Audit 1 (4) - EVENTS OCCURRING AFTER YEAR-END Flashcards Preview

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Flashcards in Audit 1 (4) - EVENTS OCCURRING AFTER YEAR-END Deck (10):
1

SUBSEQUENT EVENTS - Conditions Existing On or Before the Balance Sheet Date

Requires a financial statement adjustment

2

SUBSEQUENT EVENTS - Conditions Existing After the Balance Sheet Date

May require footnote disclosure

3

Auditor's Responsibility for Subsequent Events

1- Review for proper cutoff
2- Representation letter obtained from management
3- Inquire contingent liabilities
4- Inquire material change ,capital stock, long-term debt,
5- Inquire unusual adjustments in subsequent period;
6- inquire of client's legal counsel concerning litigation
7- Minutes of stockholders, directors, others
8- Examine interim financial statements

4

Auditor's Responsibility after the Original Date of the Auditor's Report - Dual date the report

Extend responsibility only for the particular subsequent event.

Ex. "January 21, 20X2, except for Note 2, as to
which the date is February 3, 20X2."

5

Auditor's Responsibility after the Original Date of the Auditor's Report - Later date for the report

E extends the auditor's responsibility for all subsequent events to this later date

6

SUBSEQUENT DISCOVERY OF FACTS EXISTING AT THE DATE OF THE AUDITOR'S REPORT (discovered after report is issued) - GENERAL RULE

No obligation to make continuing inquiries after the date of the report.

7

SUBSEQUENT DISCOVERY OF FACTS EXISTING AT THE DATE OF THE AUDITOR'S REPORT - appropriate actions if auditor aware of material information that would have affected the report,

1- Advising the client to issue revised financial statements
2- Advising the client to make the necessary disclosures

8

SUBSEQUENT DISCOVERY OF FACTS EXISTING AT THE DATE OF THE AUDITOR'S REPORT - If the effect on the financial statements cannot be determined on a timely basis,

Notification that the financial statements and report should not be relied upon. In addition, the client should be advised to discuss with the SEC, stock exchanges, and appropriate regulatory agencies

9

SUBSEQUENT DISCOVERY OF FACTS EXISTING AT THE DATE OF THE AUDITOR'S REPORT - If Client Refuses to Follow Procedures or refused to cooperate

1- Notify the client or persons known to be relying on that the report must no longer be associated with the FSs.

2- Notify, any regulatory agencies

10

OMITTED AUDIT PROCEDURES DISCOVERED AFTER SUBMISSION OF THE AUDIT REPORT

Determine if audit procedures tended to compensate for the omitted audit procedures.

If not satisfied audit should apply the omitted procedures

if still not satisfied the auditor should proceed as described under subsequent discovery of facts