Audit procedures to test subsequent events
1.4 Audit procedures to test subsequent events
Inquiries of management
Ø Status of items accounted for using preliminary or inconclusive data.
Ø Whether there are any new commitments, borrowings or guarantees.
Ø Whether there have been any:
ü Sales or destruction of assets.
ü Issues of shares/debentures or changes in business structure.
ü Major events affecting appropriateness of accounting policies for estimates.
ü Litigations or claims.
Ø Review management procedures for identifying subsequent events to ensure that such events are identified.
Ø Read minutes of general board/committee meetings and enquire about unusual items.
Ø Review latest available interim FS and budgets, cash flow forecasts and other management reports.
Ø Obtain evidence concerning any litigation or claims from the company’s solicitors with client permission.
Ø Obtain written presentation that all events occurring subsequent to the period-end which need adjustment or disclosure have been adjusted or disclosed.
1.4 Facts discovered after the date of the auditor’s report but before the FS are issued
Ø The FS are responsibility of the management.
Ø The management should inform the auditors of any material subsequent events between the date of the auditors’ report and the date the FS are issued.
Ø The auditor does not have any obligation:
ü To perform procedures.
ü Make enquiries regarding the FS, after the date of the report.
Ø If the auditor become aware of a fact that had it been known to the auditor at the date of the report may have caused the auditor to amend the auditor’s report, the auditor shall:
ü Discuss the matter with management and those charged with governance.
ü Determine whether the FS need amendment.
ü If amendment is required, inquire how management intends to address the matter in the FS.
1.4.1 If amendment is required and management makes the necessary changes
Ø The auditor must carry out the following procedures:
ü Undertake any necessary audit procedures on the changes made.
ü Extend audit procedures for identifying subsequent events that may require adjustment of or disclosure in the FS to the date of the new auditor’s report.
ü Provide a new auditor’s report on the amended FS.
1.4.2 If amendment is required and management does not amend the FS
Ø If the auditor’s report has not yet been provided to the entity:
ü The auditor shall modify the opinion and then provide the auditor’s report.
Ø If the auditor’s report has already been provided to the entity,
ü The auditor shall notify management and those charged with governance not to issue the FS before the amendments are made.
Ø If the FS are issued anyway, the auditor shall take action to seek to prevent reliance on the auditor’s report.