A9 Subsequent Events

Question 1

Identified Subsequent Events

Answer 1

If subsequent events are discovered before the issuance of the financial statements, the FS need revision and the auditor should issue a new report on the revised financials (dated when the FS are revised).

Question 2

New Auditor’s Report

Answer 2

A New report is issued if the financials have been revised, and should also include a reference to the note in the FS that explains the reason for the revision. The date is the same as the revised financials.

Question 3

Type I Subsequent Event

Answer 3

Type 1 subsequent event are recognized events that provide additional evidence about conditions that existed at the balance sheet date (eg lawsuit settlement).

Question 4

Type II Subsequent Event

Answer 4

Type 2 subsequent event are non recognized events which indicate conditions that arose after the balance sheet date (for example natural disasters).

Question 5

Procedure to ID Subsequent Events

Answer 5

Review IC policies. Inquire of mgmt. Review board/committee minutes. Review entity’s records/interim financials. Obtain written representations. Review subsequent event period. Document findings.

Question 6

Subsequent Event

Answer 6

These are events or transactions that occur after the balance sheet date but before the financial statements are issued.

Question 7

Revised FS Recognized Events

Answer 7

When an entity reissues/revises financials they shouldn’t recognize events that happened the dates the FS were reissued or revised.

Question 8

Subsequent Events For Issuers & Nonissuers

Answer 8

Nonissuers must disclose the date subsequent events were evaluated but issuers do not.

Question 9

PRIME

Answer 9

Mnemonic for evaluating subsequent events. Post balance sheet transactions: for proper cutoff. Representation Letter: details any events that need adjustments/ disclosures. Inquiry: asking legal counsel for litigation. Minutes: board/committees meeting minutes. Examine: review latest FS and other relevant info.

Question 10

Dual Date

Answer 10

This extends the auditor responsibility for the particular subsequent event only. For instance, Jan 22 20X2 except for note 2 which is Feb 3 20X2.

Question 11

Later Date

Answer 11

Extends the auditor responsibility for all subsequent events on report date.