## SA 560 – Subsequent Events
### What Are Subsequent Events?
Subsequent events are events that occur after the Balance Sheet date but have a bearing on the financial statements.
```
Balance Sheet Date ←——————————————→ Date of Audit Report
(31/3) (31/5)
↑ This window = Subsequent Events Period
```
---
### Types of Subsequent Events
| Type | Description | Example | Required Action |
|---|---|---|---|
| Adjusting Event | Conditions existed at BS date; event provides evidence of those conditions | Debtor declared insolvent – provision was only 10% at BS date | Adjust the financial statements |
| Non-Adjusting Event | Condition arose after BS date; no evidence of condition at BS date | Fire occurred after year-end destroying stock | Disclose if material |
---
### Auditor's Objectives (SA 560)
1. Obtain SAAE that events occurring between the date of FS and the date of Audit Report that require adjustment/disclosure have been dealt with by the entity.
2. Respond appropriately to facts that become known after the date of the Audit Report.
---
### Case I – Events Between Date of FS and Date of Audit Report
Auditor must obtain SAAE that appropriate adjustment/disclosure has been done.
Auditor's Responsibilities:
| Step | Procedure |
|---|---|
| i | Evaluate management's procedure for identifying subsequent events |
| ii | Inquire from management whether any subsequent event requiring adj/disclosure has been identified |
| iii | Read minutes of meetings held after the date of FS |
| iv | Read latest interim financial statements, if available |
| + | May also inspect/study accounting records after the date of FS |
If an event is identified → Ascertain whether appropriate adjustment/disclosure has been made.
Obtain WIR from Management relating to subsequent events.
---
### Case II – Facts Becoming Known AFTER the Date of Audit Report
#### (A) After Audit Report Date but BEFORE FS Issued to Public
```
31/3 (FS Date) → 31/5 (Audit Report Date) → [Fact discovered here] → 10/6 (FS issued to public)
```
No obligation to perform audit procedures after the Audit Report date. However, if a fact becomes known that would have affected the report:
Auditor must:
a. Discuss with management
b. Determine whether FS needs amendment
c. Inquire about management's intended action
If Management is Willing to Amend:
- Carry out audit procedures on the amendment
- Extend audit procedures to the date of the New Audit Report
- Date of new Audit Report shall not be earlier than Board approval of amended FS
Special Case – Restricted Amendment (allowed by Law/Regulator):
Two options:
1. Dual Reporting – New/Amended Audit Report + additional date on which auditor carried audit procedure on the specific fact
2. New Report with EOM/OM Para – giving details of restricted amendment and date, without extending audit procedures to entire period
If Management is Unwilling to Amend:
- If Audit Report still with auditor → Modify Audit Report (no amendment done by management)
- If Audit Report already with management → Auditor notifies management not to issue the AR to third parties unless amendment is done
- If management issues the AR to third parties anyway → Auditor takes action so that the public does not rely on the Audit Report
---
#### (B) After FS Issued to Public
Same content as (A), with one additional point if management is willing to amend:
- Management must take steps to inform the public about the amendment and that they should not rely on the earlier issued FS.
If management is not willing to take necessary action:
- Option to modify opinion is not available (FS already issued)
- Auditor asks management/TCWG to take necessary action to put non-reliance on the audited FS
- If no action taken → Auditor takes necessary action to put non-reliance on the audited FS