FAQs on SA 560 – Subsequent Events | Part-3
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- Last Updated on 22 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. What is the requirement for the auditor regarding written representations from management and those charged with governance?
The auditor is required to request management and, if necessary, those responsible for governance to provide a written representation as per SA 580, “Written Representations.” This representation should confirm that all events that occurred after the date of the financial statements and require adjustment or disclosure according to the applicable financial reporting framework have been appropriately adjusted or disclosed.
II. What are the auditor’s obligations regarding the financial statements after the date of the auditor’s report?
The auditor is generally not required to perform any audit procedures regarding the financial statements after the date of the auditor’s report, whether before or after the statements are issued. However, there is an exception. If a fact comes to the auditor’s attention after the date of the auditor’s report that, if known at the time of issuing the report, might have led to a modification of the report, then the auditor has responsibilities outlined in paragraphs 10 to 17 of SA 560. These paragraphs address the actions and obligations of the auditor when such post-reporting date facts become known.
III. What should the auditor do regarding changes in internal financial controls over financial reporting that occur after the date of auditing but before the date of the auditor’s report?
In accordance with paragraph 144 of the “Guidance Note on Audit of Internal Financial Controls Over Financial Reporting” issued by ICAI, the auditor is required to inquire with management about any changes in internal financial controls over financial reporting or significant factors that may affect such controls after the date of auditing but before the date of the auditor’s report. The auditor should obtain written representations from management regarding these changes or factors and consider their implications, if any, on the audit report, including the reporting on internal financial controls over financial reporting (IFCoFR).
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