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In the mock exam, last scenario (questions 11-15) can you please clarify the following:
– Question 11: one of the correct answers is that ‘Subsequent events’ are events occurring after the period end but before the date of the auditors report. The other correct answer is that Subsequent events are facts the become known after the auditor’s report. They look contradictory to me..Will the event on the 31st March be a subsequent event if it is after the auditor’s report. What does it mean and what implications has the fact that the FS will be issued on the 5th of April?
-Question 12. The correct answer is the 31st March but the explanation is that ‘subsequent events procedure should be performed up until the date of the auditor’s report. If the date of the auditor’s report is on the 18th March, which the correct answer is the 31st?
– Question 14. One of the correct answer is ‘extend the subsequent events procedures’. Till when do they need to be extended? Is it till the FS are issued on the 5th April? Is the auditor’s report always after the FS are approved?
Thanks!
“Events after the reporting period” is an accounting consideration which ends with the issue of the financial statements (IAS 10)
“Subsequent events” is an auditing consideration which extends beyond the date of issue and the signing of the auditor’s report. See page 101 of the notes – auditors have duty for events after they sign the auditor’s report – albeit passive (i.e. not actively searching).The point is that if the auditor becomes aware of something that happens between the date the auditor signs the report (18 March) and when they are issued (5 April) – they don’t just say “phew! – I’ve signed my report – so it doesn’t matter” – they must do something to stop the potential misleading/erroneous financial statements – with what is now an inappropriate audit opinion – being distributed to the shareholders. (Or otherwise face the consequences.)
If the directors will now amend the financial statements (as the auditor would encourage them to do) – the old FS and auditor’s report thereon are effectively ripped up and the auditor’s responsibility for subsequent events becomes active again – until they sign the auditor’s report on the amended financial statements.
Financial statements do not exist in law until they have been signed by the directors as approved – so the date of the auditor’s report must always be on or after – never earlier.
i am still unsure what should be the correct answer for Question 12. i tried click all sort of answers and was still unable to get it correct.
I am on vacation and will be able to look at the mock again upon my return on 28th April and get back to you.
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