NSA 560- Subsequent Events
→ The auditor should perform audit procedures designed to obtain sufficient appropriate audit evidence
that all events up to the date of the auditor’s report that may require adjustment of, or disclosure in,
the financial statements have been identified.
→ The audit procedures to identify events that may require adjustment of, or disclosure in, the financial
statements would be performed as near as practicable to the date of the auditor’s report. Such audit
procedures take into account the auditor’s risk assessment and ordinarily include the following:
• Reviewing procedures management has established to ensure that subsequent events are
identified.
• Reading minutes of the meetings of shareholders, those charged with governance the board of
directors, including established committees such as relevant and audit and executive committees
and the audit committee, held after period end and inquiring about matters discussed at meetings
for which minutes are not yet available.
• Reading the entity’s latest available interim financial statements and, as considered necessary and
appropriate, budgets, cash flow forecasts and other related management reports
• Inquiring, or extending previous oral or written inquiries, of the entity’s legal counsel lawyers
concerning litigation and claims.
• Inquiring of management as to whether any subsequent events have occurred which might affect
the financial statements. Examples of inquiries of management on specific matters are:
❖ The current status of items that were accounted for on the basis of preliminary or
inconclusive data.
❖ Whether new commitments, borrowings or guarantees have been entered into.
❖ Whether sales or acquisition of assets have occurred or are planned.
❖ Whether the issue of new shares or debentures or an agreement to merge or liquidate
has been made or is planned.
❖ Whether any assets have been appropriated by government or destroyed, for example,
by fire or flood.
❖ Whether there have been any developments regarding risk areas and contingencies.
❖ Whether any unusual accounting adjustments have been made or are contemplated.
❖ Whether any events have occurred or are likely to occur which will bring into question
the appropriateness of accounting policies used in the financial statements as would be
the case, for example, if such events call into question the validity of the going concern
assumptions
→ When the auditor becomes aware of events which materially affect the financial statements, the
auditor should consider whether such events are properly accounted for and adequately disclosed in
the financial statements
Financial statements amended after the date of the auditor’s report, but before the financial
statements are issued.
Circumstances may arise when the auditor becomes aware of facts that may materially affect the financial
statements and, in such situations, the auditor will consider whether the financial statements need
amending. The auditor is required to discuss with management how they intend to deal with events that
will require the financial statements to be amended after the auditors have signed their report, but before
the financial statements are issued.
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. The revised auditor’s
report must not be dated any earlier than the date of the amended financial statements. In situations
where management refuses to make amendments to the financial statements, the auditor must take all
steps required to avoid reliance by third parties on the auditor’s report. The auditor should also consider
the need to resign from the audit.
1. Discuss the matter with management or TCWG.
2. Determine whether the financial statements need amendment.
3. Inquire how management intends to address the matter in the financial statements.
If management amends the financial statements, auditor should extend the audit procedures and
1. Either amend the audit report to include an additional date restricted to the amendment.
2. Or provide a new/ amended report including a statement in EOM/ OM para.
If management doesn't amend the financial statements:
1. If audit report not yet provided to the management, modify the opinion or withdraw from
engagement.
2. If audit report has already been provided to the management, notify TCWG not to issue it to
third parties. If still issued then take appropriate action to prevent reliance on the auditor's
report.
Facts that become known to the auditor after the financial statements have been issued
1. Discuss the matter with management or TCWG.
2. Determine whether the financial statements need amendment.
3. Inquire how management intends to address the matter in the financial statements.
Review if management has taken steps to inform about the situation to everyone in receipt of the
previously issued financial statements.
1. If steps taken, issue new / amended report with EOM/ OM para.
2. If steps not taken, then auditor seek legal advice and take appropriate steps to prevent reliance
on the auditor's report.
