mike1988
Oct 16, 2011, 07:44 AM
II.) you are conducting a audit for ABC Corporation for the year ended December 31, 2011
Several items come to your attention
A. On January 15, 2012, while you are doing the audit fieldwork, the company suffers an uninsured loss estimated to be $2,000,000 due to an earthquake.
B. One of the company?s major customers filed for Chapter 11 bankruptcy protection on February 15, 2012. The company cited ?general economic conditions? As the reason. As of December 31, 2011, the customer owed the client $28,000. The company controller was not aware of any financial difficulties at this supplier prior to the bankruptcy announcement.
Your audit supervisor informs you that these occurrences are known as ?subsequent events? In auditing and asks you to research the appropriate accounting literature to determine how this should be handled. Describe the relevant accounting treatment referencing the appropriate accounting literature. Also describe the specific accounting treatment that you would recommend for each item and the specific accounting principles, assumptions or constraints involved.
Several items come to your attention
A. On January 15, 2012, while you are doing the audit fieldwork, the company suffers an uninsured loss estimated to be $2,000,000 due to an earthquake.
B. One of the company?s major customers filed for Chapter 11 bankruptcy protection on February 15, 2012. The company cited ?general economic conditions? As the reason. As of December 31, 2011, the customer owed the client $28,000. The company controller was not aware of any financial difficulties at this supplier prior to the bankruptcy announcement.
Your audit supervisor informs you that these occurrences are known as ?subsequent events? In auditing and asks you to research the appropriate accounting literature to determine how this should be handled. Describe the relevant accounting treatment referencing the appropriate accounting literature. Also describe the specific accounting treatment that you would recommend for each item and the specific accounting principles, assumptions or constraints involved.