When we are wrapping up and audit, auditors are concerned about subsequent event

Question

When we are wrapping up and audit, auditors are concerned about subsequent events that happen after the audit date (for example December 31, 2018) and the date of the auditors' report (for example February 19, 2019). Such events may happen after the date of the auditors' report, but before the financial statement is distributed to shareholders and others. We also discussed, such events may even be discovered long after the financial statements are released.

Discussed the auditors' responsibilities when dealing with subsequently discovered events. What impact may subsequent events on the financial statements and the auditors' reports on the financial statements. Remember our discussions and your reading concerning audit opinions other than the "clean", standard unmodified report (either on financial statements or internal control). Give at least one example of the events you are discussing.

Explanation / Answer

Subsequent events are events that occur (and facts that are discovered) between the date of auditors report and issue date of financial statement.

The auditor is not responsible for performing audit procedures for any subsequent event. It is the responsibility of the management to make aware the auditor about these events or facts which may have an effect on the Financial Statement. When the auditor comes across any fact or event which may have an impact on the Financial Statement, he needs to decide if changes need to be made in the Financial Statement. Then take necessary action after consulting the management.

In case, the management has brought about changes in the Financial Statement they need to make a new auditors report based on the changes made in the Financial Statement.

If, the management does not bring about any change in the Financial Statement, the auditor will change the Financial Statement.

A good example would be, the sale of inventories (which may effect the financial statement) after the date of issue of balance sheet .

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.