FAQ on SA 560 – Subsequent Events | Part-2
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- Last Updated on 16 June, 2023
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SA 560 deals with the auditor’s responsibilities relating to subsequent events in an audit of financial statements. It does not deal with matters relating to the auditor’s responsibilities for other information obtained after the date of the auditor’s report, which is addressed in SA 720(Revised), “The Auditor’s Responsibilities Relating to Other Information”. However, such other information may bring to light a subsequent event that is within the scope of this SA. The objectives of the auditor are 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; and 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. This discussion involves some commonly asked FAQs on subsequent events.
I. How does SA 560 differentiate between matters identified before and after the date of the audit report, and what are the auditor’s obligations in each case?
SA 560 provides a distinction between matters identified before and after the date of the audit report. According to the standard, the auditor is required to perform audit procedures to identify all events occurring between the date of the financial statements and the date of the auditor’s report that necessitate adjustments or disclosures in the financial statements. However, once the audit report is issued, the auditor is no longer obligated to perform any audit procedures. However, if the auditor becomes aware of a fact that, if known at the date of the audit report, might have caused them to amend the report, certain obligations are imposed on the auditor.
II. What are the auditor’s obligations when a fact becomes known to them after the date of the auditor’s report but before the financial statements are issued, and it may have caused them to amend the auditor’s report if known earlier?
When a fact comes to the auditor’s attention after the date of the auditor’s report but before the financial statements are issued, and this fact, if known earlier, might have led to an amendment of the auditor’s report, the auditor has specific obligations as follows:
(a) The auditor is required to discuss the matter with management and, if appropriate, with those charged with governance.
(b) The auditor needs to determine whether the financial statements require amendment based on the newly discovered fact.
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