Subsequent Events

Question 1

What is practitioners responsibilities respect to subsequent events

Answer 1

The practitioner is responsible for gathering evidence for subsequent events up to the auditor’s report date.

Question 2

What is the purpose of subsequent event review?

Answer 2

to determine if there are any events that have taken place subsequent to the financial statement date that require adjustment to the financial statements or disclosure in the financial statement notes

Question 3

Procedures required for the discovery of subsequent events

Answer 3

obtaining an understanding of procedures that management has established to ensure that subsequent events are identified

inquiring of management and those charged with governance

Reading the client’s latest subsequent interim financial statements

assessing the client’s compliance with bank covenants and/or borrowing limits

Obtaining written representation from the client’s management, in accordance with CAS 580 Written Representations, that all events occurring subsequent to the date of the financial statements that require adjustment or disclosure have been appropriately adjusted for or disclosed

• inquiring of legal counsel, in writing, of any outstanding litigation and/or claims
• reading minutes from Board of Director and audit committee meetings that took place between the date of the financial statements and the date of the auditor’s report

Question 4

What to do if you become of events after the date of audit report but before FS are issued.

Answer 4

Discuss the matter with management and TCWG to decide whether it is appropriate to amend the financial statements.

If so, carry out audit procedures to gain sufficient and appropriate audit evidence over the amendment.

Question 5

What are the two type of subsequent events

Answer 5

Type 1- Events that provide evidence of conditions that existed at the financial statement date.
Requires Adj.

Type 02 - Events that provide evidence of conditions that arose after the financial statement date:
No Adj. required

Question 6

What to do if the FS need to be amended?

Answer 6

is the event pervasive?

• if yes, provide new audit report on amended FS with new subsequent event review till the date of new report
• IF no, limit procedures to account impacted and double date the audit report

Question 7

What to do if you become aware of a subsequent event that impact the FS issued

Answer 7

Withdraw the previously issued auditor report

Issue formal communication to 3rd parties to inform of the withdrawal

Question 8

What to do if the FS need to be ammeneded?

Answer 8

is the issue pervasive

• if yes, provide new auditor report on amended FS with an emphasis of matter to describe the amendment
• If no, double date the auditor report