Question

Answer the three questions below. For questions (i) and (ii) key dates are as follows: Balance date is June 30th. The Audit Report was signed on September 30th. The Financial Statements were issued to shareholders on November 4th.

(i) State three audit procedures required under ASA 560 if the auditor discovers that a material event took place on July 23rd.

(ii) Is the auditor required to undertake any audit procedures if he/ she was informedby management on October 9th that management intended to amend the financial report because of the bankruptcy of a major debtor on October 4th?

(iii) True or False. If an auditor provides a new audit report in relation to a subsequent event, it cannot be dated earlier than the date on which the directors approved the emended financial report.

Answer 1

i) Audit procedures required under ASA 560 if the auditor discovers that a material event took place on July 23rd will require audit procedures to be performed as near as practical to the date of auditor's report. Three audit procedures required in this case are:

a) Whether any material event has occured that cast a doubt on the validity of going concern assumption.

b) enquiring management whether material event has affected financial report.

c) Reviewing managements proceduresfor identification of susequent events.

ii) Auditor was informed on 9th october about the intention of management to amend financial report because of event of bankruptcy of major debtor on 4th october while audit report was already signed on 30th september, the auditor is required to check if financial statements needs any amendment and if it needs an amendment the auditor should carry out audit procedures as per ASA 560 with a new report on the amended financial statements.

iii) TRUE : The auditor needs to provide a new audit report which cannot be dated earlier than date on which directors approved amended financial report.