Audit Method: Subsequent Events

Subsequent Events as defined in ISA 560 are “Events occurring between the date of the financial statements and the date of the auditor’s report, and facts that become known to the auditor after the date of the auditor’s report.”

The objectives of the auditor for considering subsequent events are:

(a) To obtain sufficient appropriate audit evidence about whether events occurring between the date of the financial statements and the date of the auditor’s report that require adjustment of, or disclosure in, the financial statements are appropriately reflected in those financial statements in accordance with the applicable financial reporting framework; and

(b) To respond appropriately to facts that become known to the auditor after the date of the auditor’s report, that, had they been known to the auditor at that date, may have caused the auditor to amend the auditor’s report.

Perform audit procedures designed to obtain sufficient appropriate audit evidence that all events up to the date of the audit report that may require adjustment of, or disclosure in, the financial statements have been identified

·   Consider changes in the areas which may affect the financial statements and other information in the annual report such as banking arrangements, currency and interest rates, key markets, key products, customers or vendors, key management or employees, government regulation or policy and the ratio of orders to sales and cash receipts and the position of the order book.

·   Consider other significant knowledge gained, for example press comment, internal audit reports, changes in client trading patterns, changes in laws or regulations, currency devaluations, major fires or catastrophes, or technology failures (e.g. computer operations failures) and security incidents.

·   Evaluate procedures management has established to ensure that subsequent events are identified.

·   Inquire of management and, where appropriate, those charged with governance as to whether any subsequent events have occurred which might affect the financial statements.

·   Review the results of the review of minutes of meetings of the entity’s owners, management and those charged with governance, including audit, executive and other Board committees since the balance sheet date.

·   Consider reviewing invoices from lawyers received after the year-end to determine whether any litigation, claims or assessments exist that were not previously identified in our analysis of legal expenses and other procedures.

·   Review the latest available interim financial statements and, as considered necessary and appropriate, budgets, cash flow forecasts and other related management reports. Consider whether they reveal any adverse trends or significant movements in balance sheet headings compared to the audited financial statements. Consider whether the management information is reliable.

Practice

Where a material subsequent event has been identified, determine whether it is reflected in the financial statements in accordance with the applicable financial reporting framework by adequate disclosure and, where appropriate, adjustment of the account balances and transactions affected. Consider also its effect on the audit report.