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Dear Professor,
“Agreement of management to notify the auditor of subsequent events after the auditor’s report is signed.”
I wish to understand two things in relation to this: one, how the above information will be relevant for auditors? Two, why is it necessary to be included in the engagement letter?
Your explanations through examples are amazing, hope you’ll address this doubt in a similar way.
Please refer to Chapter 26 for relevance of subsequent events generally.
You don’t need to know any details about after the auditor’s report has been signed but as indicated at the bottom of the page, it is just possible that something is of such significance that had the auditor’s been aware sooner, their audit opinion/auditor’s report would have been different if the financial statements had not be changed.So suppose after the AGM (at which the financial statements and auditor’s report are issued) the directors find evidence of a fraud having been committed of which they were previously unaware – they are obliged to inform the auditor (even if a different auditor was appointed at the AGM).
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