Subsequent Event Below here were subsequent event that occurs in your client. Consider that all events were has material effect on client’s financial statement. The auditor is auditing financial statement for the year ended December 31, 2020 and is completing the audit in March 15, 2021. 1) On January 12, 2021, auditor found that client made overstatement to their longlived asset account on 2020 year-end financial statement 2) On January 31, 2021, client announced that they do stock split 2 for 1 for their entire common shares 3) The client purchased raw material that was received just before year-end. The purchase was recorded based on its estimated value. The invoice was not received until February 5, 2021, and the cost was substantially different than was estimated 4) On February 15, 2021, the civil court decided that Client Company must pay compensation loss due to defect product sold to their customer. lawsuits started in court since June 2020 5) On February 20, 2021, a major of client customer which has large amount of outstanding A/R suddenly fill for bankruptcy 6) On April 1, 2021 fire rage accident destroy client warehouse and the loss were material Questions: Indicate type 1 subsequent event, type 2 subsequent event, or not subsequent event. What kinds of action, client need to do? Adjust, disclose, or no need to do adjust/disclose for every point form 1) to 6). Provide the reason why it should be adjusted or disclose or neither.
Subsequent Event
Below here were subsequent event that occurs in your client. Consider that all events were has material effect on client’s financial statement. The auditor is auditing financial statement for the year ended December 31, 2020 and is completing the audit in March 15, 2021.
1) On January 12, 2021, auditor found that client made overstatement to their longlived asset account on 2020 year-end financial statement
2) On January 31, 2021, client announced that they do stock split 2 for 1 for their entire common shares
3) The client purchased raw material that was received just before year-end. The purchase was recorded based on its estimated value. The invoice was not received until February 5, 2021, and the cost was substantially different than was estimated
4) On February 15, 2021, the civil court decided that Client Company must pay compensation loss due to defect product sold to their customer. lawsuits started in court since June 2020
5) On February 20, 2021, a major of client customer which has large amount of outstanding A/R suddenly fill for bankruptcy
6) On April 1, 2021 fire rage accident destroy client warehouse and the loss were material
Questions:
Indicate type 1 subsequent event, type 2 subsequent event, or not subsequent event. What kinds of action, client need to do? Adjust, disclose, or no need to do adjust/disclose for every point form 1) to 6). Provide the reason why it should be adjusted or disclose or neither.
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