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SA 560 Subsequent Events

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SA 560 (REVISED)
SUBSEQUENT EVENTS
(EFFECTIVE FOR AUDITS OF FINANCIAL STATEMENTS FOR PERIODS
BEGINNING ON OR AFTER APRIL 1, 2009)

INTRODUCTION
Scope of this SA
1. This Standard on Auditing (SA) deals with the auditor’s responsibilities relating to
subsequent events in an audit of financial statements. (Ref: Para. A1)
2. Financial statements may be affected by certain events that occur after the date of the
financial statements. Many financial reporting frameworks1 specifically refer to such events.
Such financial reporting frameworks ordinarily identify two types of events:
(a) Those that provide evidence of conditions that existed at the date of the financial
statements; and
(b) Those that provide evidence of conditions that arose after the date of the financial
statements.
[Proposed] SA 700 (Revised) explains that the date of the auditor’s report informs the reader
that the auditor has considered the effect of events and transactions of which the auditor
becomes aware and that occurred up to that date. 2

1 ISA 200, “Overall Objectives of the Independent Auditor and the Conduct of an Audit in accordance with International

Standards on Auditing”, Paragraph 13 (a) defines the applicable financial reporting framework as “The financial reporting
framework adopted by management and, where appropriate, those charged with governance in the preparation and
presentation of the financial statements that is acceptable in view of the nature of the entity and the objective of the
financial statements, or that is required by law or regulation.
The term “fair presentation framework” is used to refer to a financial reporting framework that requires compliance with
the requirements of the framework and:
(i) Acknowledges explicitly or implicitly that, to achieve fair presentation of the financial statements, it may be
necessary for management to provide disclosures beyond those specifically required by the framework; or
(ii) Acknowledges explicitly that it may be necessary for management to depart from a requirement of the framework to
achieve fair presentation of the financial statements. Such departures are expected to be necessary only in
extremely rare circumstances.
The term “compliance framework” is used to refer to a financial reporting framework that requires compliance with the
requirements of the framework, but does not contain the acknowledgements in (i) or (ii) above”.
2 The Auditing and Assurance Standards Board (AASB) has issued the Exposure Drafts of Revised SA 700, “Forming An

Opinion and Reporting on Financial Statements”; SA 705, “Modifications to the Opinion in the Independent Auditor’s
Report”; and SA 706, “Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report”,
corresponding to the ISA 700, ISA 705 and ISA 706. These Exposure Drafts are published in the June 2009 issue of the
Journal.

Effective Date
3. This SA is effective for audits of financial statements for periods beginning on or after
April 1, 2009.
Objectives
4. The objectives of the auditor are to:
(a) Obtain sufficient appropriate audit evidence about whether 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 are appropriately reflected in
those financial statements; and
(b) Respond appropriately to facts that become known to the auditor after the date of the
auditor’s report, that, had they been known to the auditor at that date, may have caused
the auditor to amend the auditor’s report.
Definitions
5. For purposes of the SAs, the following terms have the meanings attributed below:
(a) Date of the financial statements – The date of the end of the latest period covered by the
financial statements.
(b) Date of approval of the financial statements – The date on which all the statements that
comprise the financial statements have been prepared and those with the recognised
authority have asserted that they have taken responsibility for those financial statements.
(Ref: Para. A2)
(c) Date of the auditor’s report – The date the auditor dates the report on the financial
statements in accordance with SA 700 (Revised). (Ref: Para. A3)
(d) Date the financial statements are issued – The date that the auditor’s report and audited
financial statements are made available to third parties. (Ref: Para. A4-A5)
(e) Subsequent events – Events occurring between the date of the financial statements and
the date of the auditor’s report, and facts that become known to the auditor after the date
of the auditor’s report.

REQUIREMENTS
Events Occurring Between the Date of the Financial Statements and the Date of the
Auditor’s Report
6. 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. The auditor is not, however, expected to perform additional audit procedures
on matters to which previously applied audit procedures have provided satisfactory
conclusions. (Ref: Para. A6)
7. The auditor shall perform the procedures required by paragraph 6 so that they cover the
period from the date of the financial statements to the date of the auditor’s report, or as near

as practicable thereto. The auditor shall take into account the auditor’s risk assessment in
determining the nature and extent of such audit procedures, which shall include the following:
(Ref: Para. A7-A8)
(a) Obtaining an understanding of any procedures management has established to ensure
that subsequent events are identified.
(b) Inquiring of management and, where appropriate, those charged with governance as to
whether any subsequent events have occurred which might affect the financial
statements. (Ref: Para. A9)
(c) Reading minutes, if any, of the meetings, of the entity’s owners, management and those
charged with governance, that have been held after the date of the financial statements
and inquiring about matters discussed at any such meetings for which minutes are not
yet available. (Ref: Para. A10)
(d) Reading the entity’s latest subsequent interim financial statements, if any.
8. When, as a result of the procedures performed as required by paragraphs 6 and 7, the
auditor identifies events that require adjustment of, or disclosure in, the financial statements,
the auditor shall determine whether each such event is appropriately reflected in those
financial statements.
Written Representations
9. The auditor shall request management and, where appropriate, those charged with
governance, to provide a written representation in accordance with SA 580 (Revised), “Written
Representations” that all events occurring subsequent to the date of the financial statements
and for which the applicable financial reporting framework requires adjustment or disclosure
have been adjusted or disclosed.
Facts Which Become Known to the Auditor After the Date of the Auditor’s Report but
Before the Date the Financial Statements are Issued
10. The auditor has no obligation to perform any audit procedures regarding the financial
statements after the date of the auditor’s report. However, when, after the date of the auditor’s
report but before the date the financial statements are 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: (Ref: Para. A11)
(a) Discuss the matter with management and, where appropriate, those charged with governance.
(b) Determine whether the financial statements need amendment and, if so,
(c) Inquire how management intends to address the matter in the financial statements.
11. If management amends the financial statements, the auditor shall:
(a) Carry out the audit procedures necessary in the circumstances on the amendment.
(b) Unless the circumstances in paragraph 12 apply:
(i) Extend the audit procedures referred to in paragraphs 6 and 7 to the date of the
new auditor’s report; and

(ii) Provide a new auditor’s report on the amended financial statements. The new
auditor’s report shall not be dated earlier than the date of approval of the amended
financial statements.
12. When law, regulation or the financial reporting framework does not prohibit management
from restricting the amendment of the financial statements to the effects of the subsequent
events or events causing that amendments and those responsible for approving the financial
statements are not prohibited from restricting their approval to that amendment, the auditor is
permitted to restrict the audit procedures on subsequent events required in paragraph 11(b)(i)
to that amendment. In such cases, the auditor shall either:
(a) Amend the auditor’s report to include an additional date restricted to that amendment
that thereby indicates that the auditor’s procedures on subsequent events are restricted
solely to the amendment of the financial statements described in the relevant note to the
financial statements; or (Ref: Para. A12)
(b) Provide a new or amended auditor’s report that includes a statement in an Emphasis of
Matter paragraph or Other Matter(s) paragraph that conveys that auditor’s procedures on
subsequent events are restricted solely to the amendment of the financial statements as
described in the relevant note to the financial statements.
13. In some entities, management may not be required by the applicable law, regulation or
the financial reporting framework to issue amended financial statements and, accordingly, the
auditor need not provide an amended or new auditor’s report. However, when management
does not amend the financial statements in circumstances where the auditor believes they
need to be amended, then: (Ref: Para. A13-A14)
(a) If the auditor’s report has not yet been provided to the entity, the auditor shall modify the
opinion as required by [proposed] SA 7053 and then provide the auditor’s report; or
(b) If the auditor’s report has already been provided to the entity, the auditor shall notify
management and, unless all of those charged with governance are involved in managing
the entity, those charged with governance, not to issue the financial statements to third
parties before the necessary amendments have been made. If the financial statements
are nevertheless subsequently issued without the necessary amendments, the auditor
shall take appropriate action, to seek to prevent reliance on the auditor’s report. (Ref:
Para. A15-A16)

3 At present, there is no separate Standard on Auditing (SA) corresponding to International Standard on Auditing (ISA)

705. However, the concept of modified audit report has been discussed in SA 700, “The Auditor’s Report on Financial
Statements”. The Auditing and Assurance Standards Board (AASB) has issued the Exposure Drafts of Revised SA 700,
“Forming An Opinion and Reporting on Financial Statements”; SA 705, “Modifications to the Opinion in the Independent
Auditor’s Report”; and SA 706, “Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent
Auditor’s Report”, corresponding to the ISA 700, ISA 705 and ISA 706. These Exposure Drafts are published in the June
2009 issue of the Journal.

Facts Which Become Known to the Auditor After the Financial Statements have been Issued
14. After the financial statements have been issued, the auditor has no obligation to perform
any audit procedures regarding such financial statements. However, when, after the financial
statements 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, those charged with
governance.
(b) Determine whether the financial statements need amendment and, if so,
(c) Inquire how management intends to address the matter in the financial statements.
15. If the management amends the financial statements, the auditor shall: (Ref: Para. A17)
(a) Carry out the audit procedures necessary in the circumstances on the amendment.
(b) Review the steps taken by management to ensure that anyone in receipt of the
previously issued financial statements together with the auditor’s report thereon is
informed of the situation.
(c) Unless the circumstances in paragraph 12 apply:
(i) Extend the audit procedures referred to in paragraphs 6 and 7 to the date of the
new auditor’s report, and the date the new auditor’s report no earlier than the date
of approval of the amended financial statements; and
(ii) Provide a new auditor’s report on the amended financial statements.
(d) When the circumstances in paragraph 12 apply, amend the auditor’s report, or provide a
new auditor’s report as required by paragraph 12.
16. The auditor shall include in the new or amended auditor’s report an Emphasis of Matter
paragraph or Other Matter(s) paragraph referring to a note to the financial statements that
more extensively discusses the reason for the amendment of the previously issued financial
statements and to the earlier report provided by the auditor.
17. If management does not take the necessary steps to ensure that anyone in receipt of the
previously issued financial statements is informed of the situation and does not amend the
financial statements in circumstances where the auditor believes they need to be amended,
the auditor shall notify management and, unless all of those charged with governance are
involved in managing the entity, those charged with governance, that the auditor will seek to
prevent future reliance on the auditor’s report. If, despite such notification, management or
those charged with governance do not take these necessary steps, the auditor shall take
appropriate action to seek to prevent reliance on the auditor’s report. (Ref: Para. A18)
***

Application and Other Explanatory Material
Introduction (Ref: Para. 1)
A1. When the audited financial statements are included in other documents subsequent to
the issuance of the financial statements, the auditor may have additional responsibilities
relating to subsequent events that the auditor may need to consider, such as legal or
regulatory requirements involving the offering of securities to the public in jurisdictions in
which the securities are being offered. For example, the auditor may be required to perform
additional audit procedures to the date of the final offering document. These procedures may
include those referred to in paragraphs 6 and 7 performed up to a date at or near the effective
date of the final offering document, and reading the offering document to assess whether the
other information in the offering document is consistent with the financial information with
which the auditor is associated.
Definitions
Date of Approval of the Financial Statements (Ref: Para. 5(b))
A2. In some entities, the applicable law or regulation identifies the individuals or bodies (for
example, management or those charged with governance) that are responsible for concluding
that all the statements comprising the financial statements have been prepared, and specifies
the necessary approval process. In some other entities, the approval process is not prescribed
in law or regulation and the entity follows its own procedures in preparing and finalising its
financial statements in view of its management and governance structures. In some cases,
final approval of the financial statements by shareholders is required. In such cases, final
approval by shareholders is not necessary for the auditor to conclude that sufficient
appropriate audit evidence on which to base the auditor’s opinion on the financial statements
has been obtained. The date of approval of the financial statements for purposes of the SAs is
the earlier date on which those with the recognised authority have asserted that all the
statements comprising the financial statements have been prepared and that those with the
recognised authority have taken responsibility for those financial statements.
Date of the Auditor’s Report (Ref: Para. 5(c))
A3. The auditor’s report cannot be dated earlier than the date on which the auditor has
obtained sufficient appropriate audit evidence on which to base the opinion on the financial
statements.4 Sufficient appropriate audit evidence includes evidence that all the statements
that comprise the financial statements have been prepared and that those with the recognised
authority have asserted that they have taken responsibility for those financial statements.
Consequently, the date of the auditor’s report cannot be earlier than the date of approval of
the financial statements as defined in paragraph 5(b). A time period may elapse due to

4 Standard on Auditing (SA) 700 (AAS 28), paragraph [24] states that in addition to an opinion on the true and fair view,

the auditor’s report may need to include an opinion as to whether the financial statements comply with other requirements
specified by relevant statutes or law.

administrative issues between the date of the auditor’s report as defined in paragraph 5(c) and
the date the auditor’s report is provided to the entity.
Date the Financial Statements are Issued (Ref: Para. 5(d))
A4. The date the financial statements are issued generally depends on the regulatory
environment of the entity. In some circumstances, the date the financial statements are issued
may be the date that they are filed with a regulatory authority. Since audited financial
statements cannot be issued without an auditor’s report, the date that the audited financial
statements are issued must not only be at or later than the date of the auditor’s report, but
must also be at or later than the date the auditor’s report is provided to the entity.
A5. In the case of certain entities, such as, Central/State governments and related
government entities (for example, agencies, boards, commissions), the date the financial
statements are issued may be the date the audited financial statements and the auditor’s
report thereon are presented to the legislature or otherwise made public.
Events Occurring Between the Date of the Financial Statements and the Date of the
Auditor’s Report (Ref: Para. 6-9)
A6. Depending on the auditor’s risk assessment, the audit procedures required by paragraph
6 may include procedures, necessary to obtain sufficient appropriate audit evidence, involving
the review or testing of accounting records or transactions occurring between the date of the
financial statements and the date of the auditor’s report. The audit procedures required by
paragraphs 6 and 7 are in addition to procedures that the auditor may perform for other
purposes that, nevertheless, may provide evidence about subsequent events (for example, to
obtain audit evidence for account balances as at the date of the financial statements, such as
cut-off procedures or procedures in relation to subsequent receipts of accounts receivable).
A7. Paragraph 7 stipulates certain audit procedures in this context that the auditor is required
to perform pursuant to paragraph 6. The subsequent events procedures that the auditor
performs may, however, depend on the information that is available and, in particular, the
extent to which the accounting records have been prepared since the date of the financial
statements. When the accounting records are not up-to-date, and accordingly no interim
financial statements (whether for internal or external purposes) have been prepared, or
minutes of meetings of management or those charged with governance have not been
prepared, relevant audit procedures may take the form of inspection of available books and
records, including bank statements. Paragraph A8 gives examples of some of the additional
matters that the auditor may consider in the course of these inquiries.
A8. In addition to the audit procedures required by paragraph 7, the auditor may consider it
necessary and appropriate to:
• Read the entity’s latest available budgets, cash flow forecasts and other related
management reports for periods after the date of the financial statements;

• Inquire, or extend previous oral or written inquiries, of the entity’s legal counsel
concerning litigation and claims; or
• Consider whether written representations covering particular subsequent events may be
necessary to support other audit evidence and thereby obtain sufficient appropriate audit
evidence.
Inquiry (Ref: Para. 7(b))
A9. In inquiring of management and, where appropriate, those charged with governance, as
to whether any subsequent events have occurred that might affect the financial statements,
the auditor may inquire as to the current status of items that were accounted for on the basis
of preliminary or inconclusive data and may make specific inquiries about the following
matters:
• Whether new commitments, borrowings or guarantees have been entered into.
• Whether sales or acquisitions of assets have occurred or are planned.
• Whether there have been increases in capital or issuance of debt instruments, such as
the issue of new shares or debentures, or an agreement to merge or liquidate has been
made or is planned.
• Whether any assets have been appropriated by government or destroyed, for example,
by fire or flood.
• Whether there have been any developments regarding contingencies.
• Whether any unusual accounting adjustments have been made or are contemplated.
• Whether any events have occurred or are likely to occur that will bring into question the
appropriateness of accounting policies used in the financial statements, as would be the
case, for example, if such events call into question the validity of the going concern
assumption.
• Whether any events have occurred that are relevant to the measurement of estimates or
provisions made in the financial statements.
• Whether any events have occurred that are relevant to the recoverability of assets.
Reading Minutes (Ref: Para. 7(c))
A10. In case of certain entities, such as, Central/State governments and related government
entities (for example, agencies, boards, commissions), the auditor may read the official
records of relevant proceedings of the legislature and inquire about matters addressed in
proceedings for which official records are not yet available.
Facts Which Become Known to the Auditor After the Date of the Auditor’s Report but
Before the Date the Financial Statements are Issued
Management Responsibility Towards Auditor (Ref: Para. 10)
A11. As explained in SA 210 (Revised), the terms of the audit engagement include the
agreement of management to inform the auditor of facts that may affect the financial

statements, of which management may becomes aware during the period from the date of the
auditor’s report to the date the financial statements are issued.5 6
Dual Dating (Ref: Para. 12(a))
A12. When, in the circumstances described in paragraph 12(a), the auditor amends the
auditor’s report to include an additional date restricted to that amendment, the date of the
auditor’s report on the financial statements prior to their subsequent amendment by
management remains unchanged because this date informs the reader as to when the audit
work on those financial statements was completed. However, an additional date is included in
the auditor’s report to inform users that the auditor’s procedures subsequent to that date were
restricted to the subsequent amendment of the financial statements. The following is an
illustration of such an additional date:
“(Date of auditor’s report), except as to Note Y, which is as of (date of completion of audit
procedures restricted to amendment described in Note Y)”.
No Amendment of Financial Statements by Management (Ref: Para. 13)
A13. In some entities, management may not be required by the applicable law, regulation or
the financial reporting framework to issue amended financial statements. This is often the
case when issuance of the financial statements for the following period is imminent, provided
appropriate disclosures are made in such statements.
A14. In case of certain entities, such as, Central/State governments and related government
entities (for example, agencies, boards, commissions), the actions taken in accordance with
paragraph 13 when management does not amend the financial statements may also include
reporting separately to the legislature, or other relevant body in the reporting hierarchy, on the
implications of the subsequent event for the financial statements and the auditor’s report.
Auditor Action to Seek to Prevent Reliance on Auditor’s Report (Ref: Para. 13(b))
A15. The auditor may need to fulfill additional legal obligations even when the auditor has
notified management not to issue the financial statements and management has agreed to this
request.
A16. When management has issued the financial statements despite the auditor’s notification
not to issue the financial statements to third parties, the auditor’s course of action to prevent
reliance on the auditor’s report on the financial statements depends upon the auditor’s legal
rights and obligations. Consequently, the auditor may consider it appropriate to seek legal
advice.

5 Revised Standard on Auditing (SA) 210, “Agreeing the Terms of Audit Engagements”, paragraph A23.
6 These changes have been made pursuant to the issuance of Standard on Auditing (SA) 210 (Revised), “Agreeing the

Terms of Audit Engagements”, which is effective for all audits of financial statements for periods beginning on or after
April 1, 2010.

Facts Which Become Known to the Auditor After the Financial Statements have been
Issued
No Amendment of Financial Statements by Management (Ref: Para. 15)
A17. In some circumstances, the entities, such as, Central/State governments and related
government entities (for example, agencies, boards, commissions) may be prevented from
issuing amended financial statements by law or regulation. In such circumstances, the
appropriate course of action for the auditor may be to report to the appropriate statutory body.
Auditor Action to Seek to Prevent Reliance on Auditor’s Report (Ref: Para. 17)
A18. When the auditor believes that management, or those charged with governance, have
failed to take the necessary steps to prevent reliance on the auditor’s report on financial
statements previously issued by the entity despite the auditor’s prior notification that the
auditor will take action to seek to prevent such reliance, the auditor’s course of action depends
upon the auditor’s legal rights and obligations. Consequently, the auditor may consider it
appropriate to seek legal advice.

MATERIAL MODIFICATIONS TO ISA 560, “SUBSEQUENT EVENTS”
Deletion
1. Paragraph A5 of ISA 560 provides that in the case of public sector entities, the date the
financial statements are issued may be the date the audited financial statements and the
auditor’s report thereon are presented to the legislature or otherwise made public.
Paragraph A10 of ISA 560 provides that in the case of public sector, the auditor may read
the official records of relevant proceedings of the legislature and inquire about matters
addressed in proceedings for which official records are not yet available. Paragraph A14
of ISA 560 provides that in the case of public sector, the actions taken in accordance with
paragraph 13 of ISA when management does not amend the financial statements may
also include reporting separately to the legislature, or other relevant body in the reporting
hierarchy, on the implications of the subsequent event for the financial statements and the
auditor’s report. Paragraph A17 of ISA 560 provides that in some circumstances, the
entities in the public sector may be prevented from issuing amended financial statements
by law or regulation. In such circumstances, the appropriate course of action for the
auditor may be to report to the appropriate statutory body. Since as mentioned in the
“Preface to the Standards on Quality Control, Auditing, Review, Other Assurance and
Related Services”, the Standards issued by the Auditing and Assurance Standards Board,
apply equally to all entities, irrespective of their form, nature and size, a specific reference
to applicability of the Standard to public sector entities has been deleted.
Further, it is also possible that such situations may also exist in case of certain entities
pursuant to a requirement under the statute or regulation under which they operate.
Accordingly, the spirit of erstwhile A5, A10, A14 and A17, highlighting such fact, has been
retained though a specific reference to public sector entities has been deleted.