Dear Mr Mike,
Suppose that when we conduct the audit, the financial statements have been issued (for example in a very rare case: a subsidiary in foreign country which have slightly different accounting period and does not require statutory audit, we act as the group auditors and also auditors for the subsidiary as requested by the audit contract).
The auditors found some events which satisfy as adjusting events and management agrees to amend. The question is: we will adjust directly to the issued financial statements or restate the opening balance of next year statements?
By the way, if adjusting events happen after financial statements are issued, which are out of scope of IAS 10 (eg: 5 months after date of issue, a legal court confirms company's liability at reporting date), do managements need to adjust directly (such as re-issue F/S) or only restate opening balance?
Thank you in advance!
Ask the Tutor ACCA AAA
Subsequent Events Amendment
In answer to your first question, the parent entity will make adjustments to the subsidiary's reported figures for the purposes of the consolidation
These adjustments will be in line with the identified subsequent events
There is precedent for auditors to withdraw previously issued audit reports as a result of MAJOR incidents now coming to the attention of the entity and the auditors (fraud is the classic example)
I believe that one of the leading 4 audit firms (many years ago) withdrew 3 years' worth of audit opinions as being no longer 'safe'
Additional information to continue Mike's tutor words
Recently , our country's scandal, 1MDB , the audit firms also withdrew their audit opinions due to the significant error and fraud ..by Deloitte and KPMG
Well, there you go!
Thankfully it's not an every-day occurrence ... but it does happen
Thank you Mr Mike and teeboyz, so it is clear now that as auditors we may have to withdraw audit opinion (prevent public from using audit report, right?). How about the management side? I mean is there any accounting standard for adjusting events BUT happen after financial statements have been issued (which is not in the scope of IAS 10)?
Not that I'm aware of. The only accounting requirement would be to restate prior year figures next year where a subsequent event occurred beyond the timeframe of IAS 10
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