Question

Karyono has audited the financial statements of PT Lestari for the year ended December 31,2007. Karyono field work was completed on February 27, 2008; Karyono's auditor's report was dated February 28,2008, and was received by the management of PT Lestari on March 5 2008. On April 4,2008 the management of PT Lestari asked that Karyono approve inclusion of this report in their annual report to stockholders, which will include unaudited financial statements for the first quarter ended March 31, 2008. Karyono approved the inclusion of the auditor's report in the annual report to stockholders. Under the circumstances,Karyono is responsible for inquiring as to subsequent events occurring though:
A. February 27, 2008
B. February 28, 2008
C. March 31, 2008
D. April 4, 2008

Answer 1

Conclusion:-

B. February 28, 2008

Explanations:-

Subsequent events are those events that occur between the reporting date and the date of approval of the financial statements and the signing of the auditor’s report. The auditor should perform audit procedures designed to obtain sufficient appropriate audit evidence that all subsequent events that require adjustment of, or disclosure in, the financial statements have been identified. The auditor is not, however, expected to perform additional audit procedures on matters to which previously applied audit procedures have provided satisfactory conclusions.

Generally accepted accounting principles state that the financial statements should include the effects of all subsequent events that provide additional information about conditions in existence as of the balance sheet date. A company should disclose the date through which there has been an evaluation of subsequent events, as well as either the date when the financial statements were issued or when they were available to be issued. There may be situations where the non-reporting of a subsequent event would result in misleading financial statements.

The auditor is responsible for the events occurring up to the date of audit report and he is not responsible to perform the audit procedure after the date of audit report and also he is not responsible for inquiring as to subsequent events occurring after 28th February, 2008.