Subsequent Events and Auditor Responsibilities

Flashcards about subsequent events in auditing, adjusting and non-adjusting events, and auditor's responsibilities.

Subsequent Events (Auditing)

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.

Auditor’s Responsibility for Identifying Subsequent Events

The auditor's responsibility ends when the auditor’s report has been signed.

Adjusting Events

Events that provide evidence of conditions that existed at the date of the financial report.

Non-Adjusting Events

Events that provide evidence of conditions that arose after the date of the financial report.

Examples of Adjusting Events

Settlement of a court case, receipt of information indicating asset impairment, discovery of fraud or errors.

Examples of Non-Adjusting Events

Decline in fair value of investments, destruction of a major production plant, abnormally large changes in asset prices or foreign exchange rates.

Procedures for Subsequent Events Review

Enquire about subsequent events to management, review accounting records, communicate with the entity’s solicitor, obtain a letter of representation from management, and examine minutes of meetings.

Purpose of Analytical Procedures at the End of an Audit

To assess whether the financial statements align with the auditor’s overall understanding of the entity and examine the entity’s ability to remain a going concern.