Question

Question:

The auditor is required to review transactions and events after the balance date (subsequent events) to determine whether anything occurred that might affect the valuation or disclosure of items in the financial statements being audited.

Require:

Discuss the auditor’s responsibility for detecting subsequent events

i. prior to the completion of the field work.

ii. prior to signing the audit report.

iii. between the date of the audit report and the issuance of the financial report.

Answer 1

ISA 560, Subsequent Events outlines the auditor’s responsibility in relation to subsequent events. For the purposes of ISA 560, 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.

• As for prior to field work, auditor should ensure that all the transactions are recorded
• As on signing of the audit report, auditor should ensure that the reporting reflects the actual events and conditions as on reporting date
• As for between date of the audit report and the issuance of the financial report if there arise any condition that demand change in financial statements than the same has been incorporated into the financial statements. Where the financial statements are amended, the auditor is required to carry out necessary audit procedures in light of the circumstances giving rise to the amendment. The auditor will also be required to issue a new auditor’s report on the amended financial statements and, therefore, must extend their subsequent events testing up to the (expected) date of the new auditor’s report.

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