1. ABC Auditors are auditing Jersey Charities, which is incorporated as a not-for-profit charitable organization. The fiscal year-end is June 30, 20X0. The auditors concluded their work on July 15th, 20X0 and dated their audit report on that date. On July 20th, a major donor declared bankruptcy, leaving in serious doubt collection by Jersey of material pledges owed. The auditors should:
a) recall the audit report and re-issue a new one.
b) issue an amendment to the audit report dated July 20th.
c) determine if the financial statements have been made available.
d) depending on the circumstances, the auditor may choose any of the above.
2. As part of the wrap-up procedures, Mary Ellen Dillon reviews the minutes of the Board of Directors for a client. During her review, she discovers that a major acquisition is planned in the coming months. This planned acquisition should:
a) be disclosed in the footnotes to the financial statements.
b) be disclosed in an explanatory paragraph of the audit report.
c) be audited by the audit firm as part of its wrap-up work.
d) None of the above.
3. Company A hired Q to perform its year-end audit. Subsequent to year-end, A discovers that one of its customers, who owes Company A a material amount, has filed for bankruptcy protection. Assume that Q completed the audit work prior to the date of bankruptcy filing but has not yet issued the audit report. In this case, Q should:
a) ignore the event since it does not apply to the current year under audit.
b) notify those individuals known to be relying on its work of the bankruptcy.
c) perform additional work, as deemed necessary given the circumstances.
d) None of the above.