Question

HEEELLPPPP

An example of a Type 2 (non adjusting) subsequent event is:

	A.	An unexpected explosion after the year end at the company’s warehouse, which causes some fixed assets to be useless.
	B.	The client completes an environmental cleanup, allowing the auditor to more accurately assess a previously recorded contingent liability.
	C.	A client's customer, who has been experiencing financial difficulty for months, declares bankruptcy.
	D.	An event that confirms the auditor's belief (documented prior to the end of the client's fiscal year) that a large portion of the client's inventory is obsolete.

Answer 1

Answer (A):- An unexpected explosion after the year end at the company’s warehouse, which causes some fixed assets to be useless.

Explanation:- An Entity shall not adjust the financial statements with respect of those events which are reported after the end of reporting period and which reflect conditions that arose after the end of reporting period (i.e. Non-Adjusting Events). The statement in Option (A) A is a subsequent event that provides new information about a condition that did not exist on the balance sheet date.

All the other statements except (a) represent events that provides additional information about pre-existing conditions that existed on the balance sheet date.