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.
