Imagine you finish auditing Rajesh & Co. Pvt. Ltd.'s books for the year ending 31 March 2025. You sign your audit report on 20 May 2025. But the company's AGM where the financials are officially adopted happens on 15 July 2025. A lot can happen in those weeks — and SA 560 tells you exactly what your job is during each of those windows.
SA 560 – Subsequent Events governs the auditor's responsibilities for events that occur after the date of the financial statements (31 March here) but which may affect those statements. The standard splits this into two critical periods, and your duties are different in each.
Period 1: From the FS date to the Auditor's Report date (31 March → 20 May). You are actively responsible here. You must perform subsequent events procedures — things like reading board minutes, reviewing interim financials, and asking management whether anything significant has happened. If you find an adjusting event (one that gives evidence of a condition that existed at the FS date — e.g., a major debtor went bankrupt on 10 April but the debt existed on 31 March), the financials must be corrected. If it's a non-adjusting event (a new condition arising after 31 March — e.g., a factory fire in April), only a disclosure is needed, not a change in numbers.
Period 2: After the Auditor's Report date but before the FS are issued (20 May → 15 July). You have no obligation to perform further procedures. But if you become aware of a material fact, you must discuss it with management. If the FS need amendment, a new or amended auditor's report is issued. If management refuses to act, you must notify those charged with governance, and if that still fails, take steps to prevent reliance on the original report.
Period 3: After the FS are issued. Same logic — no obligation to hunt, but if something comes to light, the same escalation path applies. Management may need to issue revised financials, and you issue a new report with an Emphasis of Matter paragraph explaining the revision.
This is asked frequently as a 4-mark or 8-mark question — especially the auditor's duties in Period 2. The examiner loves asking: "What if management refuses to amend?"