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Subsequent Event

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25 views

Subsequent Event

Uploaded by

febysilaban
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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SUBSEQUENT EVENTS

INTERNATIONAL STANDARD
ON AUDITING 560

Semaan, Gholam & Co 1


Subsequent events
• Is used to refer to both events occurring:

– between period end and the date of the auditor’s


report, and
– facts discovered after the date of the auditor’s report.

• For the treatment in the financial statements


refer to IAS 10 “contingencies and events
occurring after the balance sheet date”

Semaan, Gholam & Co 2


Events Occurring Up to the Date
of the Auditor’s Report

• The auditor should perform audit


procedures designed to obtain sufficient
appropriate audit evidence that all events
up to the date of the auditor’s report that
may require adjustment of, or
disclosure in, the financial statements
have been identified.

Semaan, Gholam & Co 3


The audit procedures
• Reviewing procedures management has established
to ensure that subsequent events are identified.
• Reading minutes of the meetings of shareholders,
those charged with governance, including established
committees such as relevant executive committees and
the audit committee, held after period end and inquiring
about matters discussed at meetings for which
minutes are not yet available.
• Reading the entity’s latest available interim financial
statements and, as considered necessary and
appropriate, budgets, cash flow forecasts and other
related management reports.
• Inquiring, or extending previous oral or written inquiries,
of the entity’s legal counsel concerning litigation and
claims.
Semaan, Gholam & Co 4
Procedures cont’d
• Inquiring of management as to whether any subsequent events have occurred
which might affect the financial statements. Examples of inquiries of
management on specific matters are:
1. The current status of items that were accounted for on the basis of preliminary or
inconclusive data.
2. Whether new commitments, borrowings or guarantees have been entered into.
3. Whether sales or acquisition of assets have occurred or are planned.
4. Whether the issue of new shares or debentures or an agreement to merge or
liquidate has been made or is planned.
5. Whether any assets have been appropriated by government or destroyed, for
example, by fire or flood.
6. Whether there have been any developments regarding risk areas and contingencies.
7. Whether any unusual accounting adjustments have been made or are contemplated.
8. Whether any events have occurred or are likely to occur which will bring into question
the appropriateness of accounting policies used in the financial statements as would
be the case, for example, if such events call into question the validity of the going
concern assumption.

Semaan, Gholam & Co 5


Facts Discovered After the Date of the Auditor’s
Report but
Before the Financial Statements are Issued

• When, after the date of the auditor’s report


but before the financial statements are issued,
the auditor becomes aware of a fact which may
materially affect the financial statements, the
auditor should consider whether the financial
statements need amendment, should discuss
the matter with management, and should take
the action appropriate in the circumstances.

Semaan, Gholam & Co 6


Date of amended report and
actions to be taken
• When financial statements are amended by
management , the auditor would carry out the
audit procedures necessary and would provide
management with a new report. The new
auditor’s report would be dated not earlier than
the date the amended financial statements are
signed or approved and, accordingly, the
audit procedures referred to previously would
be extended to the date of the new auditor’s
report.
Semaan, Gholam & Co 7
• When management does not
amend the financial statements in
circumstances where the auditor
believes they need to be amended and
the auditor’s report has not been
released to the entity, the auditor
should express a qualified opinion or
an adverse opinion.

Semaan, Gholam & Co 8


Facts Discovered After the Financial
Statements have been Issued
• When, after the financial statements have
been issued, the auditor becomes aware of a
fact which existed at the date of the auditor’s
report and which, if known at that date, may
have caused the auditor to modify the auditor’s
report, the auditor should consider whether the
financial statements need revision, should
discuss the matter with management, and
should take the action appropriate in the
circumstances.
Semaan, Gholam & Co 9
Revision of financial statements
• The new auditor’s report should include an
emphasis of a matter paragraph referring
to a note to the financial statements
that more extensively discusses the
reason for the revision of the
previously issued financial statements
and to the earlier report issued by the
auditor.

Semaan, Gholam & Co 10


Non Revision of financial
statements
• the auditor would notify those charged with
governance of the entity that action will be taken
by the auditor to prevent future reliance on the
auditor’s report. The action taken will depend on
the auditor’s legal rights and obligations and the
recommendations of the auditor’s lawyers.
• It may not be necessary issue a new
auditor’s report when issue of the financial
statements for the following period is imminent,
provided appropriate disclosures are to be made
in such statements.
Semaan, Gholam & Co 11

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