Question

Explain what is subsequent events. What are the types of subsequent events and give an example of each. List two audit procedures the auditor may use to obtain sufficient audit evidence if the event was adjusting or if it was non adjusting ? What factors should an auditor take regarding events that have occurred after the financial report is issued?

Answer 1

1. Subsequent events are those activities that happen after the due financial period reporting date but before the financial statements are apporved and issued and signed by the auditors
2. There are two types of subsequent events:
   1. Adjusting events: Subsequent events that have happened or existed on or before the reporting date, however concluded after the reported date. Example, impairment of asset that existed before or on the reporting date.
   2. Non-adjusting events. Subsequent event that did not prevail or exist on or before the reporting date. Example, dividend declared after the reporting date.
3. The audit procedures are as follows:
   • Reviewing the minutes of meeting of the board, shareholders and other executive committee.
   • Understand, ascertain, inquire and analyse the pending litigation.
4. Factors to consider before auditing subsequent events:

• Understand the flow of business activities of the client.
• Understand the subsequent events of previous audit reports or those identified during the course of interim audit.