Facts Known After Financial Statements Have Been Issued
## SA 560: Discoveries After the FS Have Been Issued
### No Obligation, But Action Required If Fact Surfaces
Once the FS are issued, the auditor has no obligation to perform further procedures. However, if a post-issuance fact becomes known that might have caused the auditor to amend the report, the auditor must act.
---
### Step 1 — Same DIA Framework
Step
Action
D – Discuss
With management (and TCWG if appropriate)
A – Determine
Whether FS need amendment
I – Inquire
How management intends to address it
---
### If Management AMENDS the FS (Post-Issuance)
Additional steps beyond the pre-issuance scenario:
Step
Action
(a)
Perform audit procedures on the amendment
(b)
Review steps management takes to notify all recipients of previously issued FS
(c)
Issue a new auditor's report (date ≥ approval of amended FS)
(d)
If law permits restricting the amendment to specific effects, amend/issue new report accordingly
(e)
Include Emphasis of Matter / Other Matter paragraph referencing the note explaining the reason for amendment AND the earlier auditor's report
> The key new element post-issuance: the auditor must verify management has informed all parties who received the original FS.
---
### If Management DOES NOT Amend (Post-Issuance)
1. Notify management and TCWG that the auditor will seek to prevent future reliance on the report.
2. If management/TCWG still do not act → auditor takes appropriate action (e.g., communicate to regulator, legal counsel).
Worked example
### Example 1
Example – Fraud Discovered Post-Issuance: Annual FS were issued on 1 May. On 20 June, the auditor learns of a material fraud in inventory that inflated profits. The auditor discusses with management (DIA). Management agrees to issue restated FS with a note explaining the restatement. The auditor extends procedures to the new report date, verifies management has contacted all known users of the original FS, and includes an Emphasis of Matter paragraph referencing both the restatement note and the original audit report date.
### Example 2
Example – Management Refuses Post-Issuance: Same facts above, but management declines to restate. The auditor notifies management and TCWG in writing that appropriate steps will be taken to prevent reliance on the original report. If no action follows, the auditor escalates to the regulator (e.g., SEBI, RBI, ICAI) as appropriate.
⚠️ Common exam mistakes
Forgetting the extra step post-issuance: reviewing management's notification to prior FS recipients — this is not required in the pre-issuance scenario.
Omitting the Emphasis of Matter / Other Matter paragraph in the new report that references both the reason for amendment AND the original report.
Assuming the auditor's only remedy is to issue a new report — when management refuses, the auditor must proactively prevent reliance on the old report.
Treating post-issuance and pre-issuance procedures as identical — the post-issuance scenario has the additional 'notify all recipients' dimension.
Bare-Act text Q6 / Para on facts known after FS have been issued · SA 560 – Subsequent Events · click to expand
After the FS have been issued, the auditor has no obligation to perform any audit procedures regarding such FS. However, when, after the FS have been issued, a fact becomes known to the auditor that, had it been known to the auditor at the date of the auditor's report, may have caused the auditor to amend the auditor's report, the auditor shall: (a) Discuss the matter with management and, where appropriate, TCWG; (b) Determine whether the FS need amendment; and (c) Inquire how management intends to address the matter in the FS.