SA 560 - Subsequent Events

# SA 560 – Subsequent Events

## What are Subsequent Events?

Subsequent events are:

• Events occurring between the date of the Financial Statements (FS) and the date of the auditor's report, AND
• Facts that become known to the auditor after the date of the report.

## Meaning of 'Date FS are Issued'

It reflects the date the auditor's report and audited FS are made available to third parties. The exact meaning depends on the Legal & Regulatory (L&R) environment:

• In some jurisdictions, it is the date the FS are filed with the regulatory authority.
• The date audited FS are issued must be at or later than the date of the auditor's report AND the date the report is provided to the entity.

## Two Types of Subsequent Events (as per FRF)

1. Adjusting events – Events providing evidence of conditions that existed at the date of the FS.

2. Non-adjusting events – Events providing evidence of conditions that arose after the date of the FS.

## Objectives of the Auditor

• To obtain Sufficient Appropriate Audit Evidence (SAAE) about whether subsequent events that require adjustment or disclosure in FS are appropriately reflected.
• To respond appropriately to facts that become known to the auditor after the date of the report, that — had they been known earlier — may have caused the auditor to amend the report.
• To obtain Written Representations (WR) from management and TCWG that all subsequent events for which AFRF requires adjustment/disclosure have been adjusted or disclosed.

## Procedures for Events Between FS Date and Report Date

• Inquire of Management & TCWG whether subsequent events have occurred affecting FS.
• Obtain understanding of management's procedures for identifying subsequent events.
• Read minutes of meetings of owners, Management & TCWG held after the date of FS.
• Read the entity's latest subsequent interim FS.
• Request WR from Management & TCWG that all subsequent events are adjusted or disclosed.

## Facts Known After Date of Report (Two Cases)

Case 1: Facts known after the date of the report but before FS are issued.

Case 2: Facts which become known after FS have been issued.

The auditor has no obligation to perform procedures after the date of the report. However, if such a fact becomes known, the auditor shall:

• Discuss the matter with Management & TCWG.
• Determine if FS need amendment.
• Inquire how Management intends to address the matter.

### Situation 1 – Management Amends FS

The auditor shall:

• Carry out procedures on the amendment.
• Extend procedures to the date of the new report.
• Provide a new report on amended FS not dated earlier than the date of approval of amended FS.
• (Case 2 only) Review Management's steps to ensure anyone in receipt of FS & report is informed.
• (Case 2 only) Include an EOM or OM paragraph stating the reason for amendment.

### Situation 2 – L&R/FRF Permits Restricted Amendment

The auditor may either:

• Amend the report to include an additional date indicating procedures are restricted solely to the amendment, OR
• Provide a new/amended report with an EOM/OM paragraph stating procedures on subsequent events are restricted solely to the amendment.

## When Management Does NOT Amend