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Hi. I have some confusion pertaining to the following questions:
1) Is it correct to conclude on the basis that if an event occurred after Y/E, it is deemed as an non adjusting event, regardless whether Audit Report has been signed?
2) Pertaining to the Going Concerns, does amendments of F/S also include issues if the business is put into question of Going concern?
Would be appreciated if can give an example for first qs.
An adjusting event is one that occured after year end and which gives information aout the state of affairs at year end. So a large customer going into liquidation on 20 January is giving you information about the value of their debt as at 31 December and that amount would probbly have to be adjusted in the FS at 31/12..
If the audit report is not signed, suditor have an active duty to be on the look out for subsequent events that would affect the FS. They would keep looking at amounts received from customers since year end and would keep reviewing the safety of the receivables. If the audit report is signed then they have a passive duty i.e. if they happen to see this customer has gone into liquidation then they have to consider whether the FS were issued containing a material misstatement. Thye would try to get their client to issue a new set of FS.
You are correct about going concern. If trading seriouslt deteriorated after the year end, this could raise a going concern issue and migth mean that, for example, a note to that effect (and probably an emphasis of matter paragraph in the audit report) would be needed.
Thanks for the clarifications. Also if qs were to ask for audit procedures to form conclusions relating to subsequent events, are they trying to ask additional things that auditor need to do? Please advise.
Yes. Audit procedures are ways in which audit evidence is collected, so they want you to suggest how this could be done. So,obtaining a letter of representation is one way. looking at cash received from customers relating to year end balances is another. Looking at sales early in the new year is way of deciding if year-end inventory needs to be written down.
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