dividing responsibility.
Choice "c" is incorrect. Dividing responsibility does not affect the unqualified opinion, nor does it
require a disclaimer of opinion.
Choice "d" is incorrect. Dividing responsibility does not affect the unqualified opinion, nor does it
require a qualified opinion.
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