Subsequent Events|Page 1 of 2
PSA 560, Subsequent Events
Two types of subsequent events:
(1) Those that provide evidence of conditions that existed at the date of the FS (2) Those that provide evidence of conditions that arose after the date of the FS
Usually requires adjustment (“looking back”) Require no adjustment but may require disclosure (“looking forward”)
Example: Example:
o Trade receivable existing at date of the FS that is deemed o Purchase of a business
uncollectible because of bankruptcy of the customer. o Sale of debenture bonds
Auditor’s responsibility up to date of auditor’s report
Objectives of Auditor Under PSA 560:
Date of the Date of the
Financial Statements Auditor’s Report
(1) Obtain sufficient appropriate audit evidence about whether events occurring (2) Respond appropriately to facts that
between the dates of the financial statements and date of auditor’s report that became known to the auditor after
require adjustments or disclosure are appropriately reflected in the financial the date of the auditor’s report
statements
Date of the financial statements – date of the end of the latest period covered by the financial statements.
Date of approval of the financial statements – date on which all the statements that comprise the financial statements have been prepared and those with the recognized authority have
asserted that they have taken responsibility for those financial statements. (For purposes of the PSAs, earlier of the two dates)
Date of the auditor’s report – the date the auditor dates the report on the FS in accordance with PSA 700.
- Cannot be earlier than the date on which the auditor has obtained sufficient appropriate evidence
- Cannot be earlier than the date of approval of the financial statement
Date the financial statements are issued – date that the auditor’s report and audited FS are made available to third parties (in some circumstances, this may be date they are filed with a
regulatory authority)
Subsequent events – are events:
Date of the Financial Statements Date of the Auditor’s Report
(1) Occurring between the date of the financial statements and the date of the auditor’s report; and (2) Facts that became known to the auditor after the
date of the auditor’s report.
Subsequent Events|Page 2 of 2
Date of the Date of the Date the Financial
Financial Statements Auditor’s Report Statements Are Issued
Obtain evidence that all events occurring If fact became known to the auditor that, if known to him at the date of If fact became known to the auditor that, is known to him at the date
between these dates require adjustment the auditor’s report, the report would have been amended, auditor of the auditor’s report, the report would have been amended, the
or disclosure have been identified. shall auditor shall
o Obtain understanding of a. Discuss matter with Mgt and TCWG a. Discuss matter with management and, where applicable,
procedures management has b. Determine whether the FS need amendment, and if so TCWG
established to ensure subsequent c. Inquire how management intends to address the matter in the FS b. Determine whether the FS need amendment, and if so
events are identified c. Inquire how management intends to address the matter in the
o Inquiry of management and If management amends the FS, FS
TCWG a. Carry out necessary procedures
o Read minutes of meetings of b. Unless par. 12 apply: If management amends the FS,
owners, management and those i. Extend audit procedures about subsequent events to the date a. Carry out necessary procedures
charged with governance held of the new auditor’s report; and b. Review steps taken by management to ensure anyone who
after date of financial statements ii. Provide new auditor’s report on amended FS received the previously issued FS with the auditor’s report is
and inquire about those for which c. Par. 12, If there is no prohibition to restrict amendment of FS, and notified
minutes are not yet available no prohibition to restrict the approval of the FS, the auditor is c. Unless par. 12 apply
o Read the latest subsequent permitted to restrict audit procedures on subsequent events to i. Extend audit procedures about subsequent events to the
interim financial statements that amendment. In such case, the auditor shall either date of the new auditor’s report; and
i. Amend the auditor’s report and dual date the report ii. Provide new auditor’s report on amended FS
Request management and, where o Example: d. If Par. 12 apply, amend the report or provide a new auditor’s
appropriate, TCWG, to provide written “March 1, 2019, except as to Note XX, which is as of report as required by par. 12.
representation that all events occurring April 1, 2019.”
subsequent to date of FS and for which ii. Or, provide a new/amended auditor’s report that includes a The auditor shall include in the new/amended auditor’s report
the FRF require adjustment or disclosure statement in the Emphasis of Matter or Other Matter that an Emphasis of Matter or Other Matter paragraph referring to
have been adjusted or disclosed. conveys that the auditor’s procedures are restricted solely to the note which more extensively discusses the reason for
the amendment of the FS amendment of the FS and auditor’s report.
If management does not amend the FS but auditor believes that they If management does not take necessary steps to ensure that
need to be amended, anyone who received the previously issued FS is informed and does
a. If the auditor’s report has not yet been provided to the entity, the not amend the FS where the auditor believes they need to be
auditor shall modify the opinion amended, the auditor shall
b. If the auditor’s report has already been provided to the entity, a. Notify management and TCWG, that the auditor will seek to
notify management and TCWG not to issue the FS. If FS is still prevent reliance on the auditor’s report
issued, take actions, including seeking legal advice, to prevent b. If, despite such notification, management or TCWG do not take
reliance thereon. necessary steps, the auditor shall take appropriate action to
seek to prevent reliance on the report.
