Question

What are the auditor’s responsibility on subsequent events in the period after the date of auditor’s report?

Auditing

Answer 1

(Q) What are the auditor’s responsibility on subsequent events in the period after the date of auditor’s report?

(Ans) The term “subsequent events” refers to events occurring between the date of the financial statements and the date of the auditor’s report, and facts discovered after the date of the auditor’s report.There are certain responsibilities for an auditor on subsequent events in the period after the date of auditor's report,this includes :-

• The auditor does not have any responsibility to perform audit procedures
• Management has the responsibility to inform the auditor of facts which may affect the financial statements
• Once the auditor is aware of any fact that may materially affect the financial statements: consider whether the financial statements need amendment • discuss the matter with the management • take appropriate action

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.