Subsequent Events Practice Test

You are auditing an issuer for the year ended December 31, 20X4. On March 5, 20X5, after the audit report date but before the financial statements are issued, you become aware of a material subsequent event (a major customer bankruptcy) that existed at year-end and would have required an adjustment to the allowance for credit losses. Management agrees to revise the financial statements. What procedures should the auditor perform related to this subsequent event?

You are the auditor of a nonissuer in a financial statement audit. The client’s warehouse was destroyed by a tornado on January 18, 20X5, after the December 31, 20X4 balance sheet date but before the audit report date. The destroyed inventory represented approximately 35% of total inventory at year-end, and the loss was not covered by insurance. What is the most appropriate response to this subsequent event?