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📚 Learn/ / Completion and Review / SA 560
Microlesson · 5-min read

Subsequent Events — Definition, Objectives, and Audit Procedures

## SA 560 — Subsequent Events

### Definition

Subsequent events are:

TypeMeaning
Type 1Events occurring between the date of the financial statements and the date of the auditor's report
Type 2Facts that become known to the auditor after the date of the auditor's report

> The key reference points to memorise:

> 1. Date of Financial Statements (e.g., 31 March)

> 2. Date of Auditor's Report (e.g., 15 May)

> 3. Date FS are Issued (e.g., 20 May)

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### Objectives of the Auditor (SA 560)

The auditor's objectives are:

(a) Obtain sufficient appropriate audit evidence (SAAE) about whether events occurring between the date of the FS and the date of the auditor's report that require adjustment or disclosure in the FS are appropriately reflected.

(b) Respond appropriately to facts that become known to the auditor after the date of the auditor's report.

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### Audit Procedures: Events Between Date of FS and Date of Auditor's Report

The auditor shall consider the risk assessment in determining the nature and extent of procedures, which shall include:

1. Inquire of management and (where appropriate) TCWG as to whether any subsequent events have occurred that might affect the FS

2. Read the entity's latest subsequent interim financial statements (if any)

3. Read minutes of meetings of owners, management and TCWG held after the date of the FS; inquire about matters discussed at meetings for which minutes are not yet available

4. Obtain an understanding of any procedures management has established to ensure subsequent events are identified

5. Request management (and where appropriate TCWG) to provide a written representation that all subsequent events requiring adjustment or disclosure have been adjusted or disclosed

Worked example

### Example 1

Example — Identifying Subsequent Events:

Company's financial statements are dated 31 March 2025. Auditor's report is dated 20 May 2025. FS are issued 25 May 2025.

EventDateClassification
Major customer declared bankrupt15 April 2025Type 1 — between FS date and auditor's report date → auditor must perform procedures
Fire destroys factory22 May 2025Type 2 — after auditor's report but before FS issued → auditor must respond appropriately
Lawsuit settled1 June 2025After FS issued → auditor to consider recall/revision depending on materiality

### Example 2

Example — Audit Procedures for Subsequent Events:

Auditor of PQR Ltd (FS date: 31 March 2025) is completing fieldwork in May 2025. Procedures performed:

  • Inquiry: Asked CFO and Audit Committee whether any material events occurred post 31 March — CFO disclosed a new contingent liability from a regulatory notice received on 10 April 2025.
  • Read interim FS: Reviewed April 2025 management accounts which showed the contingent liability was already disclosed.
  • Read minutes: Reviewed April and May Board Meeting minutes — confirmed the regulatory matter was discussed.
  • Written representation: Obtained management's written representation confirming all post-balance sheet events requiring adjustment/disclosure have been reflected.

Conclusion: Sufficient SAAE obtained; the contingent liability is properly disclosed in the FS.

⚠️ Common exam mistakes

  • Treating all events after the balance sheet date uniformly — students must distinguish between events before the auditor's report (active duty to detect) and after the auditor's report (reactive duty to respond).
  • Forgetting that reading interim financial statements is a required SA 560 procedure, not just a good practice.
  • Ignoring minutes of meetings held after the FS date — these are a primary source of evidence for subsequent events.
  • Confusing 'date of financial statements' with 'date FS are approved by management' or 'date FS are issued' — these are three different dates with different SA implications.
  • Not obtaining written representation from management about subsequent events — this is a required procedure under SA 560.
Bare-Act text SA 560, Paragraph 6 (Objectives) and Paragraph 7 (Audit Procedures) · SA 560 — Subsequent Events (issued by ICAI) · click to expand
The auditor shall perform audit procedures designed to obtain sufficient appropriate audit evidence that all events occurring between the date of the financial statements and the date of the auditor's report that require adjustment of, or disclosure in, the financial statements have been identified.
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