 Identifying subsequent events that may

affect the financial statement under

audit
 Identifying contingencies such as
litigation, claims and assessment
 Obtaining written management
representation
 Performing wrap-up procedures
 Those events or transactions that occur
subsequent to the balance sheet date
that may affect the financial statement s
and the auditor’s report
 Events subsequent to BS date but before
the of the auditor’s report
 Conditions that
existed at the
balance sheet date

Requiring Requiring
Adjustments Disclosures
Arose subsequent
to the balance
sheet date
 PSA 560:
› “ The auditor should perform procedures
designed to obtain sufficient appropriate
evidence that all events up to the auditor’s
report that may require adjustments of, or
disclosure in the financial statements have
been identified.”
Inquiring of management about any subsequent events

Reviewing procedures management has established to

identify subsequent events

Reviewing the minutes of BOD and stockholders’ meetings

Reading the latest available interim FS as well as

management reports such as budgets and forecasts

Inquiring of the entity’s lawyers concerning litigation, claims,

and assessments
 No responsibility to perform procedures to
identify subsequent events occurring after
the date of the auditor’s report
 It is the responsibility of the management to
inform the auditor of events that may
affects the FS
› If the auditor becomes aware of an event
occurring after the date of the report but before
issuance – take actions to ascertain whether
such event has been properly disclosed in the
notes to FS
 If already released to the entity, the
auditor would notify those persons
ultimately responsible for the overall
directions of an entity not to issue the FS.
 If subsequently released, the auditor
needs to take actions to prevent
reliance of the auditor’s report
 The date is important because it shows the
date when the auditor’s responsibility for
subsequent events ends.
 On subsequent event,
› Requiring adjustment – original date of the
report (completion of essential audit
procedures)
› Requiring disclosure –
 As of the date of subsequent events (then extend
procedure for other subsequent events)
 Dual date the report
 PSA 501-
› Requires the auditor to carry out procedures in order
to become aware of any litigations and claims
involving the entity which may have material effect
on the FS
 Management – primary source of information
 Auditor – corroborates the information by
asking the client to send letters of audit inquiry
(prepared by the management, sent by the
auditors) to lawyers
 Lawyers – communicate directly to the auditors
 If management refuses to have the
auditor’s communicate with the lawyers
– issue qualified or disclaimer of opinion
 If the lawyer is unable to estimate the
amount of potential loss, the auditor
should consider adding an emphasis of
the matter paragraph to an unmodified
report to draw the attention of the
readers to this uncertainty.
 PSA 580-
› Requires an auditor to obtain sufficient
appropriate audit evidence that the entity’s
management
 Has acknowledged that it has fulfilled its
responsibility for the preparation and
presentation of fair financial statements
 Has approved the financial statements
› Requested from CEO, CFO or other
equivalent positions
 Written representation are an important
audit evidence refusal to issue may alert
the auditor of the possibility that one or
more significant issues may exist (disclaimer
of opinion due to scope limitation)
 Management written representation
complement the audit evidence the
auditor accumulates, but they do not
substitute for the performance of audit
procedures
1. Management
responsibility for
the preparation of
FS

2. Prepared and
presented in
accordance with
applicable
financial reporting
framework
Management has
provided the
auditor with all
relevant information
agreed in the terms
of engagement
 Addressed to the auditor
 Date is not after the date of auditor’s
report
 Signed by the appropriate level of
management who has the primary
responsibility for the financial statements
(e.g. CEO, CFO)
 • Final analytical procedures
a

• Evaluation of the entity’s ability to continue as

going concern
b

• Evaluating audit findings and obtaining client’s

approval for the proposed adjusting entries
c
 Identifying unusual fluctuations that were
not previously identified
 Assessing the validity of the conclusions
reached and evaluating the overall
financial statement presentation
 Management responsibility
› To make specific assessment of the entity’s
ability to continue as a going concern
› At least 12 months from the balance sheet
date
 Auditor’s Responsibility
› Consider events or conditions which may
cast significant doubt on going concern
assumption
› Evaluate management’s assessment of the
entity’s ability to continue as going concern
 Conditions or events which cast doubt
on going concern assumption may be
mitigated by other factors.
 Reasonable assurance on going
concern – unmodified audit report
 If there is uncertainty,
› If adequately disclosed – unmodified audit
report with emphasis of a matter paragraph
› Not adequately disclosed, should express
qualified or adverse opinion
 Accept the FS as fairly stated or request
the management to revise the
statements
 Recommend adjustments discovered
during audit
› If management accepts all adjusting entries
– unmodified audit report
› If management refuses – qualified or an
adverse opinion
 Ordinarily, auditors have no responsibility
after issuance of report, however if the
auditor becomes aware that the audit
report may be inappropriate due to:
› Subsequent discovery of facts
› Subsequent discovery of omitted procedures
 No obligation to make inquiry regarding
previously issued FS unless, he becomes
aware of a material fact.
› Which existed at the date of the auditor’s
report
› Which if known at that date, may have
caused the auditor to modify the report
 Critical due to users of financial
statements
 If management makes the appropriate
revisions and disclosures – auditor issues
a new audit report with emphasis of a
matter paragraph to highlight the reason
for revision
 If management refuses to revise the FS or
inform the users about the new
information, the auditor should notify
those ultimately responsible for the
direction of the entity
1. Assess the importance of omitted
procedures to the auditor’s ability to
support his opinion
› Compensating procedures
2. Undertake to apply the omitted
procedures or the corresponding
alternative procedures
› If after applying, the auditor determines that
the FS are materially misstated, discuss the
matter with management and take steps to
prevent future reliance on the report