Settlement of litigation at an amount different from the amount recorded on the books. Sale of investments at a price below recorded cost . Disposal of equipment not being used in operations at a price below the current book value . The auditor must review transactions and events that occurred after the balance sheet date to determine whether any of these transactions or events affect the fair presentation or disclosure of the current period statements . Responsibility for reviewing subsequent events is limited to the period beginning with the balance sheet date and ending with the date of the auditor’s report.
Chapter (24) Auditing and assurance services 6 Mr.Ahmed Atef Khafaga 2) Those That Do Not Have a Direct Effect on the Financial Statements but for Which Disclosure Is Required A decline in the market value of securities held for temporary investment or resale. The issuance of bonds or equity securities . A decline in the market value of inventory as a consequence of government action barring further sale of a product. The uninsured loss of inventories as a result of fire. A merger or an acquisition. ذاوحتسا
Chapter (24) Auditing and assurance services 7 Mr.Ahmed Atef Khafaga Audit tests for subsequent events 1. Procedures as a part of the verification of year-end account balances . (Cutoff objective, Valuation and allocation) 2. Procedures to discover events or transactions that must be recognized as subsequent events. (Completeness) Dual dating For example , what if an audit client acquired another company after the auditor’s last day of field work ? Assume the acquisition occurred on March 23, when the last day of field work was March 11 . In that situation, auditing standards require the auditor to extend audit tests for the newly discovered subsequent event to make sure that it is correctly disclosed. The auditor has two equally acceptable options for expanding subsequent events tests: 1. Expand all subsequent events tests to the new date. 2. Restrict the subsequent events review to matters related to the new subsequent event. For the first option, auditors simply change the audit report date to the new date. For the second option, the auditor issues a dual-dated audit report, the first date for the completion of field work, except for the specific exception, and the second date, which is always later, for the exception . Review Records Prepared Subsequent to the Balance Sheet Date. Review Internal Statements Prepared Subsequent to the Balance Sheet Date. Examine Minutes Issued Subsequent to the Balance Sheet Date. Correspond with Attorneys . Inquire of Management. Obtain a Letter of Representation.
You've reached the end of your free preview.
Want to read all 9 pages?