SUBSEQUENT EVENTS Flashcards
subsequent events
Subsequent events are events which occur between date of financial statements and date of auditors report
Adjusting events
Subsequent events for which conditions existed at balance sheet date
Non adjusting events
Subsequent events for which conditions did not exist at balance sheet date
examples of Adjusting Events
- Settlement of legal case after the year end.
- Subsequent bankruptcy of debtors.
- Subsequent sale of inventory below cost.
- Return of defective inventory after year end.
- Subsequent discovery of misstatement in F/S.
- Change in going concern assumption after the
year end.
examples of Non-Adjusting Events
- Destruction of assets by fire/flood.
- Customer cancelled order due to change in law.
- Major restructuring, discontinuance of operations,
- Issue of shares or debentures.
- Appropriation of assets by government.
- Issuance of guarantees or commitments
Important dates in sequence
- date of financial statements ( year end or balance sheet date)
- Date of audit report and date of authorisation for issuance of financial statements and
- Date of issuance of financial statements
Occured till Audit Report
(Responsibility = Active Review)»»»»»»»»»>
Procedures to identify
Subsequent Events
Auditor performs procedures to identify subsequent
events:
1.Obtain Understanding of management procedures
2. Inquiry of management & TCWG
3. Reading Minutes
4. Reading Subsequent Interim F/S
5. Obtain Representation
6. Other Procedures (inspection of books and records,
budgets, inquire legal counsel)
if any subsequent event is identified
1) if any subsequent event is identified, auditor shall perform procedures (depending on event) to determine whether it is included in F/S in accordance with AFRF
2) auditor may also consider to include emphasis of matter paragraph in his report if a subsequent event (particularly nod adjusting event) is identified
