Question

Describe what audit procedures you (the auditor) likely performed which resulted in your discovery of these subsequent events.

3. There was an avalanche in Park City, Utah resulting in serious damage to the Company’s main manufacturing plant on February 14, 2020. Even after insurance reimbursements, the Company expects to have material losses as a result of the avalanche. (Note: you do not need to discuss the adequacy of their insurance policy).

Answer 1

This is a transaction of subsequent event, auditor should consider all the events that occur till the date of audit report which have a material impact on the financial statements and financial position of the company.

The above transaction can be identified by performing the verification of fixed assets and inquiring the management about the same.

There was an impact on the existence of the company, that is the going concern concept which is way material and require serious consideration by the auditor.

Verification of fixed assets is an integral part of audit and auditor can identify the transaction by performing the verification.