Question

a) Explain five events that will require adjustment by the auditor in the financial statements after the financial statements’ date to the date of signing the audit report. (7.5 marks)

b) Explain five audit procedures which would be carried out in order to identify any material post balance sheet events.

Answer 1

Answer:

a)

Events that give extra proof about conditions that existed at the balance sheet date ought to be perceived in the fiscal statements.

A few examples are :

i) Settlement of suit identified with an occasion happening before the balance sheet date for a sum unique in relation to the risk perceived in the fiscal statements.

ii) Occasions/events that influence the acknowledgment of receivables because of conditions that existed at the balance sheet date. This may happen when trade a/c receivables gets uncollectible because of a client seeking for bankruptcy after the balance sheet date however before the fiscal statements are issued.

iii) Majour occasions happened that gives in sign on adverse impact on going concern.

iv). Any sign on presence of hindrance on assets.

v) Sale of stock at below cost.

b)

Audit procedure to identify ensuing events.

Inquiry in to the accompanying:

• Regardless of whether new responsibilities, borrowings or assurances have been gone into.
• Regardless of whether sales or acquisitions of assets have happened or are planned.
• Regardless of whether there have been increments in capital or debt instruments, for example, the issue of new shares or debentures, or a consent to consolidate or sell has been made or is planned.
• Regardless of whether any assets have been appropriated by government or obliterated, for instance, by fire or flood.
• Regardless of whether there have been any improvements with respect to possibilities.
• Regardless of whether any unusual bookkeeping changes have been made or are considered.
• Regardless of whether any occasions have happened that are pertinent to the estimation of assessments or provisions made in the fiscal statements.
• Regardless of whether any occasions have happened that are pertinent to the re-coverability of assets