Reference no: EM131618994

Question: Subsequent Events and Subsequently Discovered Facts. Michael Ewing is auditing the financial statements of Dallas Company for the year ended December 31, 2014. In concluding the process of gathering sufficient appropriate evidence, Ewing has asked to meet with his supervisor on the audit (John Ross) to discuss responsibility for events occurring after the date of the financial statements. Required:

a. What is a subsequent event? During what time period is Ewing responsible for subsequent events?

b. List some procedures that Ewing may perform to assist him in identifying subsequent events.

c. What are two types of subsequent events? How should information related to these types of subsequent events be reflected in Dallas's financial statements?

d. Assume that on January 8, 2015, Dallas Company agreed to acquire Houston Inc., in a significant transaction. The date of Ewing's report was February 7, 2015, and Dallas issued its financial statements (and Ewing's reports on its financial statements and internal control over financial reporting) on February 14, 2015. How would Ewing proceed if he became aware of this subsequent event on the following dates?

1. January 10, 2015.

2. February 10, 2015.

3. February 20, 2015.

e. On March 2, 2015, Dallas announced that it also will acquire San Antonio Company in a significant transaction. What is Ewing's responsibility with respect to this acquisition in the audit of Dallas's financial statements for the year ended December 31, 2014?