Choice "B" is correct. In obtaining evidence about subsequent events, an auditor would investigate changes in long-term debt occurring after year-end to determine if there was an unrecorded liability as of the end of the year. In addition, subsequent sales of LT debt require footnote disclosure.
Choice "c" is incorrect. Changes in employee pay rates occurring after year-end would have no effect on the year under audit.
Choice "a" is incorrect. Plant assets sold after the end of the year (that were not related to a current year transaction such as a discontinued operation) have no impact on the current year's financial statements.
Choice "d" is incorrect. Following up on payroll checks that were cashed after year-end is generally not the most effective way to audit accrued payroll and would provide little evidence about subsequent events.
