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    • Question

      During the audit of ABC Ltd., the auditor identifies

      that a major debtor who owed ₹2 crore has declared bankruptcy post year-end but before signing of the audit report. What should the auditor do?
      A Ignore the event Correct Answer Incorrect Answer
      B Adjust the financial statements Correct Answer Incorrect Answer
      C Report it in notes only Correct Answer Incorrect Answer
      D Resign from the audit Correct Answer Incorrect Answer
      E Disclose it to shareholders separately Correct Answer Incorrect Answer

      Solution

      This is an “adjusting event” under AS-4 (or Ind AS 10), as the condition existed at the balance sheet date and needs to be reflected in the financials.

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